Ontario Presses Cannabis Suppliers to Cut Prices

Article by Christina Pellegrini, Globe and Mail

Ontario presses cannabis suppliers to cut prices CHRISTINA PELLEGRINI

Ontario’s cannabis retailing arm is putting pressure on some growers to reduce prices as the province strives to ensure marijuana on its shelves will be cheap enough to compete with the illicit market.
In talks with producers to determine which companies will supply the recreational market, officials for the Ontario Cannabis Store (OCS) are pushing for some strains of flower to be available to consumers at a retail price of about $7.50 a gram, including taxes, according to sources familiar with the matter.
The Ontario government stands to be the biggest buyer of legal cannabis in Canada once the non-medical use of the drug becomes legal on Oct. 17. Companies made submissions to the OCS last month, outlining the product selection they have to offer and the wholesale prices at which they are willing to sell.
The OCS was unsatisfied with the producers’ prices for what the government considers entry-level cannabis, and sources said the OCS is in the process of haggling with growers in a bid to keep retail prices low without sacrificing its own margins.
A spokesman for the Liquor Control Board of Ontario, which operates the OCS, said that he was unable to answer questions on Thursday regarding the state of talks with potential suppliers.
It is unclear whether the OCS, which has been touring production facilities and meeting with companies for weeks, will be able to persuade growers to lower their wholesale prices to a point where both parties are content with their cut of the pie. Some sources believe that the threat of a supply shortage could hurt the OCS’s bargaining power.
Ontario is telling the potential suppliers that it wants to have product available at a price point that can compete with the illicit market, the sources said. The talks so far suggest that this price would include the proposed tax that growers have to pay to the government, as well as the taxes paid by the consumer at the point of sale. Offering competitive pricing from legitimate sources is seen as one way to snuff out illegal sales, fulfilling one of the policy objectives expressed by the federal government.

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