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Friday, Dec 9, 2022
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

Canada

New Brunswick Mulls Cannabis Privatization After $11.7 Million Loss

Privatization allows companies to take on the risk leaving the government on the sidelines to collect taxes and add oversight.

Canadian marijuana concept and Canada canabis law and legislation social issue as medical and recreational weed usage icon as a red maple leaf on a background of green pot symbols in a 3D illustration style.

New Brunswick’s premier is considering privatization after the government-operated Cannabis NB lost $11.7 million in the first six months of recreational pot becoming legal.

Premier Blaine Higgs said he will look into the details of the loss and supply issues played a role, but his government will look at all options including privatization to stop the bleeding. “It’s not something we’re going to run at a loss,” he said.

Unlike every other province, New Brunswick didn’t take advantage of its existing government-run liquor stores in its business model. Cannabis NB built separate stores from the ground up instead.

Ontario offers privatization lessons

When Ontario rolled out its highly-restrictive plan for cannabis, some industry critics predicted doom in Canada’s largest province. With a government monopoly and airtight controls in place, it seemed destined pot consumers would stay with their black market dealers or head to less restrictive provinces.

But Premier Doug Ford changed the game when he came to power and privatized cannabis sales in Ontario.  And although the provincially-run Ontario Cannabis Store has struggled and is set to lose $25 million in its first fiscal year, the government monopoly wouldn’t have fared any better.

Ontario has blamed the federal government for the slow start to privatization as supply issues have restricted the number of shops that have been able to operate so far. But in the long run the province expects a brighter future with profits rising to $40 million annually by the 2021-22 fiscal year.

Canada’s legal weed regime sees growing pains

With many marijuana companies running at losses while burning cash, it’s not a surprise that a government-run operation isn’t faring better. Privatization allows companies to take on the risk leaving the government on the sidelines to collect taxes and add oversight.

Alberta’s privately-run legal cannabis operations have seen success, which should offer other provinces reassurance that pot can be sold successfully while ensuring safety and community interests.

We’re still in the early stages for the legal industry with more growing pains ahead until supply increases and consumers have efficient access to products. But looking south to the U.S. market for legal weed might be the best example for success. With a free enterprise approach in those 10 states, it allowed the legal market to mature and sales to climb. Colorado might be the best example where privatization has led to yet another record sales month after it first legalized pot in 2014.

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