Number of stores increasing, cannabis prices dropping

Jim Southam struggles to find the right word to describe the Saskatoon retail cannabis market heading into the summer of 2022.

Saturated. Cutthroat. Unrealistic.

They're all accurate. It's a great time to be a cannabis consumer in Saskatchewan, but not so great for the people on the other side of the counter.

"Looking around at other stores, I've seen three-and-a-half grams selling for $20 or less, plus tax," he said.

"That's less than the black market was my whole life. That's just not sustainable."

Southam is co-owner of Prairie Cannabis in Saskatoon. He's also president of Saskatchewan Weed Pool, a co-operative with close to 20 members representing 40 independent stores across the province.

The co-operative incorporated in the summer of 2019. It helps independent retailers lower their costs by buying in bulk from licensed producers. Since its creation, Southam has watched the industry evolve.

Saskatoon is the most heavily saturated market in the province, with 38 stores and another half dozen on deck for this summer. This compares with 21 stores in Regina.

Last year at this time, there were 24 stores in Saskatoon.

"I could give you a long list of licensed producers and retail chains. It's been nothing but loss after loss after loss, quarter after quarter," he said.

"They've got money to throw at it. They can afford to lose money for a while when they price stuff and sell things in their stores."

Price and location are likely going to remain the dominant tools in the struggle to survive, said University of Regina economics professor Jason Childs.

This reflects, among other things, the regulatory environment in which the stores are operating. They are defined as much by what they cannot do as what they can. There are strict protocols on where the stores can locate, how the cannabis is packaged and how the companies can advertise.

Or not advertise.

"I can't really brand and advertise my in-store experience. I can't tell you what I'm doing better than my competitors. And that makes it really hard for these retailers to compete with each other and build that sort of customer base that leads to profitability," he said.

Childs said that he's skeptical a market the size of Saskatoon can support 40-plus cannabis stores. He expects that a quarter will eventually fail.

"We've probably missed our sweet spot where there's going to be a stable number of stores," he said.

"Unfortunately, some of these retailers are probably going to find that this industry just doesn't work for them."

Southam said he'd like to see a loosening of the regulations at every level of government.

"It honestly feels like we're trying to create an industry with our hands tied behind our back," he said.

"We legalized it, but we can't talk about it and we can't tell you about it. You have to come find us."