A major reason for this is that the price point is hardly competitive with black market prices. The federal government was tasked with determining what going prices were on the street, and the data was ignored when crafting the price system. It's hard to dislodge an existing dealer-"client" relationship when you offer the same (or often lower quality) product at an inflated price. Then there's also the entire problem with the legal cap on edible strength.
This is a textbook example of a good idea, executed terribly.
Cannabis at the store costs anywhere from $90 to $500 a oz, with $120-150 a oz being the average AA grade. The same prices for a "gray market" is typically around $30 to $90 range for a oz of AA grade. Most of the "gray market" cannabis is grown by private individuals or native reservations (which have exploded as nobody will police it). It is typically sold at a store on the native reservation or via mail to order websites.
Now in order for you to grow cannabis to sell to the store you have to meet a set of extremely strict criteria that range from a specific amount of acres to soil quality, to harvest techniques and warehousing. You can't grow plants over X height, need permissions from neighbouring property as flowering can be aromatic, you cannot spray or use any non-organic fertilizer, and you have to go through a series of reviews, which cost a lot of money. After that you can then grow cannabis which could be sold to a store. A store then takes that and puts it into extremely expensive special packaging that is child safe, keeps the cannabis hydrated to 65% and all kinds of stuff like that.
Now stores tend to promote CBC + THC combinations where you are balanced rather than extremes towards one or the other. As well as beverages which is where I assume they make their actual money. I have no idea what kind of up sale is the average, but you don't really make much off a few people buying 3g or 9g of cannabis in any format minus beverages. Since most of it is taxes anyway.
So you end up with a strong "gray market" that grows faster, and cheaper as there is no restrictions and they can spray and use what ever to grow the product faster. And they don't pay taxes.
It has nothing to do with any sort of "dealer client" relationship, I don't know a single person who calls up any "dealer" and gets cannabis. Everyone I know either goes to the store and buys it or gets it online mailed to them.
This is rather incorrect. In Canada I knew plenty of people who still had "their guy". You're also incorrect about this being a gray market, there exists a strong black market, and you can find articles about it to this day.
Don’t know too much about the Canadian market but isn’t the convenience of not doing something illegal and it being easily accessible worth paying for. That’s why streaming service’s completely beat out piracy
The committed cannabis smokers don't want to spend the extra money, and the rest of us don't care about it enough to keep all these businesses alive.
I live near an ex-urb/suburb of about 20,000 people. There's about 5 Tim Hortons franchises, and I think about 7 cannabis retailers at last count. I strolled into one the other day, a saturday afternoon, and it was a ghost town. Not a person in sight. At least the Tim Hortons have a line-up of addicts at the drive-thru.
I suspect anybody who is serious about smoking the stuff either grows their own (you're permitted up to 4 plants, which is a lot really) or "has a guy."
I live rural, and I have neighbours on one side open-air growing a bunch of plants. Eagerly awaiting first frost, because right now it smells like a college dorm room outside.
>That’s why streaming service’s completely beat out piracy
Are you sure about that?
Streaming is incredibly fragmented + the geolocation based limitations (certain shows are available in X country but not in Y, subtitles and dubbing varies a lot to) are increasingly prominent. Piracy will always triumph because of the ease of access and getting what you want in the format you want.
Yeah. It’s a worn out political bullet point. The dispensaries are reasonably priced as long as you’re a smart shopper. A lot of the edibles are bad-tasting gimmicks at bizarre price points for how much THC they have. Just don’t buy the junk. I’m sent to the moon on 90 cents worth of THC capsule.
That is absolutely false. Every single person on my team at work pirates instead of paying for the streaming services. At first, when it was just one or two services, I think people did pay, but as prices raised and the streaming services became fragmented, it was much easier to pirate.
Anecdotally, there are a fair number of new customers that are there because it's legal. This is especially true for edibles, despite the low THC, and the CBD oil/edible products.
I know several people who were avid smokers (even before cannabis was effectively decriminalization after Harper left office and people stopped caring) who still have "their guy" because it is "cheaper and better quality" than what they stores can legally sell.
> This is a textbook example of a good idea, executed terribly.
Partly this was due to the constraints imposed by the "reefer madness" crowd and partly due to the unexpected gold rush. Also, who would be surprised that people like Bill "Pot is Dangerous" Blair would botch a cannabis roll out. I kind of wish they would do a reset and rework the legislation now that people are less worried about it, but the current political climate makes that impossible.
Or "Cannabis is infinitely more harmful [than tobacco]" Harper. The cards have been stacked against legalisation's success since before most of us were alive.
The purpose of legalizing weed was for the government to collect taxes. Even if it was the same price as in the black market, it's going to be more expensive because of the additional taxes added to the final price.
This is why legalizing it was never going to work.
