Ontario projected to hit $155 million in weed profits this fiscal year

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Things are looking up for Ontario’s cannabis business, with figures from the provincial economic statement this week indicating profit could balloon to $155 million in 2021-2022 compared to $67 million in the previous fiscal year.

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While recreational cannabis became legal in October of 2018, the Ontario Cannabis Retail Corporation (OCRC) didn’t see a profit, amounting to $19 million, until 2019-2020, BNN Bloomberg reports.

Potential profits are expected to rise even higher, with figures in the 2021 Ontario Economic Outlook and Fiscal Review showing the Ontario portion of the Federal Cannabis Excise Duty from the federal government for 2021-2022 increasing substantially to $185 million in revenue. This is up from $106 million in 2020-2021, $48 million in 2019-2020 and $19 million in 2018-2019.

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The review points out that the net income for Government Business Enterprises — which include estimates for Hydro One Ltd. and projections provided by Ontario Power Generation, the Ontario Cannabis Store (OCS) and the Liquor Control Board of Ontario — is expected to “increase at an average annual rate of 19.2 per cent from 2021-2022 to 2023-2024.”

Across the country, Statistics Canada reported that adult-use cannabis retail sales continued their upward trend in April, following dips in January and February before rebounding in March.

Overall, $309.7 million in recreational cannabis was sold in April compared to $298.3 million in March and $262.0 million in February. Figures since April show a steady increase through August, the last month for which numbers are posted.

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Ontario reportedly has about 1,200 weed stores already opened or on their way to doing so. Last month, the province welcomed retail store number 1,000. Meanwhile in the number two position, Alberta Gaming, Liquor and Cannabis has 706 marijuana providers.

Trang Trinh, founding director and CEO of TREC Brands, told The GrowthOp in the fall of 2020 that the Ontario cannabis retail market likely has a year or two at current pace of growth before saturation.

There are already rumblings, if not outright warnings, that Ontario is close or in the midst of having as many cannabis stores as the market will bear. In a note to clients, BMO Capital Markets analyst Tamy Chen said closures for some licensed cannabis retailers in the province will likely occur in 2022, BNN Bloomberg reported this week.

Earlier this summer, OCS interim president and CEO David Lobo also cautioned that despite impressive growth in cannabis retail, those involved should be prepared for some “market right-sizing.”

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