Ontario Cannabis Store, the Crown agency with a monopoly on legal distribution in the province, is set to change its pricing structure starting in September.
The changes will reduce most wholesale markups that OCS imposes on cannabis products sold to retailers, lowering its profit margin. The impact of the reduction on prices consumers pay for pot or the bottom line of cannabis companies remains uncertain. The cannabis sector in Canada has faced financial trouble recently, with several companies going into bankruptcy protection, and many struggling to be profitable. The OCS markup accounts for a significant proportion of the end cost that consumers pay for pot. The agency is moving to new markup rates of 25% on most cannabis products and 23% on dried flower. OCS estimates the changes will save the industry $60 million next year.
Cannabis sector experts are uncertain about the impact of reduced markups on pot prices in Ontario after they take effect on September 11. Some producers may keep additional margin room, while others believe the changes will not significantly reduce consumer prices. Cameron Brown, communications officer for The Hunny Pot, believes most savings will go to licensed producers, while retailers will see little of it. Legal pot prices have been decreasing since 2019, largely due to supply gluts and the expansion of retail stores. However, some producers and retailers may pass savings from lower OCS markups on to consumers in the form of lower prices to carve more market share away from illicit dealers.