Did the government set prices as well as provide all the packaging? Or do you mean the taxes are so high that there’s no way for a business to break even without a total price substantially higher than the black market? Regardless it sounds fairly successful if 70% of the market is now legal.
I wonder how far off the Canada prices are from the California ones I’m familiar with.
Government does not set the prices, unless you live in one of the provinces which cannabis is only sold at the provincial liquor store.
The issue is the taxes are so high it's nearly impossible for a cannabis business to generate income while selling at a price point people will buy it at. You have to remember that generally most of Canada is on the poor side.
Ah yeah, by set prices I meant via tax levies. I should have been more clear. It does indirectly set prices, but you're correct they did not say "1 oz sour diesel is $10".
I don't partake myself, but I've heard that the major selling point in the US is that legal weed is generally of higher quality than what can be found on the street, even in California. Is that not the case in Canada?
It's arguable. First it will be grown professionally and not in someone's garage so you get some quality standards there. Then there's the enforcement of THC and CBD levels per price tag, which is something the street won't even bother measuring. There's also the strains: there's pretty good variety at official dispensaries, much more than your local dealer has - but it's all designed for occasional users or first timers for acquisition. Store employees also aren't allowed to recommend anything because effects may vary. So there's this whole attempt at making it like a liquor store (which are also nationalized, btw) but without the same... respect for the product or the user I'd say. Liquor stores have pseudo-sommeliers on staff and special origins and shit.
In California and elsewhere in the states Fentanyl dusting / contamination of illegal drugs including cannabis is a very real and scary danger. Cartels try to dust in a tiny tiny amount to make their product hit harder and form a stronger addiction. But if they get it wrong, it will literally kill you. I am happy to pay a premium for a lab tested product with a legal chain of custody and no spooky additives. I imagine it would be the same in Canada, but also curious.
It's a new market. Out of the gate companies over-promised and overspent (Tweed stores, as mentioned in the article, were way over the top). The market, from my mere consumer perspective, is just fine.
I am incredibly curious but short for time to investigate further. Is the George Smitherman mentioned in this article the very same one listed in all of these interesting stories? Big financial ties to the industry. My conspiracy radar suggests this piece has a motive.
I would agree, it's the first trial run and it went rather well. Now just iterate on it a bit and it will progress or settle down. It's not like alcohol companies all stayed. The amount of wine/vodka/beer/what ever startup -> bust stores are way more then a few large cannabis producers.
I live in Toronto and just got back from my morning 5k walk. I passed 7 cannabis shops and 3 places that used to be cannabis shops. That same route has 6 bars (and dozens of restaurants…)
That ratio of watering holes to weed shops seems a bit off.
> "Others say it's simply a matter of too many players and too much production that far exceeds demand."
This is the real problem: there was a ton of money poured into the industry at the beginning and now there is a ton of people, all who have no idea what the sunk cost fallacy is, getting more money and trying to ride it out and be among the last few companies standing.
An old colleague of mine is the CEO of one of the ground breakers in the industry (started with medical cannabis years ago) so watching his company ride this bronco has been interesting.
This is a big part; some of these new/young companies are now traded on TSX! Many many others (100s I'm aware of) have taken outside money. They thought they were going to be huge but didn't calculate their SAM properly (at all?). Some of them are stuck "unable" to sell at a competitive price because of pressure from up-stream investors to show profit. Meanwhile, a number of smaller self-funded companies are still just chugging along - no investors; no huge growth; just a moderate margin w/no debit. What the VCs call (pejoratively) a "life-style business.
This seems like normal market forces at work. An oversupply will naturally balance out as some stores close to meet actual demand. Achieving 70% of demand from legal markets after long-standing prohibition is commendable.
I don't see the societal benefit of these businesses becoming massive conglomerates, despite the article's insinuation.
Exactly. So there was a boom and now will be a bust.
Right now there seems to be 3 cannabis stores for every convience store, is it any surprise some need to close. And how is that closing a failure? It was a race to capture a new market.
I saw this coming. Weed is basically that - a weed. Plant a seed and 6 months later you have 40-50 pounds at harvest. Plant the correct hybrid seed and it will not spread or pollinate/or by pollinated by another plant. I recall the gps waypoint guy. Canada has huge wilderness areas that have a long summer. Walk in the bushes, plant 3 seeds, set a waypoint, walk on. In ten days you can plant a bunch. Just leave it be, and at harvest time walk your waypoints with an rv and trailer - it will soon be full, and in fact you will have a haul-back and storage problem, and this is where the police used to track these down. Now your 200 way points have given you 10,000 pounds of crop = what now? It has to be dried or it goes moldy.
Currently you can buy assorted weed, dried and sealed in bags for$200 a pound on native reservations. People buy it there(along with cigarettes and gasoline) daily. State police grab a few and scare off many, the smart people use a fat wheeled cart and walk out across the reservation with a cartful to a road 10-15 miles away that is not well patrolled = police eat the easy/fresh donuts of course.
