Alberta projects first annual cannabis profits with added markup, privatization of online sales

| Staff

Alberta says cannabis tax revenue has exceeded their expectations as the AGLC projects their first net income profits from cannabis in the coming year. 

The projections come from Alberta’s Budget 2022 Fiscal Plan, released this week, that projects $3.1 billion in tax revenue for 2022-23 and $3.3 billion by 2024-25. This represents a projected increase of $129 million more than the previous fiscal year, which is attributed to fuel, cannabis and insurance tax revenue growth.

Alberta sold just over 83,000 kg of cannabis worth almost $470 million in the fiscal year ending March 2021.

The increase in cannabis taxes in the last year is in stark contrast to declines in tobacco tax revenue and the closure of casinos during the pandemic. 

The report also projects net income from cannabis to turn positive in 2022-23, based on the new addition of a 6% markup to the price of wholesale cannabis, although this is somewhat offset by the elimination of the 2% Public Education Fund Fee (PEFF). In addition, Alberta has a 16.8% cannabis duty applied to sales in their province. 

The province is also eliminating their own online cannabis sales, and instead giving retailers the option to manage their own online sales and delivery

The AGLC, which oversees all cannabis sales in the province and managed all online sales and delivery in the province for the first nearly three and a half years of legalization, is expected to see its first profit in 2022-23, around $7 million according to the report. 

image via AGLC

This is in contrast to operating losses in the first three years of legalization of $12 million in 2019, $15 million in 2020, and $11 million in 2021, due to initial startup costs to build and manage their system. Alcohol is expected to bring in $850 million in revenue in the coming fiscal year, while gaming is expected to bring in nearly $1.5 billion.

Revenues for the province from cannabis come from taxes and additional fees, as well as fines levied towards producers and retailers who violate provincial rules. The provincial regulator conducted 7,866 cannabis inspections in 2020-2021 and 4,574 cannabis inspections in 2019-2020. 

According to the AGLC, online sales were just 1.1% of total cannabis sales for year-to-date (April 1 – October 31, 2021) in the province. Alberta sold just over 83,000 kg of cannabis worth almost $470 million in the fiscal year ending March 2021. Online sales of cannabis are managed by most provinces, and sales numbers are similarly low in those jurisdictions as well. 

According to AGLC’s 2020-2021 annual budget, cannabis product offerings saw an increase of over 800 products over the last fiscal year. The number of Alberta cannabis retailers increased over 40% and the number of licensed producers supplying cannabis products increased over 80%, capturing from 38% to 61% over the previous fiscal year. The AGLC had contracts with 17 Alberta-based cannabis producers in 2020-2021.

Sales generated by cannabis operations in 2021 increased by 76.7% in comparison to 2020, with cannabis sales increasing in all categories except for oil/spray and capsule/soft gels. The dried flower (including pre-rolls and milled flower) category continues to be the market leader for sales in Alberta, like other provinces.

Alberta currently lists over 750 retail cannabis stores. Only Ontario currently has more retail cannabis stores.