Facing closure, independent shop says no money in legal cannabis
Finance minister says aware of concerns, and working on improving profitability
As the doorbell at Thomas H. Clarke's independent legal cannabis shop goes non-stop, its owner laments its looming closure.
"I did $1.4 million in sales, which is the highest sales of any retailer in Newfoundland, as far as I know. And I'm just barely scraping by," Clarke said Thursday.
Nearly a year into legalization, Clarke says he may have to close his doors in Portugal Cove-St. Philip's because the eight per cent commission on cannabis sales isn't holding up — and he wants double.
They're gonna go back to their dealer. - Thomas H. Clarke
Clarke said he has 300 customers every day who say his shop is the best they've been in, so they're not the kind of customers who will go to Dominion or Esso when he closes.
"They're gonna go back to their dealer," said Clarke, who added that he hopes that dealer isn't him this time — as he went legal from the black market to "do things legit."
Profit margin too small
As a Tier 1 store, Clarke can sell only cannabis and cannabis-related products. He buys cannabis for eight per cent less than what he sells it for.
He said there is also a dollar per gram excise tax not included, so he's down to 7.5 per cent commission. If someone uses a credit card, Clarke has to give 2.5 per cent to that company, leaving him earning five per cent.
"I made 100 to 150 per cent in the black market. Now, I didn't have the sales volumes that I currently have," Clarke added.
He said you can buy a pound of weed for up to $1,600 and sell it for $3,000 on the illegal market right now, and dealers deliver it to your door within a couple hours.
"In order to stop that, you have to have shops like this open," said Clarke.
Clarke said the eight per cent commission from the Newfoundland and Labrador Liquor Corporation, which oversees the province's legal cannabis industry, is what the corporation gives "mom and pop liquor stores."
But those stores can sell other things as well, and therefore have more revenue potential. He hopes that when cannabis edibles are legalized in December, it will mean more revenue for his shop as well.
If he can last that long.
Finance minister says change on horizon
Provincial Finance Minister Tom Osborne said the request for proposals to be a licensed cannabis retailer went out at eight per cent commission.
"This is something that people went into with eyes wide open," he said Thursday.
However, Osborne said, the government and NLC are working on a consultation process with Tier 1 retailers like Clarke, appreciating his comparison to stores selling beer and other items.
"We're more than willing to discuss what possibilities are there to make their operations more profitable," he said.
We need to focus on the profitability side of it. - Tom Osborne
As for increasing the rate of commission owners like Clarke can get, Osborne's answer may give Clarke hope.
"I'm not gonna shut the door on that. It's something we can discuss when we sit down," said Osborne.
He said the province is concerned about how to make things easier on small, local companies, as the legalization process has had challenges with supply and demand to sort out as well.
"Now that most roads seem to have the bumps out of them, we need to focus on the profitability side of it," said Osborne.
With files from Zach Goudie