Ontario budget says cannabis store will lose $25 million this fiscal year, but profit next year

Cannabis

According to Thursday's provincial budget, the Ontario Cannabis Store will lose $25 million this fiscal year, citing Liberal management of the supply shortage as a main reason. 

"By choosing to throw open the doors to cannabis legalization without first taking into account the reliability and sustainability of the national cannabis supply, the federal government is failing to curb the growth of the illegal cannabis market while also creating widespread business uncertainty," the document said. 

Of the 25 licensed cannabis operators, only roughly half are currently operating and 12 of the locations have had their $50,000 letters of credit begin to be withdrawn.

"Cannabis-related revenue outlook will change once the government has determined that the federal government has provided for enough reliable supply and further retail store authorizations are issued," the budget said. 

Following the loss next year however, the government is projecting the Crown corporation will see cannabis sale become a profit at $10 million. 

That will be followed by projected profits of $25 million and then $40 million the next two years. 

Professor Michael Armstrong with the Goodman School of Business at Brock University says we have to partly take the government at its word because there's so little we know about Ontario Cannabis Store operations. 

"There's no information about what they're paying to the producers, for the costs of the goods they're selling, nothing about their operating expenses," he said. "So it's basically a black box so far and that's something I'd like to see the Ontario Government improve on."

"They talk a lot about being open for business, it would be nice if they were open about their Ontario Cannabis Store."

However, based on public data we do have, such as OCS order numbers, Stats Canada sales information and the basic principles of business, he doesn't think the projections are unreasonable. 

"There would be a lot of start-up costs, a lot of fixed costs and relatively low revenue," he said, adding $40 million in three years is attainable. 

"Hopefully the supply has improved well before then, we would be having a lot more than 25 stores hopefully so we'd be talking about several hundred million dollars of cannabis sold per year in Ontario," he said.