Cannabis companies weigh pricing strategies after OCS margin cut

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Cannabis companies aren’t required to pass along the savings to consumers by lowering their prices, so many observers believe licensed producers will adopt a range of pricing strategies

will hold its prices as licensed pot producers weigh whether to pass along to consumers the savings from the Ontario Cannabis Store’s forthcoming margin decrease.

The decision comes after the OCS, the province’s pot distributor, said last week that it would reduce the margins it makes on weed sales this September in a move expected to put $35-million back in the hands of licensed pot companies this fiscal year and $60-million in the 2024 fiscal year. However, two industry sources told The Canadian Press the average mark-up will decline to 25 per cent from 28 per cent, though the amount will vary across product categories. The biggest margin reductions will come in the vapes, edibles and beverage categories with more modest decreases to flower, pre-rolls and concentrates.

Once companies understand the margin changes, Boodram said businesses will have to factor in production and distribution costs for each item, taxation, market competition, profitability and supply and demand. “At the consumer level they’re not aware of this OCS announcement and the reasoning behind the price decrease, so they might wonder what’s going on here?” Boodram said.

 

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Not sure of the relevance here. In Ontario, LPs sell to the OCS who then sell to retailers. How would the OCS reducing their markup impact a producers price? It wouldn't.

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