Secrets of Canadian Hemp's Rapid Growth
This study by our Canadian colleagues actually reveals the secrets of the rapid growth of Canadian cannabis sectors associated with the use of the therapeutic and recreational properties of the hemp plant:
- the federal government of Canada protects Canadian manufacturers from foreign competition;
- for the most part, profits in the two above-mentioned segments of modern cannabis production in Canada are associated with the monopoly position of companies in specific administrative-territorial units of the “Maple Leaf Country”;
- private hemp corporations, despite attracting significant investment funds, traditionally demonstrate losses in their economic activities;
- the technological development of various segments of modern cannabis production in Canada predetermines the active provision of grants for the development of know-how in this sector of the country's economy;
- considering the fact that government officials initially budget for their administrative-territorial units, as well as the federal government, it is difficult not to guess at what level the interests of the most profitable Canadian hemp corporations are lobbied if they are promoted to specific markets of other states.
According to a study by our Canadian colleagues, the most profitable cannabis businesses in Canada are owned by various levels of government. At the same time, the cumulative losses of the private sector specializing in the cultivation of cannabis with significant therapeutic potential exceed $ 12.5 billion - with the lion's share coming from large producers such as Smiths Falls, Canopy Growth Corp, Edmonton , “Aurora Cannabis”, “Tilray”, etc. For example, in a recent filing by Tilray's management with the U.S. Securities and Exchange Commission, the company acknowledged that it "began operating in 2014 and has yet to turn a profit."
The largest private companies have not yet become profitable despite the fact that:
• investors have poured billions of dollars into the industry before and after regulation of the therapeutic and recreational use of the hemp plant in Canada;
• the federal government protects Canadian growers from foreign competition in the medical cannabis market;
• the federal government of Canada showered cannabis corporations with hundreds of millions of dollars in federal grants - a resource that does not need to be repaid.
So far, the most profitable marijuana business in Canada has been the Ontario Cannabis Store (OCS), which is expected to make about $200 million over the three-year period ending in March 2022, according to the analysis. OCS is owned by Ontario and its Board of Supervisors is appointed by the provincial government. It is he who is the monopoly wholesaler of hemp for more than 1,600 private retail stores in Ontario.
The next highest-grossing cannabis business in Canada is the Société québécoise du cannabis (SQDC), with a net profit of about $120 million since legalization. SQDC is a Quebec state monopoly engaged in wholesale and retail cannabis trade. Unlike Ontario, Quebec does not allow leaves and flowers to be sold through private cannabis shops, preferring instead to use the state monopoly on all retail sales, including online.
BC Liquor Distribution (LDB), which includes cannabis wholesale and some retail in British Columbia, is the third most profitable cannabis business in Canada. According to a recent annual report, the above organization earned about $25.6 million in net profit from its cannabis business.
New Brunswick-owned cannabis wholesaler/retailer Cannabis NB is also reporting good earnings. Cannabis NB's combined net income is estimated to reach $22.5 million over the period 2020-21 to 2021-2022.
Together, the four state-owned companies generated just under $356 million in net profits for their respective provinces.
Where does the profits of state-owned hemp companies go
State-owned cannabis enterprises transfer the profits they make back to their provinces.
In the case of SQDC, all income, after deducting expenses, is fully transferred to the Ministry of Finance of the province of Quebec in the form of dividends. The dividends are then reinvested mainly in cannabis-related prevention and research efforts. In addition, the SQDC collects consumer and excise tax revenues estimated at $137.6 million. About $98 million goes to the government of Quebec and about $40 million to the federal government.
In Ontario, OCS profits are also returning to public hands. In its annual report, OCS said it is "proud of its financial contributions that support important municipal structures, especially during the COVID-19 pandemic, at a time when municipal services have been essential to the economic and social health of our province." OCS spokeswoman Amanda Winton says the organization is a self-financed, income-generating public business enterprise whose annual income is included in Ontario government accounts. “Under the Ontario Retail Cannabis Act of 2017, net profits from OCS can be transferred to the Consolidated Revenue Fund and made available to the Government of Ontario to support its financial priorities. These revenues help pay for important community services that benefit all Ontarians,” says Ms. Winton. "Our priority is to take consumers away from the illegal market while running an efficient business that benefits Ontario taxpayers."
The situation in the private sector
Unlike Canadian government-owned cannabis businesses, private sector profits have been marginal at best. Cannabis growers face heavy government regulation but make many mistakes themselves, such as:
• loss of hundreds of millions of dollars due to failed investments in greenhouses, resulting in billions in "balancing adjustments";
• selling less than 20% of its production since the legalization of the use of cannabis for recreational purposes, which is unacceptable for any agricultural business;
• destruction of a huge amount of commodity stocks;
• mass overproduction.
Commentary of the specialists of the “Ukrainian Industrial Hemp Association”
This study by our Canadian colleagues actually reveals the secrets of the rapid growth of Canadian cannabis sectors associated with the use of the therapeutic and recreational properties of the hemp plant:
- the federal government of Canada protects Canadian manufacturers from foreign competition;
- for the most part, profits in the two above-mentioned segments of modern cannabis production in Canada are associated with the monopoly position of companies in specific administrative-territorial units of the “Maple Leaf Country”;
- private hemp corporations, despite attracting significant investment funds, traditionally demonstrate losses in their economic activities;
- the technological development of various segments of modern cannabis production in Canada predetermines the active provision of grants for the development of know-how in this sector of the country's economy;
- considering the fact that government officials initially budget for their administrative-territorial units, as well as the federal government, it is difficult not to guess at what level the interests of the most profitable Canadian hemp corporations are lobbied if they are promoted to specific markets of other states.
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