These 8 companies want to buy Cannabis NB

On Jan. 10, 2020, New Brunswick closed its request for proposals from companies to take over the 20-store Cannabis NB crown retail monopoly.

Eight corporations are in the running for the venture—including the nation’s largest cannabis producer (Canopy Growth), its largest grocery-pharmacy chain (Loblaw Companies, including Shoppers Drug Mart), and the largest chain of convenience stores (Couche Tard, through cannabis retailer Fire & Flower, in which it owns majority stake).

Also among the contenders: Nova Scotia cannabis retailers Green Stop Cannabis, BC cannabis retailer Kiaro Brands, Alberta cannabis retailer YSS Corp, the New Brunswick Association of Cannabis Distributors, and obscure New Brunswick company “RSL – NB.”

New Brunswick finance minister Ernie Steeves said, “We will be diligently reviewing the submissions in order to identify the overall best proposal that focuses on public health, education, and safety and offers the best value for the New Brunswick taxpayers.”

The company his government selects will take over the entirety of the Cannabis NB system for a proposed date this summer.

From the first days of legalization in 2018, Cannabis NB struggled as a crown monopoly retailer, and was among the first retail companies to lay workers off last January during the height of the supply shortage. Sales during the first quarter of legalization were only half of what Cannabis NB predicted, with New Brunswickers buying the least amount of legal recreational cannabis in the Atlantic provinces.

Last April, Cannabis NB reported year-end results showing $11.7M losses, as the company complained it was still having difficulty keeping products in stock. By November, sales were up 17.6%, but the company was still posting losses, and prices remained as much as 46% higher than neighbouring Prince Edward Island, which also has a crown retail monopoly on cannabis.

Here's an identical product sold for $39.10 in PEI and $56.99 in New Brunswick. (PEI says it's on track to make a profit in this fiscal year.) pic.twitter.com/tlRlJUjGw0

— Patrick Cain (@Cain) November 8, 2019

Incoming president Patrick Parent warned the public the corporation would not be profitable until into this year.

Seeking one buyer

The failure of Cannabis NB (which even won retail awards) was so perplexing that the University of New Brunswick Saint John offered a third-year cannabis-research course examining why the crown monopoly was unable to turn a profit.

Shortly after Cannabis NB posted its second quarter of losses in November, finance minister Ernie Steeves announced his government intended to lease the organization to a private operator. However, rather than split the monopoly’s 20 stores among various businesses, the government is seeking a single operator to take over the entire Cannabis NB structure.

The winning private company—one of the eight finalists—will have the option of closing stores or laying off Cannabis NB employees.

Canopy and Loblaw already share a large portion of adult-use cannabis retail in nearby Newfoundland. Ten of Newfoundland and Labrador’s 26 adult-use cannabis stores (38%) are C-Shops, operated by Loblaw as part of their Dominion supermarkets, while six of 26 (23%) are Canopy’s Tweed stores. Fire & Flower, meanwhile, opened its 45th Canadian store last week.

Brock University business professor Michael J. Armstrong worried the stores will still fail under private management, and argued they might have succeeded if they had been designed, as in Nova Scotia, as part of liquor stores.

“You have a relatively small population that’s relatively rural, so it’s difficult for a stand-alone store to make money,” he told the CBC. “They don’t have a lot of fixed costs to cover that way, which means they don’t have to sell very much cannabis.”

However, Nova Scotia’s decision to debut adult-use cannabis retail inside of NSLC Liquor Stores was a controversial one, ignoring warnings in a 2016 report from the chief medical officers of health for all provinces and territories along with 21 Canadian cities not to sell cannabis in the same place as alcohol.

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