November 20, 2016 12:00 pm

Legal pot in Canada could sell for $5 a gram — or less

A Seattle, Wa.-based marijuana chain is selling budget-priced pot at a cost that works out to C$4.76 a gram.

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Uncle Ike’s Budget Bud is the cheapest pot we’ve found anywhere.

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A product line of a Seattle, Wa.-based marijuana retailer, it lives up to its name at US$99 an ounce. That works out to $4.76 a gram Canadian, and it would put the cost of a joint in the $1.50-$2 range.

But you get what you pay for, an email from Washington State-based marijuana writer Steve Elliott makes clear.

“It smokes more harshly and burns the throat a bit more than the expensive stuff,” he writes.

There’s more leaf material making up the weight than with a higher-priced product, he explains, and “it’s not exactly ‘bragging rights’ material if you get it out in front of your friends.”

READ: How will legal pot be sold? Three things that might happen, and one that won’t

On the other hand, though the journey is rougher, the destination is much the same:

“The high is often comparable to more expensive weed, but … the taste is nowhere near as fine.”

Under legalization, how cheap could marijuana get? At the low end, in the $5 a gram range, says Bruce Linton, CEO of  Canopy Growth, a large medical marijuana growing facility in Smiths Falls, Ont., which plans to produce recreational pot after legalization.

The cheapest medical marijuana is sold in that price range now. Medreleaf’s cheapest strains for medical customers are $5 a gram. (Medreleaf, a Markham, Ont.-based grower also sells low-THC trimmings, leaf material left behind when buds are prepared, for $3 a gram.)

Aphria, a grower in Leamington, Ont., starts at $7.20. The lowest-priced strain from Tweed, a Canopy Growth company (Boaty McBoatface), is $6.

WATCH: The marijuana industry got a boost on election night as voters in several states approved measures to legalize recreational pot.

Canopy tried pricing medical pot at $5, but couldn’t make money on it, Linton says:

“We found that it was a great way to introduce and bring patients on, but it’s not a sustainable price at which you can run a business.”

Washington State applies a 37 per cent excise tax to recreational pot, so the profit margin on Budget Bud must be tiny. (Uncle Ike’s didn’t respond to a request for comment.)

For many years, Canadian provinces have imposed minimum prices on alcohol for a combination of public health and tax reasons. (Basic distilled spirits can be produced very cheaply: a 750ml bottle of vodka costs $6.75 for a distillery to make, but retail prices start around $25.)

But with a parallel illegal marijuana market still in place, governments can’t afford to price legal pot too high, Linton argues.

READ: Why the government can’t charge more than $10 a gram for legal pot

“You could pick any big number as a minimum price. You don’t actually achieve anything for public health — you achieve the opposite, because the product will be supplied, but by suppliers who have no obligation to test, or not use pesticides or fungicides. It’s a tricky piece of work.”

Earlier this month, the Parliamentary Budget Office estimated that the pre-tax price of legal cannabis wouldn’t go below $6.67 a gram, with a mid-point estimate around $7.50.

READ: Ottawa expects 600,000 more people to smoke pot after it’s legalized

At least the second number is about right, Linton says: “So far in the medical space, by making it market-based, it has sort of levelled in the range that the government estimated.”

“There will probably be some stuff which is five bucks, (but) I suspect that you’re going to find an average price of $7-$8 a gram.”

© 2016 Global News, a division of Corus Entertainment Inc.

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