Why a P.E.I. cannabis company says it’s losing money, in an industry-wide trend

0
25

Touring round FIGR’s large manufacturing facility in Charlottetown, it would be straightforward to conclude the P.E.I.-owned cannabis company is prospering. 

Everywhere you flip, workers are busy filling baggage and cartridges with cannabis flowers and oil, or loading merchandise into packing containers, that can wind up in shops proper throughout the nation. 

But as busy because the company and its 130 workers are, and as strong as gross sales have been, the CEO stated it’s hardly translating into a revenue. 

“If you look throughout the trade, I do not know that you’re going to discover a licensed producer reporting a revenue at this level. And as a native company competing in the trade, we’re definitely not resistant to that both,” stated Alex Smith, FIGR’s CEO. “The trade is not viable proper now for licensed producers.”

High taxes, low costs 

Smith stated the most important problem is the excise tax imposed on cannabis producers. For each gram of cannabis they promote to distributors, they owe the federal government $1, or 10 per cent of the per gram worth — whichever is bigger. 

Since pot grew to become authorized 4 years in the past, he stated, producers throughout Canada have needed to decrease their costs to compete with unlawful growers and sellers, who do not face the identical overhead prices or taxes. 

When cannabis merchandise first hit cabinets, many licensed producers began promoting their merchandise for $7-8 per gram. Now, most are promoting for $4 or much less per gram, and $1 of that’s misplaced to the excise tax. 

“So what that outcomes in, is a tax that’s 25-35 per cent of our revenues, which is restrictive,” he stated. “If you have a look at any enterprise, giving up 25-35 per cent of revenues, it’s merely not a sustainable enterprise model.”

Alex Smith, CEO of FIGR, says excessive taxes and competitors from unlawful growers and sellers are stopping his company from turning a revenue. (Steve Bruce/CBC)

Adding to the problem? The rising value of nearly every part — besides cannabis. 

“It’s type of a double whammy. Our prices are going up. But we won’t merely elevate our costs or shoppers will go to that unregulated and probably unsafe space of the market, and return to these channels,” stated Smith. 

Cannabis group lobbying Ottawa 

They’re all points the Cannabis Council of Canada has been elevating in Ottawa this week, with members of parliament and federal officers. 

The council’s president, George Smitherman, stated many cannabis companies throughout the nation are on the point of closure. 

His council’s calling on the federal authorities to streamline a overview of the Cannabis Act, together with the excise tax. In the meantime, it needs Ottawa to drop a separate 2.3 per cent regulatory tax that producers should pay. 

“We’re saying to authorities, ‘again off a little in the quick time period, and collectively we are able to develop the pie collectively,'” stated Smitherman. “Otherwise, we run the danger, particularly in a lot of elements of rural Canada, the place cannabis has been related to financial renewal, of seeing some setbacks.”

FIGR’s CEO worries elevating costs would make it powerful to compete with unlawful growers and producers, who aren’t taxed and do not face the identical overhead prices. (Juan Mabromata/AFP/Getty Images)

While FIGR’s CEO stated the company has prevented shedding any workers, it has began eliminating some positions as folks have left them. 

In truth, over the previous two years, staffing numbers at FIGR have dropped from 160 to 130. 

“We’ve needed to make very tough selections — mood our development, scale back head depend over time simply to stay aggressive in this house,” he stated. 

About a 12 months in the past, a group of native buyers took over the company. Smith stated they’re decided to show it into a worthwhile enterprise. 

“We have a workforce to provide one thing very particular on the Island. We simply want the assist from authorities to do this.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here