Yahoo Finance 6 months in, pot shops in Sask. say prices push people to dealers
Recreational cannabis has been legal in Canada for six months, but licensed retailers in Saskatchewan say they are still struggling to compete with the illegal market.
According to Statistics Canada, marijuana users who buy their product legally are paying, on average, almost 57 per cent more than those who buy it illegally.
Saskatoon pot-user Brandon Gerbig said that price difference is one of the biggest reasons he still buys his product from dealers or unlicensed websites.
Gerbig said the strain he normally purchases for $5 per gram online is $18 per gram in local stores, despite the fact that it's grown in the same area.
"I don't know what the retail market would have to do to make me pay that much more for the same product."
Gerbig said he bought a few grams from each store in Saskatoon, but he hasn't been convinced to fully switch over to the legal market.
"The dealers are people I trust and they let me interact with the cannabis a lot more before I buy it," Gerbig said.
He said shopping online makes it easier to research strains and look up reviews.
"It's just not that possible in a shop."
Quality in question
Gerbig also takes issue with the quality of cannabis in the legal market.
"Sometimes you open it up and it's dry as a bone and it falls apart in your hands and when you try and grind it it just turns to dust," he said. "Cannabis has to have a certain amount of humidity within it to be good for grinding, good for smoking, good for vaping.
"I don't think the producers really know how to preserve cannabis long-term, especially when it's going out to a retail market to be sold."
Saskatchewan pot users are speaking with their dollars, or lack thereof.
In the first months after the legalization of cannabis, sales at cannabis stores in Saskatchewan were lagging behind every other province in the country, according to Statistics Canada.
Across Canada, $151.5 million in cannabis was sold from the date of legalization on Oct.17, 2018, to the end of December. Saskatchewan cannabis stores sold just under $2.5 million in product in that time.
Corey Tyacke is the general manager of 5 Buds Cannabis, which has stores in North Battleford and Warman. He said the federal government needs to take action to help drive revenue towards the licensed retail market.
"Sales have been disappointing," Tyacke said.
"When you look at the efforts that the retailers have made to open these wonderful stores and provide employment for people in Canada, we pay taxes and all those things that go with traditional retail, and we're up against a black market industry where it's a website or an individual who's just providing a service, not paying taxes."
Tyacke said the wholesale price of each product is set by the licensed producers. Federal and provincial taxes are applied and then the retailer adds their margin.
"I think Health Canada needs to take a really good look at their tax system," Tyacke said. "They're aggressively taxing it."
In Prince Albert, Prairie Cannabis president and CEO Jim Southam said suppliers need to charge less for wholesale product.
"We're getting Google reviews and social media comments and in-store comments and you know us retailers are on the front line of dealing with customers," said Southam. "What we're hearing the most is that pricing is the largest barrier for them to use the legal market."
Southam acknowledged the startup costs and red tape faced by suppliers.
"Anything in a regulated market is obviously going to be a little more expensive than something that was produced and sold on the black market where there is no regulation," he said.
29 permits not being used
Each province and territory has its own rules for cannabis, including the legal minimum age, where adults can buy it, where adults can use it and how much adults can possess.
In Saskatchewan, you have to be 19 to purchase cannabis products in stores or online.
The province used a lottery to determine who would be able to get the 51 cannabis retail store licences in the province. So far only 22 of those licences have been issued by the Saskatchewan Liquor and Gaming Authority (SLGA).
Jimmy's Cannabis Shop co-founder John Thomas was awarded four licenses and has since opened locations in Martinsville, Battleford and Estevan. Two opened on legalization day. His store in Moosomin will open on April 20, commonly celebrated in the cannabis community as 4/20.
Thomas said being part of the legal market has meant educating both staff and customers. He said many cannabis users expected it to be regulated like alcohol and were surprised to learn they couldn't bring their children in store and would be ID'd whether they were 19 or 95.
"It's certainly been an interesting journey," Thomas said. "You're introducing a brand new legal industry, it's bound to provide some headaches. A lot of those have been kind of cleared up and especially supply. The supply issue in Saskatchewan anyway has greatly improved."
The SLGA allows retailers to work directly with suppliers, rather than purchasing from the government, a decision praised by some store owners.
Those who were awarded licences to open cannabis stores must be operational within 12 months of legalization, or the SLGA said it will pass on the opportunity to the runner up in that community.
Once a permitted store is fully operational, the owner can sell the permit. In Saskatchewan, the only restrictions on who can buy existing permits are that the new owner has to meet the SLGA's permitting requirements and cannot hold more than 50 per cent of permits in any one community.
While many store owners say long-time pot smokers are sticking with their old dealers, Tyacke said it has provided an option for others.
"We're seeing a lot more of people who haven't used the product in years or it's the first time they're trying it and now it's like it's sort of a regulated product and they can trust it," he said. "They know it's been tested and they know that Health Canada has done its due diligence to make sure it's a safe product."
Gerbig said more avid pot users would switch their buying habits, joining new pot users in legal stores, if changes are made.
"If the price comes down and the quality comes up, I would gladly support local business and buy cannabis in Saskatoon."
