Dan Sutton of BC-based Tantalus Labs is calling on the cannabis industry to rally together to demand that the heavy excise tax burden on small- and medium-sized cultivators be reduced.
“This is untenable, and new operators who have mortgaged their lives on a chance in this new industry are waking up to a financial picture that structurally sucks them dry even while succeeding in market,” he wrote in an impassioned Twitter thread.
Price drop pressure
Excise taxes can be as high as 30% on top line revenues when prices are as low as they are, according to Sutton — higher than both alcohol and tobacco.
While the future of smaller cultivators is threatened, larger companies are an advantage when it comes to survival: “[They’re] happy to sell at a gross margin loss, with unit economics that would be laughable in any healthy ‘CPG’ model,” he tweeted.
American dreams
While selling at a loss is no long-term business model, many say larger LPs can stay in the game longer with the hope that profitability comes in the US if and when the country passes reform to allow them access to the market.
“Well-heeled pubcos are using Canada as a playground to fund US initiatives, while the government sucks out whatever is left,” wrote Stoic Advisory’s Aaron Salz. “Without significant structural change, it’s hard to see small and medium sized Canadian companies surviving in any meaningful way.”
Signs of solidarity
Sutton said he’s committed to push for lower taxes, and he hopes for support from colleagues and organizations representing the industry.
“You will see more from me and others on this front,” he concluded. “If you are the kind of person who cheers for local brands, quality products, and deep personal stories behind the companies you support, stand with us.”
