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Marijuana delivery proposed as a way to save Canada Post

Marijuana delivery proposed as a way to save Canada Post

Canadians consume marijuana. They smoke it. They eat it. They use its extracts and derivatives.

Statistics Canada found that 43 per cent of Canadians over the age of 15 have tried the drug and 33.5 per cent have used it more than once.

Furthermore, in a 2015 poll by Forum Research just under one-fifth of participants, or 18 per cent, admitted to having consumed the drug in the past year, with an added 13 per cent saying they would be more likely to do so if it were legal.

And with Canada lurching towards legalization, many businesses are looking to get into the market, including Canada Post.

A task force studying the floundering Crown Corporation released a 94-page discussion paper earlier this week that found “fundamental and transformational changes” are need to save it from having to be propped up by taxpayers.

One of the changes suggested was the distribution of marijuana across the country by Canada's postal service, with its more than 6,200 post offices and pickup locations also getting in on the act.

The report estimates that 88 per cent of Canadian consumers live within five kilometres of a postal outlet.

Through its currently unparalleled national delivery network, Canada Post stands to capture a large part of the recreational shipment volume,” says the report. 

“(It) is positioned to benefit from increased distribution revenues regardless of whether sales jurisdiction is accorded to the federal or provincial levels.”

Francoise Bertrand, one of the task force’s chairwomen, told the Toronto Star that sales could generate between $10 million and $20 million a year in delivery fees. 

“There’s not a huge amount of money,” she told the newspaper.

Joanne McNeish, a professor at Ryerson University’s Ted Rogers School of Management, told Yahoo Finance Canada in an email based on her own estimation the profits from deliveries would be “relatively high” but the net revenue will likely be “small.”

McNeish pegged the cost of delivery at between $2 and $5 based on the fact that the national mail carrier charges $12 charge per delivery for alcohol, which is much heavier than marijuana, and it will likely be more than a stamp but less than a parcel.

She added that eight million Canadians could be considered potential marijuana users, which could translate to 31,000 orders a year based on the fact that many consumers may shy away from publicly purchasing the drug because of its social stigma and may prefer home delivery.

Mike Moffatt, a professor of business, economics and public policy at Western University, said Canada Post’s potential foray into marijuana delivery could be beneficial for the Crown Corporation, but likely won’t have the “transformative” effects needed to rescue its financial woes. 

I think it shows that Canada Post is looking for any sort of revenue model it can get – they’re in a lot of trouble,” he said, adding that this shows its “desperation.”

“They keep talking about postal banking, and that kind of thing, so they’re looking for any revenue stream possible, but I think this is going to be a fairly small one.”

In the report, the national mail carrier offered the July rollout of alcohol delivery from the LCBO in Ontario through Canada Post as a model to follow.

The LCBO said the new the service has been a success and expects 40,000 orders in the first year. 

However, Moffatt was quick to put the number in perspective, noting that a similar number in terms of marijuana deliveries would represent a “drop in the bucket” compared to the millions of packages delivered by Canada Post. 

“I mean it is a rounding error … certainly, it is additional money, but in the grand scheme of things it is not transformative,” he said.

He added that it is difficult to project a true outcome because  there hasn’t been any research on the subject, there’s no precedent in terms of companies offering a similar service around the world and the rules governing recreational marijuana use have yet to be revealed. 

But Moffatt remains unconvinced that mail-order weed would “move the needle” for the Crown Corporation.

However, he said the move could help it attract a new customer base among young Canadians. 

Moffatt said the answer to Canada Post’s problems likely won’t come from one source, but a variety of new revenue increases across the board.

“There’s no silver bullet for this organization,” he said.

Canada Post posted $8 billion in revenue from operations in 2015, but the task force’s report said a decline in letter mail deliveries is sapping these revenues and other operations have yet to make up the difference. 

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