Brock University Associate Professor of Operations Research Michael Armstrong wrote a piece recently published in The Globe and Mail about what has caused the issues being experienced by the cannabis industry.
“A major problem underlying the cannabis industry’s continuing financial struggles has been overcapacity. In provinces that allow private retailers, there are too many shops competing for too few customers to cover costs. And nationwide, producers have been making more cannabis than the retailers need.
Four years ago, the industry looked promising. In 2019, Ontario’s first 24 licensed cannabis shops opened with a bang. Those privately-owned retailers initially averaged about $1-million in monthly sales each, thanks to minimal legal competition and average prices above $12 a gram.
Their estimated monthly contribution margins, i.e. after paying the wholesale costs for their products, were similarly impressive. The margins averaged around $300,000 apiece, more than covering other expenses such as employee wages and store rents. That was major money for simply selling marijuana.”
Continue reading the full article on the Globe and Mail website.