How are they fairing? What are their challenges? What are some potential solutions?
CertiCraft was joined by Kyp Rowe and Abyan Schupp of Shelter Cannabis, and Ben Williams of Joint Venture Craft Cannabis.
You can watch the full recording of The State of Craft episode 15 here.
For those who don’t have time to watch the full episode, here is a summary of some of the points discussed.
- The provincial boards want legacy growers to transition to the legal market, and they generally support initiatives that help them do that. It’s beneficial for the government – more legal businesses means more tax from excise, sales, payroll, and corporate. They also want to hear about companies that get brought over from the legacy market.
- Excise Tax is too high and makes it hard to have a sustainable business. With a tax of $1/gram, in many cases the government makes more than the grower.
- In addition to the excise tax, there is also a ‘provincial adjustment’, where the province can adjust by adding a markup, tax, or fee. Each province does this differently.
- Excise Tax represents 24-30% of top-line revenues, making it near impossible to break even. A producer needs to be able to produce a gram for $1.50 to make money, and the days of retailing for $4-$6/gram are gone.
- Other restrictions like marketing and labeling make it hard to let consumers know what exists. The SKU process is challenging and different from province to province.
- Being able to deliver direct to retail would be extremely beneficial. It would improve supply lines and speed up the process. In BC, micros can now work with a wholesale manager in the BCLDB so that if a product doesn’t qualify for provincial retail stores, they can still speak to a buyer for potential access to private retail.
- The existence of a government body between the producer and retailer slows things down. They don’t have the expertise and years in the field to understand the nuanced differences between products. Producers should be able to directly interact with budtenders to explain the product to someone who understands it and be able to give samples like in liquor stores.
- Medical sales can be a benefit to producers since there isn’t a provincial board making decisions, however, the excise duty applies just the same for cannabis packaged for medical prescriptions, despite prescription drugs generally not being taxed at all in Canada. This, again, makes it so that businesses aren't able to turn a profit and in turn struggle to support medical patients.
- Exporting can be beneficial in the future; however, we must also be mindful that if we open ourselves to imports, the market may get flooded with cheaper products from the US and Mexico, ultimately harming the Canadian industry.
- Provincial distributors being able to return products to vendors can make it difficult for small businesses. Until the product is finally sold to a retail store, the producer can’t be confident that their product is sold.
- Processors should have access to farm gate. However, farm gate may not provide the desired revenue since many producers do not necessarily want to turn their site into a place to be visited by the public. The demographic growing cannabis is different from that of the wine industry, and many don’t want to have restaurants or host events.
- More focus needs to be put on locally produced products. Having designated shelves at retail stores for local products can be beneficial. In Quebec, only products from Quebec are sold. Nova Scotia and PEI have similar initiatives.
- Consumers wanting to support the craft industry should ask stores for local products.
Want to keep reading about processing? Check out The State of Craft episode 21 with Antidote Processing.
This article was written in tandem with Mike F.