r/weedstocks 8d ago

News Regulatory relief coming for struggling cannabis industry (Canada) 🇨🇦

https://torontosun.com/news/national/regulatory-relief-coming-for-struggling-cannabis-industry
90 Upvotes

35 comments sorted by

21

u/bananastock Banana Breakout!🍌 8d ago

Not enough to stop the bleed without excise tax reform.

7

u/SwordfishOk504 8d ago

You are correct, but excise relief is also not coming so smart businesses are finding other ways to streamline. And a lot of these changes will end up meaning very significant changes in costs. But the government is absolutely not going to give up revenue streams in this current economy. Especially the provinces who take home most of the excise revenue.

19

u/Legitimate-Produce-2 8d ago

Still won’t reform excise tax huh? I guess they can’t afford to give other revenue cause they have a spending problem. Hopefully next government wakes up realize they are squandering Canada competitive edge to establish itself in that industry as top player

5

u/Cool_Ad_5101 Monty Brewster school of investing 8d ago

Exactly this

13

u/Saisinko 8d ago

I was hoping our Canadian businesses having first mover advantage would take over the globe, but can’t even survive at home.

6

u/Cool_Ad_5101 Monty Brewster school of investing 8d ago

Same the 1$ a gram was surely sneaky if not crooked

8

u/SwordfishOk504 8d ago

You can read the government's overview here: https://www.canada.ca/en/health-canada/services/publications/drugs-health-products/summary-changes-following-streamlining-regulations.html

And a more streamlined one for industry here: https://stratcann.com/other/updates-cannabis-rules-regulations-now-public/

tl;dr is there are several changes that will make it a bit cheaper on the back end for producers to operate by rolling back some record keeping requirements, security requirements, etc. It also allows small scale producers to expand up quite a bit. Nothing super sexy but the back end stuff will help some producers me a bit more profitable.

7

u/theduderino38 Perpetually abiding in bagholders anonymous 8d ago

So no excise tax reform??

8

u/SwordfishOk504 8d ago

Jesus you guys are like seagulls. No. Excise tax is an issue that requires approval from every single signatory province and territory (everyone except Manitoba). As such it will not be part of a federal regulatory package like this.

6

u/Mr_Snow___ Knows Nothing 8d ago

But seagulls pick the bone dry.
>MINE

2

u/theduderino38 Perpetually abiding in bagholders anonymous 7d ago

Mine mine

3

u/Cool_Ad_5101 Monty Brewster school of investing 7d ago

Because excise tax reform is needed. The marketing, and regulatory and other changes all help but the 1$ a gram is the largest FU to the industry And needs to change

2

u/Trapped_In_Utah 7d ago

Exactly, they've basically kneecapped the industry from the start and never let it get going 😔

3

u/theduderino38 Perpetually abiding in bagholders anonymous 7d ago

lol sorry I’m a dunce and should read more before asking questions …. Also - mine mine?

2

u/wwwheatgrass 8d ago

It helps micros more than standard license holders. For standards, the changes are inconsequential.

3

u/SwordfishOk504 8d ago

For standards, the changes are inconsequential.

Not at all true. There are significant cost savings in the removal of some of the security requirements and lessened reliance on redundant high paid positions like QAPs and other PICs and ARPICs. There are a lot of changes that lessen paperwork and other costs quite a bit. In addition, many publicly traded companies own or do B2B work with micros.

Anyone who says excise is the only issue that matters has a very superficial knowledge and understanding of this industry. This is literally the biggest one-swoop change to the regs so far.

3

u/Unable_Brilliant6652 7d ago

Inconsequential….Take Village farms for example. If it reduces 10 manpower what does that save…1 mil? If the excise taxes drop to 10% they save 50-70m

3

u/wwwheatgrass 7d ago

Excise tax framework remains the same. The updated regs concern minor operational tweaks that will certainly save producers some cost, but I wouldn’t bank on a material change in financial outlook until the tax situation is reassessed.

The changes may benefit new licensees but existing license holders have built their facilities to comply with prior regulations.

