Â鶹´«Ã½

Skip to main content

Price matching, loyalty programs adding to race for lowest cannabis prices

Employee Sophia Lovink arranges cannabis products at the HOBO Cannabis Company during the COVID-19 pandemic in Toronto on Thursday, June 11, 2020. THE CANADIAN PRESS/Nathan Denette Employee Sophia Lovink arranges cannabis products at the HOBO Cannabis Company during the COVID-19 pandemic in Toronto on Thursday, June 11, 2020. THE CANADIAN PRESS/Nathan Denette
Share
TORONTO -

It's hard to miss the smattering of cannabis store signs aiming to lure in customers with deep discounts and flashy membership programs along the stretch of Front Street East leading to Toronto's St. Lawrence Market.

Outside Civilian House of Cannabis, one sign promises 15 per cent off and encourages membership to the Club Civilian loyalty program, which offers even more savings on marijuana and access to special events at owner Ink Entertainment's Rebel nightclub.

A few doors down at Canna Cabana, discounts are even steeper, hitting 70 per cent on accessories. The store promises "unbeatable" prices and Canna Club members routinely pay anywhere from a few dollars to $50 less than market prices on some items.

While welcomed by customers, the promotions playing out along that strip -- and in many neighbourhoods across Canada -- signal an intensifying war on prices in the cannabis market.

The push to slash prices is so significant industry members worry how independent retailers and even some franchisees can stay in business.

"There's a lot of independent retailers who have mortgaged their house, they put all their savings into their store, and it's such an oversaturated competitive market," said Lisa Campbell, cannabis marketing company Mercari Agency's CEO.

"Price is the key to success in these areas, and we're seeing quite a few stores close as a result of lowering margins for the retailers."

In some regions, like Ontario, stores must order cannabis from provincial pot distributors like the Ontario Cannabis Store, but have flexibility over how much to charge consumers.

The average price for cannabis was $11.78 per gram at the start of 2019, shortly after legalization, but fell to $7.50 per gram in 2021, a November report from Deloitte Canada and cannabis research firms Hifyre and BDSA said.

The average price for vape cartridges has similarly fallen by 41 per cent from $32.02 per gram around legalization to $19 per gram a year later.

The report showed price is the leading factor contributing to Canadian cannabis sales, with 34 per cent of consumers naming it their top consideration.

Though much of the push for lower prices is led by an industry desperate to squeeze out illicit dealers and dispensaries, the explosion of pot shops is also a trigger.

Ontario alone has 1,333 stores and with all hawking the same items, standing out has never been tougher and loyalty programs, which are mostly free to sign up, have never made more of a difference.

Canna Cabana, for example, found same-store sales rose by 48 per cent since its loyalty program's October launch.

"Everybody has a loyalty program and it's so competitive that it's kind of required or I felt that it was," said Sean Kady, co-founder of Cosmic Charlies, a Toronto cannabis shop.

"We're all selling the same products... so it's hard to differentiate. Price is the main thing for consumers."

Cosmic Charlies' loyalty program is a stamp card called Cosmo Pass that gives members 10 per cent off their first purchase for signing up. Then, every 11 purchases, they get 20 per cent off.

In the six months since its launch, customers have responded well and Kady said he sees an uptick in visits when members are notified of new promotions.

But it's "daunting" to keep up with competitors, he said.

Many give discounts for seniors and veterans, some like Tokyo Smoke offer $2 deals every Wednesday and price matching is common too.

Campbell saw many stores resisting such incentives since cave because inflation climbed to a near 40-year high and customers increasingly sought the lowest prices.

They're most often found at Canna Cabana. The High Tide Inc.-owned chain with 128 stores across five provinces is staying ultracompetitive with its Cabana Club, a lowest price guarantee and lottery style scratch cards promising up to $850 in prizes.

Campbell feels the chain is "crushing the game," while Kady calls it "a beast."

A recent visit to one of its Toronto locations showed 14 grams of MTL Cannabis' Sage n' Sour dried flower selling for $85.47 for members, 32 per cent less than the $125.99 market price and 26 per cent less than the $114.97 it was listed for at the Ontario Cannabis Store.

The company is able to offer such steep cuts because it got out of the wholesale business, so it could pass on discounts to customers, said High Tide CEO Raj Grover.

Those discounts will expand, when he launches Cabana Elite, a paid version of the Cabana Club loyalty program later this year.

Is he worried about copy cats? No, said Grover.

"We've always been innovative ... and I don't really pay too much attention to what the next guy is doing," he said. "We just put our head down."

Jaclynn Pehota, executive director of the Association of Canadian Cannabis Retailers, sums up what's happening in the industry as a "race to the bottom" that will have many victims.

"It is impossible for a privately-held small business to compete with a national, publicly-traded company that is backed by international funding," she said.

"It is a ludicrous proposition."

She suspects many of the big cannabis chains are adopting a Starbucks-like model, where they flood the market with stores, eventually cutting out the competition and becoming the dominant player.

She foresees many businesses closing, as a result, and consumers feeling the brunt.

"We're going to see a much less vibrant and colourful market and much narrower spectrum of brands that are functioning," Pehota said.

"I personally don't believe in the long term that's going to be a positive thing for the Canadian cannabis consumer."

This report by The Canadian Press was first published August 3, 2022.

CTVNews.ca Top Stories

Two and a half years after losing her best friend and first love to suicide, Brooke Ford shared her story of grief and resilience at the CMHA Windsor-Essex Suicide Awareness Walk.

An Ottawa driver has been charged with stunt driving after being caught going 154 km/h on Highway 417, according to the Ontario Provincial Police (OPP).

opinion

opinion How to make the most out of your TFSA

The Tax-Free Savings Account can be a powerful savings tool and investment vehicle. Financial contributor Christopher Liew explains how they work and how to take full advantage of them so you can reach your financial goals faster.

Local Spotlight

A tale about a taxicab hauling gold and sinking through the ice on Larder Lake, Ont., in December 1937 has captivated a man from that town for decades.

When a group of B.C. filmmakers set out on a small fishing boat near Powell River last week, they hoped to capture some video for a documentary on humpback whales. What happened next blew their minds.

A pizza chain in Edmonton claims to have the world's largest deliverable pizza.

Sarah McLachlan is returning to her hometown of Halifax in November.

Wayne MacKay is still playing basketball twice at Mount Allison University at 87 years old.

A man from a small rural Alberta town is making music that makes people laugh.

An Indigenous artist has a buyer-beware warning ahead of Sept. 30, the National Day for Truth and Reconciliation.

Police are looking to the public for help after thieves broke into a Lethbridge ice creamery, stealing from the store.

An ordinary day on the job delivering mail in East Elmwood quickly turned dramatic for Canada Post letter carrier Jared Plourde. A woman on his route was calling out in distress.

Stay Connected