Cannabis NB CEO Expects Profits To Boom Exponentially In The Crown Corporation
According to the statement made by the CEO of the Crown Corporation who is in charge of Cannabis sales in New Brunswick, the first quarter post the legalization of cannabis in Canada has proven to be extremely profitable. According to globalnews.com, the business expects to see a huge profit this business year.
The reports of the Cannabis NB’s fourth-quarter results for the time of 2019-2020 showed a $500000 profit that came with a yearly loss of $4.3 million.
Moreover, according to Patrick Parent who is the president and CEO of ANBL and Cannabis NB, it is expected that the upward trend is more likely to continue with a profit of about $1 million only in the first quarter of this business year.
A statement made by him said that they have been profitable for seven consecutive months now and although the quarter is not officially closed yet, he can’t be specific with the figures. But however he is confident enough that they are more likely to bring in a profit of $1 million for Q1 alone, which is a substantial turnaround versus the last year, Parent stated.
As it has happened that covering only five months in its fiscal year, Cannabis NB has lost around $12.5 million. The huge losses incurred prompted the government to look at privatizing cannabis sales in the province and also issued a request for proposals in November.
When the RFP was announced, the Finance Minister, Ernie Steeves said that the best approach for New Brunswick taxpayers and the government is to turn to the private sector.
The province has reportedly received eight bids from the interested parties in the private sector and it is also said that last week a decision on whether or not to move ahead with the privatization thing is quite on a track for later this summer.
Furthermore, the statement made by the spokesperson of the Department of Finance, Vicky Deschenes in an email read, that like many activities, the COVID-19 pandemic has had quite an impact on the RFP evaluation work over the past few weeks and that being said it is still quite possible that a decision shall be taken by the end of the summer.
The turnaround in Cannabis NB’s fiscal situation clashed with the arrival of Parent, who has taken over from outgoing Brian Harriman.
Parent has stated that his priority to come in was because to stem the losses and move towards profitability which thereby involves cutting some of the operational expenses but most importantly lowering the price point for the customers.
Furthermore, Parent added that what they first needed to do is to renegotiate the pricing with the suppliers. The price points were at a place that they could not pass those savings on to the consumers.
Parent also said that this has allowed Cannabis NB to begin offering prices that are truly competitive with the black market and are also among the cheapest legal prices in the country that includes a $100 ounce of dried flower.
Now as it happens that the Crown Corporation no longer continues to be a fiscal liability, the decision on whether or not to sell, becomes more complicated. But according to one expert, that is perhaps not the most important question which the province needs to question itself for.
Shelley Rinehart, the head of the MBA program at UNB Saint John has raised a question that says, is this a business they want to be in. Now, this truly is a question that the government needs to answer. Do they want to be in that business or would they rather prefer not to be a part of that business?
However, if the decision to sell is finally being made then the move from a public monopoly to a private one will constitute a large amount of regulatory work on the part of the government, and that also with no guarantee that a private seller would have greater fiscal success.
An associate professor at Brock University named Michael Armstrong has stated that the government may need to look at changing some of the present structures in the current regulatory framework to make it worth it for a private operator. He also added that if the government doesn’t intend to be in that business, it is not a core business of the New Brunswick Government, and then they must be at ease to walk away. He also added that they must be realistic in their approach and must find out what they are getting by walking away. He stressed the point, that how nothing is not going to get magically better, but if they still require some standalone stores or if they still have an excise tax that on a $5 (one gram) product, that would make up about a third of the price.
According to him, as long as they have got those restraints in place, the private sector isn’t going to turn in a huge profit.
One thing that should factor in making the decision is the potential long term profitability of the Crown Corporation.
Rinehart further added that when they sell off a revenue generator or a potential revenue generator, then in that case they have to make sure that the money they get upfront in equivalent to the money they would generate over five years.
Armstrong said that now that Cannabis NB is at least breaking, there is subsequently no harm in putting a potential sale on hold.
He further added that if he were in the charge at this point, then he would have just said an Okay and they would have managed to break even and let them run for another year. Now that they have got this new CEO, this means that they have got these new products and so they all must let them play for another year.
According to Parent’s viewpoint, Cannabis NB has the potential to be a handsome revenue-generating asset down the road as it continues to try and gain back its former black-market customers.
As per Statistics Canada, 31.7 percent of the New Brunswickers are still getting their cannabis from certain illegal sources while 40.1 percent are going through legal forefronts. Therefore, Parent sees quite a stable potential to expand that market share and even expand from the twenty stand-alone stores which are in operation right now.
Parent stated on how Cannabis NB is reportedly generating month over month increasing profits and increasing earnings and therefore they believe that they shall continue to increase those returns to the province. They also believe that it is an asset that is worth investing in, Parent said.
Parent says now how other opportunities come with a hybrid model that would thereby expand the footprint, albeit at a lower cost.
He says that there have been plans made for how to create agency stores or a store within a store model, used by ANBL in rural areas across the province. But due to some reasons, the plans have been shelved to allow the RFP process to take place.
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