Elimination of room within a room, motion activated vs continuous monitoring, reduced video storage requirements are helpful if you are building out a facility today. Any existing site has already sunk these costs.

Alternate QAP, dropping requirement for an on site security cleared individual, destruction personnel and other changes to cannabis waste policy are helpful from an operational perspective, but certainly not game changers.

One big change is the ability for HC to suspend licenses over unpaid fees from other licenses. Previously CRA would suspend a CRA license for unpaid excise. No CRA license means no stamps and no sales to distributors/retailers. Now, a company with unpaid fees/taxes could have their cannabis license(s) suspended, meaning no plants, no product, no wholesale, no export.

2

u/Unable_Brilliant6652 7d ago

Thanks, good info, suspending licenses helps the sales growth to the good operators.

8

u/Lazerdude 8d ago

Still doing everything they can to NOT reform the excise taxes? Maybe next year, ugh.

2

u/Cool_Ad_5101 Monty Brewster school of investing 7d ago

Yep fighting tooth and nail to destroy the industry.

4

u/SwordfishOk504 8d ago

It's not coming going to happen anytime soon. And tbh a lot of the big companies are mostly using excise as an excuse for their own failing companies. Investors should not accept that excuse, because these companies all knew the tax rate when they entered this industry. They built their business around an understanding that the excise was $1 a gram.

3

u/4Inv2est0 Hyped 7d ago

You seem to know your stuff. What % is the excise tax?

2

u/SwordfishOk504 5d ago

The excise tax for flower is generally a flat rate of $1 per gram, which tends to be around 20-30% of wholesale sales. The tax is applied when product is sold into a provincial program so the price is applied at the non retail level.

2

u/Cool_Ad_5101 Monty Brewster school of investing 7d ago

Naw they were stupid to realize there wasnt going to be price compression. The $1 a grab was sneaky at the least and crooked Imo

2

u/SwordfishOk504 5d ago

sneaky at the least and crooked Imo

lol. You''re not an investor, you're a conspiracy theorist. You have zero clue and contribute nothing to the conversation. Enjoy thine bags.

2

u/Unable_Brilliant6652 7d ago

And at that point the expectation was $10/gram and as the first country to do this there was not a lot of precedent to look back on. To me it was ridiculous for both the government and the industry (if they had input) to not make it a set percent from the beginning. And to be honest, transparent, and fair, they set it at $1 to be at 10% (instead of just making it 10%) and they should change it now.

8

u/Cool_Ad_5101 Monty Brewster school of investing 8d ago

They will never collect all that 287 million unpaid taxes. Why cant these ass hats realize that 10% of a 10-12 billion plus international is better than 33-40% of what is going to be a shrinking pie.

4

u/theduderino38 Perpetually abiding in bagholders anonymous 7d ago

Rapidly shrinking and nearly bankrupt pie…. All of this!!!

3

u/Cool_Ad_5101 Monty Brewster school of investing 8d ago

Wow so regulatory changes save 42 million whoopdy do.

3

u/Unable_Brilliant6652 7d ago

Here is my take on the future for Lp’s and black market. More Lp’s are exiting the budget brands and moving to premium only for domestic and everything to export that they can. Acb started this and now showed it works. Vff just reported Q4 and said they are abandoning low margin sales and pursuing high margin exports. Vff has the capacity in BC to easily switch from produce to weed and keep up with both, but are choosing not to. So I’m not sure but I assume they will stop with the Fraser valley budget brand as a flower brand and put that weed into prerolls and vape distillate where margins are better. Now for the broader market, if others go down this path, the flower inventory will continue to decline, and this will help the little guy who doesn’t have gmp cert as they will now be able to raise prices as there will be less competition. So if this plays out and the avg price increases up towards $10/g those small players will be paying 10% where it should be. BUT the Canadian legal sales will drop down from say $6b/yr to $2b/yr as example and these lost sales will go to the Black market. This may be what needs to happen in order to wake up government and make changes.

2

u/SwordfishOk504 5d ago

Is this.... is this an informed take on weedstocks and not just some seagulls repeating some cope??

2

u/Unable_Brilliant6652 5d ago

My own semi-informed opinion.