Finance minister raises prospect of privatizing Cannabis NB after $11.7M loss

Finance Minister Ernie Steeveswants the province to considerprivatizing Cannabis NB or closing some of its stores afterthe Crown-owned retailer of recreational marijuana products recordeda loss of $11.7 million during its first fiscal year.

"To say [I'm] disappointed would be an understatement," Steeves said Tuesday after theunaudited year-end results were released.

"I'm looking for a way to try and save some money for taxpayers,tryingto make some money for taxpayers, and try and bring in some revenuefor taxpayers and this is not turning out to be one of those ways."

The figures show total sales of cannabis for the quarter ending March 31 were $9.7 million, resulting in a year-end total of $18.6 million.

When Cannabis NB launched last October, former president and CEO Brian Harrimanhad predicted sales of $45 million during the first fiscal year,which he expected would result in a break-even or small loss once start-up and operational costs were factored in.Harriman resigned earlier this month.

On Tuesday, general manager Lara Wood described the financial resultsas "pretty good" for only 22 weeks of sales sincethe storesopened on Oct. 17, when recreationalcannabis became legal across Canada.

It's hard to imagine that it would be sustainable.- Ernie Steeves, finance minister

"We knew there would be challenges and unknowns in this brand new industry," said Wood, blaming the losses largelyon "supply challenges," not its higher than illegal market prices.

But Steevesis questioning whether the existing business modelimplemented by the former Liberal government of Brian Gallant, needs to be revamped.

He said 20 storefronts "seems like a bit of overkill," particularly becausethey're expensive to lease and operate.

"It's hard to imagine that it would be sustainable at this point, but if sales go up dramatically, then there you go."

In the meantime, Steeveswants caucus, cabinet and Cannabis NB officials to look for efficiencies.

"Do we keep the model we have and maybe cut down onthe number of the lowest-producing stores, dowe privatize the model, or do we find an expert in the business and say, 'You know what, manage this for us?' Those are three options, there may be more."

Steevessaid he has been studying the privatized model in Saskatchewan.

"We're trying tolook at all the models in Canada and find out if there's one that's better out there that will work."

People's Alliance Leader Kris Austin has previously called for New Brunswickto abandon the government-owned system of selling cannabis and liquor.

Full privatizationhas worked well in other jurisdictions across North America, he has said, citing Alberta as an example.

"They brought forward a privatization model which saw increased employment, increased revenue, better variety and distribution. Just all the way around seemed to be a better system."

Wood contends Cannabis NB's mandate is not an economic one, but rather to providesafe products, reducethe illicit market and create public awareness.

Having said that, she believes the existing model "has an opportunity to be really profitable and successful" now that the agency has passed the costly start-up phase, which includedhiring and training staff and getting systems set up.

She noted theloss for the latest quarter was $4.6 million, down from $7.1 million in the previous quarter.

"Everything's sort of stabilizing, we're getting back to normal operations and that's why you're seeing that loss get smaller and the trajectory looks really good for next year."

Not enough product to meet demand

The demand is there, she said. It's supply shortages,both in terms of volume and rangeof products at varyingprice points, that have posed the biggest challenge.

Cannabis NB had planned to offer 360 products when it launched, but was only able to provide 50, said Wood.

However, she said there has been "slow but steady improvement."

"As our partners continue to get us the products that we originally wanted, you're going to see a broader range of price points, you're going to see more diversity in products, we are going tobe a bit more competitive on priceand I think that will sort of appeal to customers and bring them back more regularly."

Breakdown of sales

The figures show in-store sales revenue during the fourth quarter was $9.4 million, while online sales revenue was $0.3 million.

Dry flower sales represented 85 per centof sales;extracts,12 per cent;seedsales,0.2 per cent,and accessories, 2.7 per cent.

Parent company NB Liquor will consolidate Cannabis NB's results into its year-end results, according to the release.