On the Dangers of Monopolies in the Cannabis Industry
By Lindsay Blackett
Allowing an unfettered monopoly in any industry is harmful to consumers, producers and the industry as a whole. This notion applies equally to Canada’s nascent cannabis industry. There are many Licensed Producer (LP) applicants and existing small-scale producers who live in a constant state of uncertainty over what the giants in the industry, might do in their quest to be the world’s dominant players in the Cannabis economy. Most importantly, these companies which are hurtling toward monopoly scale appear to be focused not on the quality and breadth of product, but rather with their obligation to shareholders and the minimization of costs. Somewhere along the way, the consumer has been forgotten.
We have many experiences with monopolies in this country. Labatt, Molson, and Carling O’Keefe enjoyed a longstanding reign over the beer market share, providing a cheap and homogeneous product with little outside competition. In recent years, the craft beer culture has surged and the monopolies have had the rug pulled out from under them. Consumers have switched over in droves because smaller-scale brewers offer better quality, unique and interesting products at a comparable price point. If we learn from the past, we need not endure decades of mediocre product to arrive at a healthy cannabis market with an abundance of choices for all types of cannabis users.
We were led to believe that Bill C-45 was introduced to rid us of the scourge of the black market and to keep cannabis out of the hands of young people. As such, there is a disproportionate focus on undercutting the price of illegal cannabis even though cost is only one of several considerations for consumers of cannabis. There is a common understanding that the majority of the cannabis users are and will be aged 18-24. Interestingly, according to a survey of 60,000 people by the Alberta Cannabis Secretariat, it is users aged 45-65 who represent the largest share of the market in terms of dollars spent on cannabis. Individuals in the latter age group are more likely to prioritize high-quality product over affordability. Indeed, younger consumers of cannabis may be enticed by the lower prices that monopolistic producers can offer. However, those who are willing to pay more for high-quality product may quickly become disenchanted by the offerings of the legal market, and look to the black or grey markets for cannabis products that suit their needs.
To be clear, I am not against people making money. I’m certainly not opposed to having an Alberta company being a dominant player in any market. However, while we continually hear about the public interest when it comes to pipelines, this should be a key consideration in the in the cannabis space as well. Based on the activity we see in the cannabis industry, it is safe to argue that the 100 plus existing cannabis producers are in the medical cannabis business because it is a gateway to legalization. The upshot is that the 200,000 Canadian medical cannabis patients have been used as a launching pad for companies to raise billions of dollars even though most of those companies plan to exit the market. MedReleaf, not that long ago was one of the few Licenced Producers who said they were committed to the medical market. I don’t doubt that, but is hard to imagine how that will look moving forward when their new parent company, Aurora Cannabis, is in the race to the bottom for the lowest cost with little mention of the best quality. A healthy balance is needed for both.
I joined the Chamber realizing that the legalization of Cannabis is complex, confusing and messy. There are many representatives for the producers, and there are those who are supposed to represent the rest of us: our elected members of parliament and senators. However, over the last many months I have heard of predatory or bullying tactics exercised by big producers with impunity. Other players are looking for loopholes to go around the very laws meant to deter advertising to minors.
What we as a society should not be tolerating is a cannabis industry where a few large players dominate and potentially destabilize the market. We need hundreds of licenced producers of all sizes to cater to the vastly different needs and wants of millions of potential customers. Some want lower cost, some quality and others simplicity. This is a huge business with billions that ought to be invested not just in a couple of players, but rather hundreds of different companies.
Choice is key to the survival of a market that aims to displace the black market. Otherwise, we will have just wasted years advertising for the future illegal sales. The cannabis industry, unbeknownst to most, will affect each and every Canadian in their lifetime. We need to be vigilant and engaged. Talk to your MP or senator and ask the tough question – someone needs to.