Who Owns the Most Profitable Cannabis Business in Canada?

According to an analysis by MJBizDaily, different levels of government own the most successful cannabis companies in Canada. At the same time, total private sector losses have easily exceeded CA$16 billion (US$12.5 billion), with giant producers such as Ontario-based Canopy Growth Corp, Smiths Falls, Alberta-based Aurora Cannabis, Edmonton and New York City- is based on Tilray Brands, which made the main contributions.

The giants have not yet reached profitability, although:

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

• The federal government protects Canadian producers from foreign rivalry in the medicinal cannabis industry.

• The Canadian federal government rewarded the same companies with hundreds of millions of dollars worth of non-repayable federal grants.

MJBizDaily examined the financial statements of many public and state-owned companies. Privately held companies typically do not disclose financial accounts and are excluded from the investigation. The Ontario Cannabis Store (OCS), which expects revenue of approximately CA$262.8 million ($200 million) for a three-year fiscal year ending in March 2022, has been Canada’s most lucrative cannabis business to date.

The OCS is the monopoly cannabis supplier to more than 1,600 privately owned retail outlets 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 net sales of approximately CA$168.5 million since legalization, is the second most lucrative cannabis company in Canada. The SQDC is the only state-owned distributor and retailer of cannabis in Quebec. Unlike Ontario, Quebec bans privately operated cannabis outlets and uses a state 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 businesses in British Columbia. According to its latest annual report, the governmental organization made net profits from its cannabis business of approximately CA$36 million. Additionally, Cannabis NB, the province-owned New Brunswick cannabis retailer and wholesaler, also announced solid earnings. For 2020-2021-2022, Cannabis NB is expected to achieve CA$31.7 million in total net income. The four state-owned companies together generated a net income of almost 500 million Canadian dollars for their respective provinces.

The revenue goes to the provinces where the state-owned cannabis companies are located. For questions related to SQDC, all profits, net of expenses, will be paid in full as dividends to the Treasury. According to SQDC’s annual report, dividends are primarily reinvested in cannabis-related research and prevention initiatives. SQDC also collects excise and excise taxes, which are expected to total CA$195.4 million. The federal government will get $56.4 million, while the Quebec government will get about $139 million. OCS revenue in Ontario is also returning to the general public.

According to the annual report of the OCS, “it is proud of its financial contributions that sustain important public services, especially during the COVID-19 pandemic, at a time when frontline services have been critical to the social and economic and social health of our province.” According to Amanda Winton, a spokeswoman for OCS, the company is a self-funded, for-profit state-owned company whose annual earnings are disclosed in the Public Accounts of Ontario.

Net proceeds from the OCS may be contributed to the Consolidated Revenue Fund and publicly released to the Ontario Government to fund its financial obligations under the Ontario Cannabis Retail Corporation Act of 2017. According to Winton, these funds contribute to the crucial funding of public services Ontarians can use. Our ultimate goal is to keep clients off the black market while maintaining a productive business that benefits Ontario taxpayers.

Unlike the Canadian government-run cannabis companies, revenue from the private sector has been small. Despite being subject to strict government oversight, cannabis breeders have also made a number of mistakes, including:

• Catastrophic investments in greenhouses costing millions of dollars and leading to multi-billion dollar “balance sheet reviews”.

• Selling just under 20% of their production since adult cannabis use was legalized is disastrous for any farming business.

• Destroyed a significant amount of stockpile of an estimated 900 million grams of dry bulk marijuana since its legalization.

• overproduction. By the end of November 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 companies have risen to these challenges.

Founded in Delta, British Columbia and a subsidiary of Florida-based vegetable grower Village Farms International, Pure Sunfarms has been one of the most successful state-licensed mass growers. In recent years, Village’s Canadian cannabis industry has roughly evened out in terms of net income. Prior to its purchase by Quebec-based Hexo Corp. in 2021, cannabis producer Redecan also reported an annual profit.

However, according to financial documents, Redecan, now a subsidiary of Hexo, lost CA$91,000 in the most recent quarter ended April 2022. In comparison, Decibel Cannabis Co. reported net sales of CA$1.7 million for the fiscal year ended December 31, 2021 compared to a net loss of CA$9.2 million for the prior year. Tilray has had lucrative quarters but no annual profits. The company announced in the latest Securities and Exchange Commission publication that it “began operations in 2014 and is yet to turn a profit.”

Conclusion

Anindya Sen, an economics professor at the University of Waterloo in Ontario, believes the government doesn’t need to monopolize key parts of the cannabis supply chain to earn “rent” from the industry. He claimed that through tariffs and other measures, governments could recoup the same amount of cash from companies they earn from the industry by controlling critical segments of the supply chain like the wholesale market.

According to Sen, the government will still get the same revenue from a wholesale levy. The government will continue to enjoy the benefits of a private market with development and employment opportunities as an engine for economic growth.

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