High fees, long delivery times work against cannabis retailers, store owners say
CBC
Some cannabis store owners say the current retail structure works against businesses — and they want changes to help them survive in what's become an ultra-competitive market in Manitoba.
The province has introduced legislation that would eliminate the social responsibility fee, which takes six per cent of a store's gross sales to use for public education, safety, health and addictions associated with cannabis legalization. The bill, which has not passed yet, would repeal the social responsibility fee starting Jan. 1, but retailers say that's not enough — fees and taxes need to be reviewed so the market can find some stability.
"For a new business to get off the ground, often you're not seeing profitability in the first two years ... and then it might be a little modest going beyond that," said Mistik Cannabis Co. co-owner Melanie Bekevich.
The heavy fees imposed on cannabis retailers are having a huge impact on the store Bekevich and her husband, Othmar Joos, opened in Winnipeg last year, she said.
"It [makes] it very difficult to compete against the illicit market, who are not subject to any of those licensing fees or taxes," she said.
Bekevich said along with the social responsibility fee, cannabis retailers are charged a licensing fee, excise tax and a wholesale markup from Manitoba Liquor & Lotteries. This is in addition to taxes imposed on cannabis producers, which affect prices before retail stores even order product.
"If stamping out the illicit market is a priority for the government, they absolutely need to review those fees and taxes," Bekevich said.
Finance Minister Cliff Cullen said the province is in negotiations regarding the excise fee and how it's being split with Ottawa.
He said he's optimistic the repeal of the social responsibility fee will allow stores to lower their prices and help drive cannabis sales away from illegal sources.
"We think [eliminating the fee] will be another tool for [retailers] to increase their market share," he said.
Tom Doran, who owns Jupiter Cannabis with his wife, America Fernandez, said he's concerned for independent businesses that are shouldering additional constraints that don't apply to bigger businesses.
"There's just some things that I think need to change in terms of creating a level playing field," he said.
Doran said larger brands can negotiate discounts directly with suppliers because they're purchasing big quantities for multiple stores.
"We don't qualify because we don't purchase enough inventory," he said. "We're just one independent location."
