Cannabis New Brunswick considering privatization

Publication November 2019

New Brunswick Finance Minister Ernie Steeves announced on November 14, 2019 that the province has launched a request for proposal (RFP) to consider a single private sector company takeover of the New Brunswick Crown corporation, Cannabis NB. If successful, the interested proponent would be responsible for operation, distribution and sales of recreational cannabis in New Brunswick. To access the RFP document, interested participants must register and download the documents through the NBON Opportunities website

In his press conference, Mr. Steeves indicated a number of criteria on which interested proponents would be judged, including “demonstrated experience in recreational cannabis sales, financial capacity to develop and sustain operations, and a viable plan to combat the illegal market thorough price competitiveness and product diversity.” He went on to note that the RFP should include “an attractive financial offer for the rights to this business, [… as well as] strong direct and indirect partnerships with local entrepreneurs and First Nations.” While Mr. Steeves indicated that the government anticipated strong interest in the RFP, he also noted that a “compelling proposal” for the province would be required to do the deal.

The decision comes on the heels of the poor financial performance of Cannabis NB and the recent legalization of edibles in Canada. In the first six months of operation, the New Brunswick government reported that Cannabis NB lost close to $12 million, and continues to lose money even in the face of rising sales. However, New Brunswick is not the only province (or the only provincial distributor) that has reported losses since legalization over a year ago. Ontario Cannabis Retail Corporation and Alberta Cannabis have also reported large losses in the first year of legalization. 

Initial reactions in the online community and in some media outlets question whether privatizing Cannabis NB makes sense. Other provinces have taken a different approach to privatization, allowing multiple parties to compete, or have decided not to make the move to privatization yet, if ever.  

The move to privatization by the New Brunswick government provides a unique opportunity for private sector cannabis companies to expand and grow their businesses. However, it also demonstrates the cannabis industry continues to be an industry in flux. A changing regulatory landscape and the challenges associated with being a global leader in cannabis legalization means companies, consumers and governments continue to work towards and develop a sustainable, profitable solution.

The author wishes to thank Lauren Stelck, Associate, for her help in preparing this article.

 


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