The Ontario government is seeing high profits from the cannabis sector, while retailers are being charged more for their products.
According to recently released public accounts, the province made over half a billion dollars from cannabis.
But some local retailers are saying this large profit is coming at their expense.
“The whole system needs to be revamped,” said Brian Garner, owner of Cambridge cannabis retailer Caribbean Oxygen.
The Ontario Cannabis Store (OCS) has a 31 per cent mark-up that's up over an estimated 28 per cent from the previous year.
Garner says it’s ludicrous that for every $1 spent at his store around 44 cents is going to the government in one way or another.
“Luckily we are still making a profit, but I know there are many stores that aren’t and they are closing down,” said Garner.
Hespeler Village Cannabis is another store that is feeling the impacts of rising OCS costs; feeling like the government is out to make more of a profit than help eliminate the black market.
“They could still be making a profit if they weren’t charging as much,” said Ramandeep Gill, owner of Hespeler Village Cannabis.
Gill thinks that to really hurt unregistered sellers, the province should remove red tape and flood the market with cheap legal cannabis. If the mark-up was half of what they are charging now, more stores would be in business and the government would still make billions of dollars, he added.
The OCS acknowledges these complaints and is in the process of addressing some of concerns stores are having.
"The OCS is undertaking a review of its approach to pricing to assess whether changes are needed to support illegal market capture objectives," said Daffyd Roderick, senior director of communications for the OCS in an email to CombridgeToday.
Their goal is to provide licensed producers with greater transparency while still ensuring they can provide a meaningful return to the province.
With the rise in living costs across the board, some of Carribean Oxygen’s regular customers have turned back to buying cannabis from the black market, said Garner. For some people, tuning back to their old dealers is starting to make sense with the way the market is going, he said.
The province is not only raising prices for wholesale, they operate their own online store, selling directly to consumers for often times cheaper than what in-store can offer.
At the OCS, 28 grams of 'Fruity Pebbles OG' will cost the customer $124.95 with taxes included, while at Caribbean Oxygen they sell it normally for $134.98 taxes in.
“The fact that they have an online store, I think, is ridiculous,” said Garner. “If you want a reseller market or a partner channel, you're not supposed to compete with it.
All of the cannabis retailers are like independent dealers on the street and when the kingpin, the Ontario government, is also selling to consumers and for cheaper, it can look a little messy.
The OCS denies claims that they are in competition with local stores, saying they continue to work as partners to create a retail network that covers the province. "This is beneficial to us all in capturing sales from the illegal market," added Roderick.
Despite having lower prices, the OCS claims that in the last quarter, over 96 per cent of sales took place at a brick-and-mortar retail store.
The rising prices and "friendly" competition from the government is not the only complaint Garner has with the OCS. He claims they are the most disorganized business he has ever worked with.
“They make mistakes weekly and correcting their errors is even tougher for them. Nothing makes sense,” he said.
Sometimes Garner will order a product only to find out that he’s not getting it the day of delivery. If he orders $20,000 worth of product, he can end up with only a third of his shipment, because the rest is suddenly out of stock. “It's a complete mess,” he adds.
Hespeler Village Cannabis is also seeing these issues crop up in their shipments as well.
“We will not receive a product and they will claim it is out of stock. When you go on their website to order something else, they have that out-of-stock product available on their store for consumers to buy,” Gill said.
The OCS has become a thorn in the side of retailers in Cambridge, but over saturation of the market is one of the main concerns for the business owners.
Garner had two pot shops located close to his Galt shop; in about a two minute walk you could pass all three. One of them has recently closed down and Garner is hoping to be the last one standing.
“We pride ourselves on our customer service and experience. We know all our customers on a first name basis and have the largest variety out there,” he said.
With climbing prices from inflation and a turbulent economy, the owners of Caribbean Oxygen and Hespeler Village Cannabis say they're happy to be in business and are weathering the storm.
“We think in the next month or so there will be a price break, bringing prices pretty low. We just gotta hold onto that and keep on going forward,” Garner said.