So the aborigines also do online mail order $100 gets you an ounce delivered tax free( an ounce is the max legal private stash) - so the big money market plays all died on the vine. The bootleg crop can match price all the way down to below what the legal ones can match. Just like prohibition - an ecology emerged...
One positive aspect to all of this oversaturation of cannabis here in Canada is is my teens think cannabis is pretty stupid. Ridiculously named tacky stores on every street corner and retailers losing their shirts all over.
The rebellious "counterculture" veneer has worn off entirely.
I think we've actually hit the world the postmodernist theorists of the 1980s/1990s talked about where culture as a whole is so diffuse and decentered that speaking about counterculture is mostly meaningless.
The market can provide any "experience" you want. So there's really no single mainstream dominant focus to be "counter" to. In the 90s I had to hunt for all the "alternative" media I could get my hands on (in record stores, book stores, conventions, clubs, etc. etc), now it can play out on your phone after about 30 seconds of searching.
The demand just isn’t there. Legalization was met with a shrug. Amongst folks I know that used cannabis have been pleased at the ease of buying legally, but everyone else has barely, rarely, made use of this newly legal drug.
> By law, cannabis companies cannot advertise their products or build brand recognition in the way companies in other industries can.
And here’s a big reason why. Advertising companies should point to this as a reason why people should give them money.
I don't think anyone expected or wanted the user base to expand. It would have been pretty easy to squash legalization if anyone thought it was to create new users or that we would be awash in advertising/marketing.
Legalization/commercialization was simply bringing a large black market into the light.
I feel this is the same problem most businesses face in Canada. A small/capped, distributed population with higher cost of business driven by labour rates. Most other businesses (b2b or b2c) get around this by scaling/selling to the much larger, wealthier population down south which is not possible in this case. This is part of the reason we have a market of conglomerates (e.g., 3 telcos, a handful of grocery chains, 5 banks, etc...).
The gov't (re: JT) pushed this through to some fanfare but has resulted in oversupply and fairly botched execution as some other posters have mentioned already. I'd expect to see contraction in the suppliers / M&A as some of the growers and distributors start to go belly up.
Not the govt's fault that all these businesses jumped in on what they thought was a get rich quick scheme.
In Ontario the Wynne gov't had what I thought was a better proposed approach in keeping the retailing under the same jurisdiction as wine/beer/liquor in the gov't run LCBO. When used-car-salesman-Doug got into power that idea got axed, and it seems like every strip-mall has a cannabis store now.
Finally, to your dig about "JT" -- the feds only provided the legalization framework. It's the provinces that administered it in their varying ways.
I'm not a Liberal voter, but I see this very often these days, blaming the feds for things (COVID policies, real estate regulation, etc.) outside their jurisdiction. It's a bit annoying.
Conglomeration happens in all markets. A given American in a given geographical area (say lower Michigan) has exactly the same limits in options of grocery stores, for instance. Almost all Americans choose from three telcos. There is nothing unique in that.
Most markets trend towards a few winners that dominate.
Overall the legalization and commercialization has been a spectacular success, and ultimately it is markets and capitalism at its healthiest. Loads of firms tried to capitalize to find the market saturated, so there are a few winners and lots of losers. Everyone adjusts. That's exactly how it should be.
> The gov't (re: JT) pushed this through to some fanfare but has resulted in oversupply
I’m not sure what the PM should have done here then. Protecting capitalists from misreading the level of demand, or maintaining cannabis as an illegal product?
Readit News
This is a textbook example of a good idea, executed terribly.
Now in order for you to grow cannabis to sell to the store you have to meet a set of extremely strict criteria that range from a specific amount of acres to soil quality, to harvest techniques and warehousing. You can't grow plants over X height, need permissions from neighbouring property as flowering can be aromatic, you cannot spray or use any non-organic fertilizer, and you have to go through a series of reviews, which cost a lot of money. After that you can then grow cannabis which could be sold to a store. A store then takes that and puts it into extremely expensive special packaging that is child safe, keeps the cannabis hydrated to 65% and all kinds of stuff like that.
Now stores tend to promote CBC + THC combinations where you are balanced rather than extremes towards one or the other. As well as beverages which is where I assume they make their actual money. I have no idea what kind of up sale is the average, but you don't really make much off a few people buying 3g or 9g of cannabis in any format minus beverages. Since most of it is taxes anyway.
So you end up with a strong "gray market" that grows faster, and cheaper as there is no restrictions and they can spray and use what ever to grow the product faster. And they don't pay taxes.
It has nothing to do with any sort of "dealer client" relationship, I don't know a single person who calls up any "dealer" and gets cannabis. Everyone I know either goes to the store and buys it or gets it online mailed to them.
