Marijuana

How Do You Lose Money Dealing Marijuana? Be a Government Agency.

Ontario has lost millions trying to sell cannabis.

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When Canada legalized recreational marijuana, it did a lot of things right, including lower weed taxes than you'll find in some U.S. states. Unfortunately, it also insisted on licensing, heavy regulation, and state monopolies in the supply chain.

The result: Over the last fiscal year, Ontario has lost $42 million—$31.7 million in U.S. dollars—by getting the country's largest province directly involved in setting up the marketplace.

Ontario doesn't just handle the licensing and regulations. It also is responsible for operating the only legal online site for purchasing marijuana in the province, and it is the only wholesale vendor. The Ontario Cannabis Retail Corp., the state-owned business that runs the Ontario Cannabis Store, reported revenues of $64 million for the last fiscal year, which ended in March. But newly consolidated financial statements show that during the same time, the corporation logged $106 million in expenses. (The province of Ontario, incidentally, logged a $7.4 billion budget deficit for the 2018-19 fiscal year.)

Tons of supply-side problems hamstrung the rollout of legal marijuana in Canada, leading to shortages in stock, not enough storefronts, and bureaucratic troubles for private vendors seeking permission to operate. Because the state handles the wholesaling, it had to limit the number of storefronts it would permit, leading to a lottery. Thousands entered for 75 allotments, and it all got messy.

British Columbia has seen similar frustrations due to not having enough licensed—only 60 for a province that is physically larger than California. Alberta next door has 270 licensed retailers and is making more than four times as much revenue as British Columbia in sales, even though British Columbia has a higher population (5 million compared to 4.3 million). The government of British Columbia wants to share revenues with cities within the province, except it doesn't actually have any revenue to share, according to Finance Minister Carole James.

Canada's legal marijuana isn't as expensive as it is in places like California. But the process is still so bogged down that a black market for weed still remains.

On the positive side, many of those issues are being resolved; legal marijuana sales across Canada are mostly on the rise. Ontario reported $25 million in cannabis revenue for June. British Columbia reported $4.1 million for June, doubling its revenue from February. The country will start permitting sales of edibles in October, but supply-side issues may mean yet more shortages in supply.

Government bureaucracy works slowly, and it lacks the profit motive that prompts the private sector to sort things out quickly. Until Canada and its provinces get their collective acts together for licensing and approvals, they'll be holding the private market back and costing taxpayers money in the process.

NEXT: Banning Flavored E-Cigarettes Has Nothing to Do With the Hazards of Black-Market Cannabis Products

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  1. Holy crap. Can’t make money selling dope as a single source supplier? LOL

    1. Single LEGAL source. The black market product is cheaper and better.

  2. Don’t get high on your own supply.

  3. Bwuhahaha! People who never finished high school can make money selling dope, but a government? Not so much.

    Sweet Jesus, and they wonder why some of us don’t want them put in charge of anything important.

    1. One thing to keep in mind; If they MADE money out might be more embarrassing than LOSING. Certainly all kinds of people would be asking all kinds of questions along the lines of “How dare you?”. LOSING money is something governments do every day.

      I will say, though, that I now know of examples of governments losing money on three of the classic ‘gangster operated’ businesses;

      Everybody has at least heard of the Nevada bordello that the government took over and lost money on. And we have this example of failing to make money on Pot. When I lived in the Washington DC area there was an Adult Bookstore (what Bookstore? Books were always decidedly in the minority. Video and magazine racks dominated) that had been taken over because the owner was in over his head for back taxes. They had a good location, ok stock, and should have been raking it in. They were losing,

      Drugs, pornography, and prostitution. Governments can lose money on all three,

  4. Until Canada and its provinces get their collective acts together…

    You, sir, are an optimist.

  5. STOP POURING GRAVY OVER THE DOOBIES.

    1. lol. dude.

  6. If you like your dealer, you can keep your dealer.

  7. The State Store model applied to pot. No surprise here. It failed for State Stores, why would it not fail for pot?

  8. Now the joke about the alien landing and saying “Take me to your dealer” isn’t funny anymore.

  9. The weed at their state stores is low quality too. The better cannabis is still found on the Reservations or black market.

  10. “How Do You Lose Money Dealing Marijuana? Be a Government Agency.”

    Oh, please.
    The government can’t lose money selling MJ any more than it can lose money running a post office.

    1. Well, much like a hedge fund or Bernie Madoff, it loses other people’s money.

  11. >>>a black market for weed

    rolled eyes so hard one fell out

  12. Something, something, sand, Sahara Desert.

  13. the corporation logged $106 million in expenses

    Because…?

    No one is asking why Ontario spent so much. That figure seems ridiculous.

    1. Leafs tickets

  14. I don’t know the details, but it seems reasonable to assume that the first year would include significant one-time expenditures even for a private business: purchasing real estate, training staff members, establishing supply chains, advertising, etc. I’ll be curious to see what the numbers look like in year 2.

    Of course, profitability is not the only (or even primary) consideration when it comes to the trade-offs between the public and private models. I see other comments here regarding the quality of the legal stuff – if that is indeed suffering, that’s a huge failure of the public approach.

  15. How many employees of the state run cannabis operation have been caught smoking the inventory without paying for it?

  16. Two things to note.
    The government of Ontario is Conservative. They specifically do NOT want any government run business to succeed.
    The Premier of Ontario Doug Ford, was never actually arrested for drug dealing when he was a teenager, although the Globe and Mail, “Canada’s National Newspaper”, wrote extensively about the business he and his brother, Rob Ford (yes, the crack smoking former Mayor of Toronto) ran in their teens. He did not sue.

  17. “British Columbia reported $4.1 million for June, doubling its revenue from February. ”

    It was routinely reported as far back as I can remember that BC Bud was a BILLION-dollar/year industry. Also, they make you show an I.D. card at the govt head shops. I ask you, what kind of moran would hand over his ID to score govt dope when he could buy it on any random street corner anonymously.

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