HIGHLIGHTS
- New Brunswick issues RFP for a single company to become the province’s wholesaler and retailer
- Alberta-based pot retail chains applaud the opportunity
- Successful company will show ability to partner with local entrepreneurs and First Nations
The New Brunswick government’s decision to get out of its loss-making marijuana business and choose one private company to run wholesale and retail cannabis operations within the province will better serve consumers and taxpayers alike, but the move will likely limit competition in the region.
On Thursday, New Brunswick Finance Minister Ernie Steeves said that Cannabis NB’s financial losses have caused the government to turn to the private sector.
The provincial Crown corporation, Cannabis NB, lost almost $12-million in its first six months and continues to lose taxpayer’s dollars even as sales rise. Now the province has issued a request for proposals (RFP) to find a single private operator that will be responsible for the operation, distribution and sales or recreational pot.
Edmonton-based retail chain Fire and Flower Holdings Corp., which also has a wholesale business in Saskatchewan, plans to apply for the opportunity in New Brunswick, said Trevor Fencott, chief executive of Fire and Flower.
“We view this as a very positive step and we absolutely applaud the New Brunswick government for recognizing that the most taxpayer-efficient system is private cannabis distribution,” Mr. Fencott said.
“We’re looking forward to the opportunity to compete for the opportunity.”
Fire and Flower’s wholesale distribution business in Saskatchewan called Open Fields operates with just six staff members and sells product to seven of its corporate stores and 32 others, with the capacity to service an additional 100 outlets.
“Margins for distribution are admittedly lower because it’s wholesale. We do not lose money on that operation because it’s our money,” Mr. Fencott said.
This move will make New Brunswick the second Canadian province to privatize recreational cannabis at the wholesale level.
“We are happy to see the Province of New Brunswick make this announcement," said Nick Kuzyk, chief strategy officer and senior vice-president of Capital Markets for High Tide Inc.
“High Tide’s operational expertise as both a bricks-and-mortar and online retailer, as well as a wholesale manufacturer and distributor of accessories, positions us well for an opportunity such as this.”
When cannabis was legalized in late 2018, Saskatchewan was the only province to permit private companies to run wholesale operations. In other provinces, the provincial government is the sole wholesaler of adult-use pot, and the numbers are not looking good.
Alberta Gaming, Liquor and Cannabis saw negative revenue of $34-million from cannabis last year and estimates $114-million more in negative revenue over the next four years.
The provincial pot wholesaler in Ontario posted a $42-million loss in its latest fiscal year, though it had positive revenues, and the Ontario Cannabis Store has since launched consultations to get the private sector involved in the storage and distribution of cannabis.
“The more provinces that allow private distribution as well as retail, that’s when retailers can compete with each other,” Mr. Fencott said, adding that this is what ultimately will displace the black market.
Increased retail competition typically results in lower prices for consumers.
Mr. Steeves said the previous Liberal government went with a bad business model that stuck the province with expensive leases on 20 stores across the province. He also said Health Canada regulations make it hard to be successful.
“I’m convinced Health Canada did not want it to succeed. Health Canada has come out with rules like you can’t smile in pictures on our website, because that might encourage people to take part in this activity,” Steeves said.
Though the plan in New Brunswick is for one company to operate the wholesale and retail portions of the recreational cannabis supply chain, proposals will be reviewed on their approach to building direct and indirect partnerships with local entrepreneurs and First Nations.
“It is good that the province is leaning on the private sector in terms of retail and wholesale. The private sector is generally more receptive to consumer demand,” said David Clement, North American affairs manager for the Consumer Choice Center.
“It’s a huge opportunity for whoever wins it but a much better approach would be to empower local entrepreneurs in the same way that we do for restaurants or bars or stores.”
Mr. Clement questioned the decision to offer this opportunity to just one company, adding the province should allow for more competition within the sector.
- With a file from Canadian Press