Canadian CANNAINVESTOR Magazine October 2017 - Page 130

Now add another layer of complexity to this. Assuming there will be inter-provincial barriers similar to the beer industry whereby the producers within each jurisdiction may have an

advantage over their competition from outside that Province or Territory then new layers of complexity emerge. Even if there were to be no barriers of entry, the cost to ship product say from BC to New Brunswick distributors is likely significantly greater that from within New Brunswick itself. The markets to be served and where each LP is located may be critical in determining degrees of success in the legal recreational market. Let’s zoom in on Ontario for example:

- Largest potential market with the largest labour force.

- Hydro rates amongst the highest in Canada.

- Tax rates considered by many to be uncompetitive.

- Some Municipal water and wastewater rates higher than in other provinces.

- Minimum wage increases forecast for the new few years (~32%) that is several

times the anticipated inflation rate.

- Other changes to labour laws that may increase the cost to employers.

- Monopoly Government owned and operated retail for recreational marijuana,

and therefore likely expensive compared to other models. Fewer locations,

more restrictive hours and product choice etc (assuming it mirrors the LCBO

model) may hamper demand when compared to, for example, a private sector

owned and operated Dispensary model accommodating the consumer.

- Stated wants the price at $10 per gram. One would hope that means average

because there are different costs associated with different LPs and from there

different strains. If the price is to be $10, back out the higher costs associated

with a government run unionized monopoly for the effective ceiling that

wholesalers and LPs.

- etc.