Manitoba hikes wholesale markup on cannabis, suggests window-covering rule may change
Increase won't make big difference to customers, but may hurt ability to compete with illicit market: owner
The price of cannabis is rising in Manitoba after the province's cannabis distributor slapped a higher markup on the products it sells to retailers — an added cost stores are passing down to consumers, in many cases.
Retailers buy their cannabis products from Manitoba Liquor & Lotteries, the provincially owned distributor, which charges a markup as the wholesaler. That markup was nine per cent, but it increased to 11 per cent on June 1.
In an April memo to stores announcing the price hike, the Crown corporation appeared to offer some consolation to retailers by promising to "explore" the idea of removing a rule that forces cannabis stores to cover their windows.
Liquor & Lotteries quietly made other changes to its cannabis policies recently, allowing retailers to begin selling marijuana seeds.
Customers won't notice a significant price difference on most products after the two percentage point markup increase, said Melanie Bekevich, co-owner of Mistik Cannabis on Winnipeg's Main Street. But she argues it will hurt the industry's efforts to stamp out the illicit market.
"We want to be able to compete meaningfully on pricing, as we are subject to so much more taxation and regulatory requirements that cost us a significant amount of money," she said.
The other surcharge on cannabis is the excise tax of $1 per gram of flower (75 cents of which goes to the province, and 25 cents to the federal government).
Added costs on cannabis
Over time, taxes and surcharges have made up a greater share of the price consumers pay, said Bekevich, who is also vice-president of the Retail Cannabis Council of Manitoba.
As the number of stores has multiplied since legalization in 2018, the price for cannabis has dropped considerably. The market price per gram has dropped from around $10 to $5 or $6, Bekevich said, but the excise tax remains flat.
"Certainly producers and retailers are feeling the hit the greatest," she said. "Government would not feel that."
She said making the excise tax a percentage would lower prices for consumers, and in turn take customers away from the illicit market. (Manitoba initially charged a six per cent social responsibility fee as well, but it was later dropped.)
In the meantime, the markup increase — the first in Manitoba since legalization — is "going to burden us even further," Bekevich said.
Blissful Bloom, one of the newest entrants in the province's cannabis market, opened in Winnipeg's Old St. Vital neighbourhood in April.
Co-owner Brendan Swiridjuk is responding to the markup increase by absorbing the increase on some of the cheapest products he sells, such as single gram pre-rolled joints and edibles, but not the rest of his inventory.
"I've never had any customers or consumers bring anything up in regards to the slight increases I have had on certain products," he said.
"[But] I definitely do notice it when I'm making purchase orders myself, because I'm not making small-quantity purchase orders — these are thousands of dollars, most times."
Window covering change could boost safety: owner
Manitoba Liquor & Lotteries collected $12.7 million in revenues from cannabis markups in 2023-24, the last year in which audited figures are available. It expects an additional $3 million from the markup increase in the current fiscal year.
The Crown corporation hasn't increased its markups on most liquor categories in more than 15 years, except for micro producers.
Glen Simard, the minister responsible for Liquor & Lotteries, said the higher markup reflects the growth of a maturing cannabis industry and its contribution to Manitoba's economy, but he didn't explain why the increase is necessary.
Simard said the additional revenues will help the province fund social responsibility and law enforcement programs, such as the Winnipeg Police Service's "Don't Drive High" campaign.
He said the increase brings Manitoba — with one of the lowest markup and taxation rates in Canada — in line with other provinces.
The NDP government suggested it may borrow another practice from elsewhere by changing its policies around window coverings. Currently, cannabis products are prohibited from being visible from the exterior of shops.
The April notice to cannabis retailers said Manitoba may relax the requirements "to provide retailers more freedom over their storefronts and create a safer working and shopping environment."
Some provinces have scrapped similar rules after worries they endangered staff and led to a rise in crime. Alberta's regulator made a change in 2022 after a "significant rise" in robberies.
Swiridjuk said the window coverings work against the welcoming environment he's hoping to create, evidenced by the store's lime green walls and bright lights, and the use of "blissful" in its name.
"I want anyone from the kid who just turned 19 to feel welcome in here, to your grandmother, to your parents," said Swiridjuk, who at 23 years old was told by a cannabis official he and his business partner are likely Manitoba's youngest cannabis store owners.
Mistik's Bekevich believes an end to window coverings will improve safety.
Her employees have used a panic button three times because of issues with a customer, she said, and each time, other customers or police officers could have walked into the store oblivious to the problems inside because the windows were covered up.
"You can have many incidents that put people at risk and it's not visible to the exterior," she said.
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