It would not be an exaggeration to say that Ontario’s provincial government has done everything wrong in its half-hearted effort to roll out cannabis legalization.
It took the province nearly 6 months to open its first cannabis store. Ontario only has 22 licensed stores in the province today. This compares with over 280 retail locations in the province of Alberta. Alberta has less than 1/3rd the population of Ontario.
Then there is the terrible job the province has done with online cannabis retailing. When only “a handful” of cannabis stores were opened in April 2019, Ontario’s cannabis revenues more-than-doubled in the first month.
That’s a reflection of how anemic were online sales. Now we have another indication of how terribly the Doug Ford government has done with its cannabis retailing. The provincial government managed to lose CAD$42 million selling cannabis in the first 6 months of legalization.
Jay Rosenthal, the president of Business of Cannabis was an apologist for Ontario’s government in a recent interview with the CBC.
Rosenthal’s excuse for the provincial government with respect to this huge loss was that it reflected all of the “start-up costs” of legalization. Fair enough.
However, Rosenthal immediately goes way out on a limb when asked to compare Ontario’s cannabis industry with Colorado’s legal cannabis industry. Most cannabis investors know that Colorado has been the most successful jurisdiction in making the transition to legalized cannabis.
Other state and provincial government can learn from Colorado’s experience, both its (initial) failure and its subsequent success. However, these other governments -- including Ontario -- appear determined not to do so.
This becomes obvious later in the interview.
[Question] We've seen in Colorado, where this has been going on for five years, they finally reach the $1 billion dollar mark in tax revenue. Are we on the path to being as successful as the Colorado Model.
[Answer] I think we are, for a couple of reasons, one — we have a bigger population. Two — we have a higher tax burden of on cannabis and on lots of other things. And three — we actually have the province involved in the distribution and sale of the product so we'll get there probably quicker than Colorado did but we are getting there a lot slower, certainly, in the initial phase with retail.
So I think we'll get there I think we'll probably be celebrating that no earlier than Colorado did. [emphasis mine]
[Answer] I think we are, for a couple of reasons, one — we have a bigger population. Two — we have a higher tax burden of on cannabis and on lots of other things. And three — we actually have the province involved in the distribution and sale of the product so we'll get there probably quicker than Colorado did but we are getting there a lot slower, certainly, in the initial phase with retail.
So I think we'll get there I think we'll probably be celebrating that no earlier than Colorado did. [emphasis mine]
The first thing that Colorado learned about legalizing cannabis is that high cannabis taxes don’t work. The problem is obvious for anyone capable of simple arithmetic (apparently this excludes most politicians).
High taxes on cannabis mean that legal cannabis products can’t come close to competing with black market prices. This guarantees that the black market will continue to dominate cannabis commerce.
That was the experience in Colorado. It is what has been seen in virtually every jurisdiction that has legalized cannabis. It was only when Colorado substantially cut cannabis taxes subsdtantially that legal cannabis sales – and cannabis taxes – went up.
Low cannabis taxes translate into strong revenues for the legal cannabis industry and more tax dollars for the state government. High government taxes not only strangle the legal industry, they result in less tax revenues for government.
Ontario’s clueless policy on cannabis taxation simply spells more failure for the legal cannabis industry in that province.
We learn from our mistakes.
Not Doug Ford’s provincial government in Ontario. The more mistakes it makes in legalizing cannabis, the less it learns.
Rosenthal (and the Ontario government) say that there will be “another 50” cannabis stores opening “sometime this year”. But Ontario has so badly bungled its lottery system for selecting these licensing candidates that the entire process is now bogged down in court challenges.
Ontario’s provincial government has earned an “F” for its effort(?) at legalizing cannabis in this province to date. Going forward, there is no reason to believe it will do any better.
It is still totally inept in simply trying to open up more cannabis storefronts. It is pursuing the worst possible policy with respect to its taxation/regulation of the legal cannabis industry.
Yet (as seen in the CBC interview) government officials and their apologists continue to dwell in their own little fantasy world when it comes to cannabis legalization. In that world, Ontario’s cannabis policies are working and the province is on the road to success.
Incompetent and delusional.