Deleted Comment
I live near an ex-urb/suburb of about 20,000 people. There's about 5 Tim Hortons franchises, and I think about 7 cannabis retailers at last count. I strolled into one the other day, a saturday afternoon, and it was a ghost town. Not a person in sight. At least the Tim Hortons have a line-up of addicts at the drive-thru.
I suspect anybody who is serious about smoking the stuff either grows their own (you're permitted up to 4 plants, which is a lot really) or "has a guy."
I live rural, and I have neighbours on one side open-air growing a bunch of plants. Eagerly awaiting first frost, because right now it smells like a college dorm room outside.
Are you sure about that?
Streaming is incredibly fragmented + the geolocation based limitations (certain shows are available in X country but not in Y, subtitles and dubbing varies a lot to) are increasingly prominent. Piracy will always triumph because of the ease of access and getting what you want in the format you want.
ime this is only true for the unwashed masses.
piracy has a trove of benefits, but you gotta know your way around the sharp edges.
I know several people who were avid smokers (even before cannabis was effectively decriminalization after Harper left office and people stopped caring) who still have "their guy" because it is "cheaper and better quality" than what they stores can legally sell.
> This is a textbook example of a good idea, executed terribly.
Partly this was due to the constraints imposed by the "reefer madness" crowd and partly due to the unexpected gold rush. Also, who would be surprised that people like Bill "Pot is Dangerous" Blair would botch a cannabis roll out. I kind of wish they would do a reset and rework the legislation now that people are less worried about it, but the current political climate makes that impossible.
Or "Cannabis is infinitely more harmful [than tobacco]" Harper. The cards have been stacked against legalisation's success since before most of us were alive.
This is why legalizing it was never going to work.
Deleted Comment
I wonder how far off the Canada prices are from the California ones I’m familiar with.
The issue is the taxes are so high it's nearly impossible for a cannabis business to generate income while selling at a price point people will buy it at. You have to remember that generally most of Canada is on the poor side.
you have to get a prescription from a doctor, get registered (and leave a massive paper trail) and then pay the same or more as usual.
most consumers don't bother
I am incredibly curious but short for time to investigate further. Is the George Smitherman mentioned in this article the very same one listed in all of these interesting stories? Big financial ties to the industry. My conspiracy radar suggests this piece has a motive.
https://torontolife.com/tag/george-smitherman/
That ratio of watering holes to weed shops seems a bit off.
> "Others say it's simply a matter of too many players and too much production that far exceeds demand."
This is the real problem: there was a ton of money poured into the industry at the beginning and now there is a ton of people, all who have no idea what the sunk cost fallacy is, getting more money and trying to ride it out and be among the last few companies standing.
An old colleague of mine is the CEO of one of the ground breakers in the industry (started with medical cannabis years ago) so watching his company ride this bronco has been interesting.
I don't see the societal benefit of these businesses becoming massive conglomerates, despite the article's insinuation.
Right now there seems to be 3 cannabis stores for every convience store, is it any surprise some need to close. And how is that closing a failure? It was a race to capture a new market.
The rebellious "counterculture" veneer has worn off entirely.
Deleted Comment
The market can provide any "experience" you want. So there's really no single mainstream dominant focus to be "counter" to. In the 90s I had to hunt for all the "alternative" media I could get my hands on (in record stores, book stores, conventions, clubs, etc. etc), now it can play out on your phone after about 30 seconds of searching.
Dead Comment
> By law, cannabis companies cannot advertise their products or build brand recognition in the way companies in other industries can.
And here’s a big reason why. Advertising companies should point to this as a reason why people should give them money.
Legalization/commercialization was simply bringing a large black market into the light.
The gov't (re: JT) pushed this through to some fanfare but has resulted in oversupply and fairly botched execution as some other posters have mentioned already. I'd expect to see contraction in the suppliers / M&A as some of the growers and distributors start to go belly up.
In Ontario the Wynne gov't had what I thought was a better proposed approach in keeping the retailing under the same jurisdiction as wine/beer/liquor in the gov't run LCBO. When used-car-salesman-Doug got into power that idea got axed, and it seems like every strip-mall has a cannabis store now.
Finally, to your dig about "JT" -- the feds only provided the legalization framework. It's the provinces that administered it in their varying ways.
I'm not a Liberal voter, but I see this very often these days, blaming the feds for things (COVID policies, real estate regulation, etc.) outside their jurisdiction. It's a bit annoying.
Most markets trend towards a few winners that dominate.
Overall the legalization and commercialization has been a spectacular success, and ultimately it is markets and capitalism at its healthiest. Loads of firms tried to capitalize to find the market saturated, so there are a few winners and lots of losers. Everyone adjusts. That's exactly how it should be.
I’m not sure what the PM should have done here then. Protecting capitalists from misreading the level of demand, or maintaining cannabis as an illegal product?