The adult-use cannabis industry is quickly becoming one of the world's most lucrative new markets, and weed startups in US states with recreational legalization on the books are seemingly breaking sales records every single month. This is apparently not the case in Canada, where legal pot sales have been held back by supply shortages, high prices, and a thriving black market.
The Société Québécoise du Cannabis (SQDC), Quebec's government-owned cannabis retailer, reported that it sold nearly 10 tons of weed during its first fiscal year of sales, generating C$71 million (slightly over $53m USD) in total revenue. But even with that much profit rolling in, the SQDC reported a net loss of C$4.9 million ($3.7m USD) — a loss that Quebec's taxpayers will end up paying for.
The SQDC is reporting that this loss is due to “non-recurring start-up costs,” and expects to turn a profit of at least C$20 million ($15m USD) in the coming fiscal year. The agency is reporting that it sold C$14 million ($10.5m USD) in weed online and C$57 million ($42.8m USD) via its brick-and-mortar storefronts. These sales still managed to bring in C$21.7 million ($16.3m USD) in sales tax revenue for the province.
There are several reasons why Quebec's first year of legal weed sales was not as profitable as expected. Although the fiscal year ran from June 12, 2018 to March 30 of this year, legal cannabis sales did not begin until October 17th, the day adult-use went into effect. Demand for legal weed was high when the SQDC opened its doors, but a lack of supply quickly forced the retailer to cut its opening hours from seven days a week down to just four. Weed stores were only able to return to their seven-day schedule last month.
Even though it ended its first fiscal year in the red, Quebec actually boasted the highest weed sales of any Canadian province. "Despite the supply issues and its scaled-back expansion plan, the SQDC estimates, based on Statistics Canada data, that during its first months of operation, Quebec was the province with the highest sales in Canada, in dollars as well as volume," the agency said, according to The Canadian Press.
Sales figures from nearby Ontario are even more bleak. The Ontario Cannabis Store, which has a monopoly on sales in the province, is expecting to report a loss of C$25 million ($18.8m USD) for its first fiscal year, and only expects to turn a C$10 million ($7.5m USD) profit this current year.