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New Brunswick moves to privatize Cannabis NB

WATCH: The crown corporation that was created to sell legal cannabis more than a year ago has been losing money, so now the Higgs government is looking to get out. Andrew Cromwell reports.

A little more than a year after the legalization of cannabis, New Brunswick says it is prepared to privatize the Crown corporation created to handle recreational cannabis.

The province’s finance and Treasury Board minister made the announcement on Thursday, saying that losses incurred by the provincial cannabis corporation persuaded the government it was time to turn to the private sector.

“This was the best way to stop losing money at this point,” Steeves said. “We are responsible for the taxpayers’ money, and we have to be prudent with it.”

He also said Health Canada regulations make it hard to be successful.

“I’m convinced Health Canada did not want it to succeed. Health Canada has come out with rules like you can’t smile in pictures on our website, because that might encourage people to take part in this activity,” Steeves said.

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READ MORE: Why New Brunswick loses money selling weed, and what the lessons are

Steeves said the province is issuing a request for proposals (RFP) in order to find a single private operator to take over Cannabis NB operations. 

The government’s RFP will look to identify a proponent who has “demonstrated experience in the sale of recreational cannabis” and a “viable plan to combat the illegal market.”

The RFP will remain open until Jan. 10, 2020.

The New Brunswick government said there is not a 100 per cent guarantee that the province will have a bidder that satisfies its needs, but provincial officials say they’re confident after having received a significant amount of interest from the private sector.

N.B. government considering privatizing its crown corporation Cannabis NB
N.B. government considering privatizing its crown corporation Cannabis NB

Steeves said the successful operator will not be required to take on the approximately 200 Cannabis NB employees. Instead, there’s an “expression” to have them transferred to the new private model.

The New Brunswick government said it does not plan to issue any further comments until after the close of the RFP on Jan. 10.

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The decision comes only a few weeks after the government-owned cannabis monopoly disclosed it was still losing money and had no prospect of making money in the current fiscal year.

Cannabis NB CEO Patrick Parent told provincial lawmakers at the beginning of November that the Crown corporation might start turning a profit in the 2020-21 fiscal year.

Cannabis NB — which the cash-strapped province once hoped would be a revenue source — is bleeding money.

The Crown corporation lost almost $12 million in its first six months and continues to bleed red ink, although sales are on the rise.

In the second quarter of this fiscal year Cannabis NB reported a $1.5-million loss.

Premier less than convinced on the profitability of Cannabis NB
Premier less than convinced on the profitability of Cannabis NB

The inability of Cannabis NB to get in the black has not been well received by Premier Blaine Higgs.

Before Parent’s appearance, he grimly told reporters:“We’re not going to keep losing money on this.”

READ MORE: No profit expected this year for Cannabis NB as ‘challenges’ of black market continue, CEO says

Other provinces that have operated under a government-run model are doing better than Cannabis NB, with observers pointing to the extensive network of 20 retail stores in communities that may not be able to support those businesses.

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Cannabis NB currently operates out of 20 standalone retail spaces scattered across 15 communities in the province.

The province said that retail outlets will not be part of the RFP but could be considered part of the deal.

A Global News analysis of retail prices for four standard cannabis products in six provinces found earlier this month that New Brunswick usually had the highest prices.

— With files from Andrew Cromwell, Patrick Cain and The Canadian Press