Who Owns The Most Profitable Cannabis Business in Canada?



canadian government owns weed

According to MJBizDaily analysis, various levels of government own the most successful cannabis companies in Canada. At the same time, total losses in the private sector have easily surpassed 16 billion Canadian dollars ($12.5 billion), with giant producers like Ontario-based Canopy Growth Corp, Smiths Falls, Alberta-based Aurora Cannabis, Edmonton, and New York City-based Tilray Brands being the main contributors.

 

The giant companies have not yet achieved profitability even though:

  • Investors invested billions of dollars before and after cannabis legalization in Canada.

  • The federal government protects Canadian producers against foreign rivalry in the medical cannabis industry.

  • The Canadian federal government rewarded the same companies with federal grants worth hundreds of millions of dollars that are not to be repaid.

 

MJBizDaily looked into the financial statements of many publicly listed and government-owned companies. Privately held businesses typically do not disclose financial accounts and are excluded from the research. The Ontario Cannabis Store (OCS), which anticipates earnings of approximately CA$262.8 million ($200 million) over a three-year financial year ending in March 2022, has been the most lucrative cannabis business in Canada to date.

 

The OCS is the monopoly cannabis supplier for more than 1,600 privately held retail stores in Ontario. The OCS is known to be owned by the provincial capital, and the government nominates its board. Société québécoise du cannabis (SQDC), which has generated approximately CA$168.5 million in net revenue since legalization, is the second-most lucrative cannabis company in Canada. The SQDC is the sole government-owned distributor and retailer of cannabis in Quebec. Contrary to Ontario, Quebec forbids privately operated cannabis outlets and uses a government monopoly to control all sales volumes, including those made online.

 

The third most lucrative company is the BC Liquor Distribution Branch (LDB), which operates some wholesale and retail cannabis enterprises in British Columbia. According to its latest yearly report, the government organization generated net profits from its cannabis business of about CA$36 million. Furthermore, cannabis NB, the province-owned cannabis retailer and wholesaler in New Brunswick, has also announced solid earnings. For 2020–2021–2022, Cannabis NB is anticipated to generate a total net income of CA$31.7 million. For their respective provinces, the four state-owned businesses collectively generated a net income of just shy of CA$500 million.

The provinces in which the government-owned cannabis enterprises are located receive the income. As regards issues surrounding SQDC, all profits after expenses are entirely paid as a dividend to the Ministry of Finance. According to SQDC’s annual report, the dividend is reinvested primarily in cannabis-related research and prevention initiatives. SQDC also collects excise and consumer taxes, which are anticipated to be worth CA$195.4 million. The federal government receives $56.4 million, while the Quebec government receives about $139 million. OCS revenues in Ontario also return to the general public.

 

According to the OCS’s annual report, it is “proud of its financial contributions that sustain significant public services, particularly throughout the COVID-19 pandemic, at a time when front-line services have been crucial to the social and j economic and social health of our province.” According to Amanda Winton, a spokesperson for OCS, the company is a self-funded, profit-making government business venture whose yearly revenue is disclosed in the Public Accounts of Ontario.

 

Net revenues from the OCS may be put into the Consolidated Revenue Fund and released publicly to the Ontario government to fund its financial commitments according to the Ontario Cannabis Retail Corporation Act, 2017. According to Winton, these monies assist in crucial financing public services that all Ontarians can use. Our first aim is to keep customers away from the black market while running a productive company that benefits Ontario taxpayers.

Contrary to cannabis businesses operated by the Canadian government, revenues from the private sector have been few. While cannabis growers are subject to strict government oversight, they have also committed a number of errors, including:

 

  • Disastrous greenhouse investments costing millions of dollars, resulting in billion-dollar “balance sheet revisions.”

  • Selling just under 20% of their output since the legalization of adult cannabis use is catastrophic for any agricultural enterprise.

  • Destroying a significant amount of stock, at an estimated 900 million grams of dry, unpackaged marijuana since its legalization.

  • Overproduction. By the end of November of last year, the total weight of dried cannabis held by authorized growers, distributors, and retailers had risen to 1.4 billion grams.

 

 

Not all giant cannabis businesses have faced those challenges.

 

Pure Sunfarms, established in Delta, British Columbia, and a subsidiary of Florida-based vegetable grower Village Farms International, has been one of the most successful federally permitted mass growers. Over the past few years, Village’s Canadian cannabis industry has roughly broken even in terms of net income. Prior to being purchased by Quebec-based Hexo Corp. in 2021, cannabis producer Redecan also declared an annual profit.

 

However, according to financial documents, Redecan, now a subsidiary of Hexo, lost CA$91,000 in the most recent quarter concluded in April 2022. Decibel Cannabis Co. recorded net revenue of CA$1.7 million in its fiscal year ending 31st of December 2021, compared to a net loss of CA$9.2 million the previous year. Tilray has recorded lucrative quarters but not annual earnings. The company revealed in the latest Securities and Exchange Commission publication that it “opened for business in 2014 and has yet to earn a profit.”

 

Conclusion

Anindya Sen, an economics professor at Ontario’s University of Waterloo, believes the government does not need to monopolize crucial sections of the cannabis supply chain in order to earn “rent” from the industry. He claimed that governments might recover the same amount of cash from businesses through tariffs and other measures they are earning from the industry by controlling critical supply chain segments such as the wholesale market.

 

According to Sen, the government will still obtain the same earnings through a wholesale levy. The government will still enjoy the benefits of a private market, with development and job opportunities, as an economic growth engine.

 

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