A Leamington medicinal pot producer explains how Ontario pot could be priced

Saturday, September 9, 2017

CBC News




An expanding marijuana producer in southwestern Ontario says they are in prime position to meet expected demand from recreational pot sales in the province following Friday's announcement. 

Ontario's government announced plans to open 80 cannabis stores by July 1, 2019, with another 150 by 2020. Online distribution will be available across Ontario from July 2018 onward.

"I couldn't have added much to the script if I were the author," said Vic Neufeld, Chief Executive Officer of Aphria, a medical cannabis producer in Leamington.

The facility is set to expand to close to 9300 square metres of greenhouse growing space with the ability to supply more than 100,000 kg of marijuana. 

Neufeld said that expansion will time perfectly with the opening of stores across the province. 

"Oh, I don't think so - I know so," said Neufeld, when asked if he expects his company to be able to handle the increase in demand. 

Price Points

Neufeld said the real advantage his company has is their low cost production. 

"We'll be able to stick handle and navigate any troubled waters that may come up as we get closer and closer to July of 2018," he told CBC News. 

He expects the province to spend the next year working with the federal government to establish a price point at which they'll expect suppliers to hit. 

"They can't go too far north of what the illicit market has to offer today - approximately $10 a gram," said Neufeld. "And they can't go too low because that is just not in keeping in trying to keep this more of a lifestyle."

He said that working backwards from a $10 price point and subtracting a so-called sin tax, the HST, their cost of doing business and the profit margin leaves the province looking for a licensed producer than can deliver product at $5 a gram. 

"At $5, our cost per gram is somewhere around $1 cash costs per gram," said Neufeld. "So we can still very much dominate the marketplace under the Ontario rules as presented today."

He said that other licensed producers have costs in the $3-4 range. 

Neufeld said their advantage is being in Leamington. 

"Powered by the sun, mother nature working at her best," said Neufeld. "Our growers are agriculture greenhouse growers. We just know how to grow, grow to scale and grow without crop failure."