Concerns grow that British Columbia may lowball cannabis growers for supplies

(This article has been updated to include comments from the BC Liquor Distribution Branch.)

As British Columbia begins the process of securing supplies of recreational marijuana for sale later this year, concern is growing among executives that the province is lowballing cultivators.

That could limit the quality of products available in the legal market and bolster the black market, one industry executive warned.

In meetings between the BC Liquor Distribution Branch (LDB) and licensed producers, the wholesale prices being discussed might be too low for businesses to produce anything but low-quality “commodity grade” product, according to executives familiar with the talks.

The LDB is responsible for securing a supply of recreational marijuana for sale in both private and government-owned stores.

The “key aim” of the LDB is to be competitive with the illicit market, spokesperson Viviana Zanocco said in an emailed statement.

“We will continue to work to develop an assortment of products that includes competitive pricing to ensure we can effectively compete with, and ultimately eliminate, the illicit market,” Zanocco added. “We will not sacrifice quality for cost, and will be sourcing the highest quality product for each product segment.”

The LDB wouldn’t comment on specific pricing, but confirmed that it has not made any offers to licensed producers.

One executive, who requested anonymity because of the ongoing negotiations, said the BC LDB “risks being branded by its patrons as a place to get boring weed, and if you want to get good weed you have to go to the black market. If the black market is seen as better quality and price, we’re going to continue to perpetuate what’s going on.”

Another source said it “simply doesn’t make a lot of sense” for licensed producers to be engaging in transactions with the LDB at the numbers being discussed, because producers can get higher prices from other wholesalers.

British Columbia is said to be offering producers between 2.50 Canadian dollars and CA$4 per gram wholesale ($1.94-$3.11), whereas other provinces are willing to pay between CA$5-CA$6 per gram.

Moreover, some Canadian producers are getting around CA$20 per gram for medical cannabis in export markets like Germany.

“So why would (a licensed producer) want to engage in a price war with the LDB when you can be making more elsewhere?” the source said.

“BC has to understand that, at the end of the day, there is a limited number of LPs that will have sales licenses by September, so they’re not fully understanding that there’s a limited supply. And that supply can ship to other provinces or countries.”

Matt Lamers can be reached at mattl@mjbizdaily.com

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