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How did the Ontario Cannabis Store lose $42-million selling weed?

September 18, 2019
Ameri ontario cannabis store
Photo by Jesse Milns
Cannabis is supposed to be profitable. How can you lose money selling cannabis? As it turns out, there are a bunch of ways, but in the case of the $42-million loss the Ontario Cannabis Store (OCS) reported last week for the fiscal year ending March 31, there are a few explanations worth noting.

The first is that prior to March 31, there was no brick-and-mortar cannabis retail in Ontario, and the supply shortage was at its apex. As we’ve learned in the near-year since legalization, retail stores tend to drive retail sales at a far-greater rate than online stores, where people are more hesitant to buy—both because they fear for their privacy, and also because they can’t smell product samples.

Arguably, Ontario’s real experiment with legalization started April 1—the day after the end of this report period, when brick-and-mortar private retail stores opened alongside the government’s online outlet.

But unlike other provinces, Ontario’s Ford government didn’t invest any money into building retail stores, which leaves the revenue-dwarfing $106-million in expenses that outpaced $64-million in sales looking even more mysterious.

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Some of the lost money represents the cost of scrapping Kathleen Wynne’s Liberal government’s plan to make the OCS a provincial monopoly with 40 outlets throughout the province within the first year.

Doug Ford’s decision to cancel that plan last August in favour of “unlimited cannabis retail licenses” beginning in April (a number Ford later decreased to 25 retail licenses, followed by a second set of 50) cost at least $10-million. These costs, Global News reported, went mainly to pay for equipment and renovations that were later written off, and to costs associated with terminating the leases on four properties chosen by the Wynne government as the first Ontario Cannabis Store outlets.

Related

Opening Day in Ontario: 10 Cannabis Stores Approved to Open

The Financial Post, which broke the OCS numbers down in greater detail, noted the OCS’s $44-million cost of sales was so great that it obliterated two thirds of the company’s $64-million in revenue, leaving a gross product of only $19.8-million.

Jesse B. Staniforth's Bio Image

Jesse B. Staniforth

Jesse B. Staniforth is the editor of the free cannabis-industry
newsletter WeedWeek Canada. He also reports on Indigenous issues,
cybersecurity, and food safety.

View Jesse B. Staniforth's articles

  • Pasquale

    50yrs it’s been still as good today as the first.

    Nature’s gift.

  • Nikko

    I like to start off by letting people know that the Tweed company that rolls for the government stores is ripping us all off…

    The 1 gram pre-rolls are under weight (.08g) to be exact , and small as hell and I have informed 3 of the employees about the ripping off Tweed is doing.

    I have contacted Tweed about it and all could say they will look into it and we all know that’s a bunch u bullshit!!!…

    So maybe that could be a reason why the they have lost the money they have.

    The only pre- rolls I always get are the RIFF
    ‘Sunday Special’. Those are proper in size and weight.

    • TrappenWeisseGuy ;

      Trudeau is in bed with Tweeds founder.

      • gary clarke

        This problem is country wide. Hobo recreational cannabis in Vancouver is so over priced it’s not funny, they will be next to go broke.

  • chulookin

    Well… lol… since home owners are growing their own…everyone is getting it from them for $50 an ounce….or….*$2.00 a gram…or in bulk for $700 a pound…so…why over pay ?…we’re not stupid…
    Hold on this is waiting to be approved by Leafy…lol…wake up !!! Been eight hours & counting Leafy….the LPs’ have a right to know…oh also Natives’ are growing + selling flower for fifty an ounce or a half ounce for thirty dollars… people have a right to know…I’m not turning my computer off until this is approved as I’m recording this to show the bias.

    • Rebecca Wood

      I agree with you live in the USA and is a medical cannabis card patient you have to go where you can save money these days stuff is to much money especially with cannabis go great Canada patients A

    • TrappenWeisseGuy ;

      I’m a little concerned about what the conservative government will do if elected. I mean I don’t buy government weed to begin, with but I’d like a better selection than “knowing a guy”. And yes the wait for posting here is ridiculous.

  • Rory Lyness

    Is there someone who can send Doug Ford a batch of “cookies” so he can mellow out and realize the damage/ devolution he is causing the province by cutting health and education?