New Brunswick wants to ditch province's Cannabis NB for private pot retailer

New Brunswick wants to ditch province's Cannabis NB for private pot retailer

The New Brunswick government plans to hand over recreational cannabis sales to the private sector, according to the province's finance minister.

Finance Minister Ernie Steeves announced Thursday the provincial government has issued a request for proposals for a single, private operator to "undertake the operation, distribution and sales of recreational cannabis in New Brunswick."

"This is part of our efforts to energize the private sector, get our financial house in order and maximize the benefits for taxpayers and the government," Steeves said.

Cannabis NB, the provincially owned and operated cannabis distributor, has been a money-loser since the outset of legalization in October 2018. New Brunswick is among several provinces dissatisfied with their retail cannabis model and proposing to overhaul the system.

Elizabeth Fraser/CBC

The Progressive Conservative minister said he never liked the Liberal-implemented business model, which sees the government monopoly run 20 stores across the province.

During a news conference in Fredericton, Steeves said the provincial government should not be in "the business of business." 

"Our government strongly believes our role should be to regulate and enforce the regulations to protect the health and well-being of our citizens," he said.

Steeves did not estimate what the transition could cost the province, saying the details will be ironed out through the proposal process.

Steeves blamed high prices unable to undercut the illegal market, supply issues, restrictive Health Canada regulations and expensive store leases as factors for why Cannabis NB is failing.

Rival parties react

People's Alliance Leader Kris Austin applauded the move, saying "it's the right thing to do." Austin has long called for the privatization of cannabis and liquor in the province.

"We have always said this needs to be placed in the free market and that the government's only involvement should be in the regulation and taxation of cannabis sales," Austin said in a statement.

Green Party Leader David Coon sang the opposite tune, saying it was "very disappointing." He said government did not give Cannabis NB enough time to turn a profit, and there could have been smarter decisions to build a sustainable model.

"It's a startup that went from prohibition to legalization, and it takes time," Coon said.

"There's no need to rush to judgment based on such a short period of time … but the government is deciding to go a different route and, I guess, we'll be looking at legislation around this."

The People's Alliance's three seats in the legislature would give the governing minority Tories enough votes to push through new laws.

Cannabis NB promises improvement

Patrick Parent, the newly installed CEO of Cannabis NB, said the future of the corporation rests with the government but pledged to improve the operation and continue its plan to roll out edibles in the coming months.

"We have clearly stated on numerous occasions that we must offer more competitive products. We couldn't agree more on this point," Parent said, in a statement Thursday afternoon.

He said Cannabis NB has negotiated lower prices with producers that will challenge the illegal market.

Elizabeth Fraser/CBC

"We will continue to make consumers aware of our offers, albeit within the very restrictive regulatory framework around advertising," Parent said. 

"We will continue to offer an exceptional educational in-store and online experience fully respecting the federal and provincial laws governing the cannabis industry."

Workers' fate unclear

What happens to the roughly 250 Cannabis NB employees if a private operator takes over remains unclear. 

Steeves said it would be up to the business, adding it's likely a successful proponent would want a trained workforce.

But employment and other issues, such as which stores might be closed or opened, would be up to the company, he said.

The minister emphasized that Cannabis NB will continue operating as usual, and the transition would occur only if a "compelling" proposal was presented.

RFP conditions

Proponents interested in taking over cannabis sales will need to demonstrate experience in recreational sales, financial capacity to develop and sustain operations and "a viable plan" to combat the illegal market, the provincial government said. They have until Jan. 10, 2020, to submit their proposals.

The proposals will be evaluated by a third-party fairness monitor. A new private operator could be announced as early as spring 2020, with a new delivery model later next year.

The provincial government would bring amendments to the New Brunswick Liquor Corporation Act in the fall.

Sustained losses

Although legal cannabis sales in New Brunswick showed some improvement over the summer, Cannabis NB, which has 20 stores across the province and also sells cannabis products online, continues to lose money.

At the end of October, Cannabis NB reported that sales in its second quarter, which covered 13 weeks ending Sept. 29, were $10.7 million.

CBC

That was a 17.6 per cent increase over first-quarter sales.    

The provincial Crown corporation has been in financial difficulty since it launched October 2018, when recreational marijuana became legal in Canada.

Cannabis NB sales have been less than half the original projections, forcing layoffs and causing significant financial problems. It was expected to break even but lost $12.5 million over its first six months and a further $2.2 million during the first quarter of this year.

The latest results increase losses to $16.2 million over its first 50 weeks.

Initially, Cannabis NB blamed a lack of supply for sales problems but, more recently, has pointed to illegal dispensaries it said are poaching customers.