After four years of existence, the Quebec Cannabis Society (SQDC) has plateaued, with 58% market share stolen from the black market. An unacceptable status quo in the eyes of its CEO.
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“It’s a very good first result, but we still have a long way to go,” recognizes Jacques Farcy, who has been at the head of the youngest state corporation in Quebec for 12 months.
Photo Pierre-Paul Poulin
Jacques Farcy, president and CEO of the Quebec Cannabis Society, in Montreal (SQDC), last week.
He agreed to take stock on the occasion of the “important milestone for Quebecers” which is the fourth anniversary of the legalization of cannabis – Justin Trudeau’s law came into force on October 17, 2018.
His message? “We must continue our development, the status quo is certainly not an option.”
It must be said that Jacques Farcy manages a funny bitch. The SQDC is a commercial enterprise that cannot – and does not want – to stimulate its sales.
The sandbox that Quebec has designed for him is limited by public health issues. But it must continue its mission, which is to capture the black market of cannabis.
The CEO is confident of getting there, even if he recognizes that the curve “caps”. We were talking about 30% the first year, 50% in 2021 and 58% today.
A lot of work to do
“It is not a model that was chosen by the SQDC. We have already evolved a lot in four years, although the mission is very clear and we are supervised,” he said.
It is all in the way of accomplishing the mission and this is where the next few years will be decisive.
The CEO is aware that the 450 products offered in stores are not highlighted.
“There are customers who don’t yet know we’re selling hash, because it’s not obvious when you walk into a branch,” he gives as an example.
The SQDC must therefore “be better” at explaining the types of products it sells so that customers “are able to find their way around” through its offer.
Better than the black market
In short, the “easy to capture” market shares have already been captured. It is a more difficult part of the evolution of the SQDC which is about to begin.
“We are going to need finer strategies,” admits Jacques Farcy.
Still, the SQDC “is not there to make money”. Public Health sits on the Board and the advisor trainings are designed by the Ministry of Health.
“Cannabis is a special product, its social acceptability in Quebec has progressed, but there is still a long way to go,” explains the CEO.
Now that the product is accessible through a network of 90 – soon to be 100 – branches, phase 2 will be to “make people understand” that the SQDC has a “better offer” than the black market. And it’s not won at all.
The SQDC after 4 years
187,000 kg Total consumption of dried cannabis in Quebec from March 2021 to March 2022, according to the Quebec Cannabis Survey
109,351 kg SQDC’s annual cannabis sales for the same period, i.e. 58.5% of the total
$6.31 Average price per gram of cannabis at the SQDC, taxes included
$75.7M Profits of the SQDC in 2021-2022, money that goes to the fund allowing the financing of prevention, research and the fight against harm related to cannabis
Photo archives, Chantal Poirier
Front of a branch of the SQDC in Montreal.
THE SUCCESS OF BRANCHES
The measured approach to the number of branches is a success, says the CEO of the SQDC. “At the beginning, everyone said that it didn’t make sense, that there wouldn’t be enough branches in Quebec. Today, everyone understands the benefit of not having one on every street corner,” he says. There are currently 90, a number that will increase to 98 shortly. “Our customers are able to have accessible quality products,” he says. He argues that while many retailers would like to rely on such a distribution network, its modest size makes it possible to avoid economic instability.
MARKET SHARE TO WIN
The SQDC currently captures 58% of the cannabis market in Quebec, while the objective for 2022 was 66%. Here’s how she could get more customers.
BEET AND CAULIFLOWER
The state-owned company is limited in the edible products it can offer, “because the law prohibits certain types of edible products which are very attractive”, insists CEO Jacques Farcy. If some customers want to be able to buy products like candy, for example, the SQDC has found “a way through”: cannabis-infused beets, figs and cauliflower. “I agree that’s not what you think of when you think of edibles,” says Farcy. For now, the SQDC has not convinced anyone with its offer.
LARGE CONSUMERS
For heavy consumers, the black market continues to offer volume discounts, admits CEO Jacques Farcy. The black market continues “to be particularly aggressive in terms of trading strategies”. The SQDC does not want to go there, because “it could lead to excesses”. The state-owned company “wants to be competitive with the black market”, but does not want to “be cheaper than the black market”.
SMALL LOCAL PRODUCERS
It is more profitable for a small producer to sell elsewhere in Canada or in the world than at the SQDC, maintains Maxime Guérin, from Mindicanna. If we want to diversify the supply of Quebec products, we will have to relax the rules, he pleads. Because for the moment, it is easy to lose your place on the shelves if you are not able to supply the 90 branches yourself, which is quite a logistical challenge.
And the suppliers here in all this?
The SQDC will never hide it: it is not there to stimulate the market and accelerate sales, but to meet a need.
If a cannabis producer has an “overly commercial” vision, he is not in the same logic as the state-owned company, recalls its CEO, Jacques Farcy.
It is difficult, under these conditions, to create an ecosystem of Quebec producers who have a chance of carving out a place for themselves in the market.
“The CAQ government and Public Health got it into their heads that cannabis is tobacco, and that we were going to apply the same rules everywhere,” argues Pierre Leclerc, director of the Association québécoise de the cannabis industry (AQIC).
“An aberration”
The former political employee in Quebec recalls that, for the moment, all the ministries of Quebec have the directive to apply the rules of the World Health Organization in the fight against tobacco to the cannabis industry.
“It’s a complete aberration. We cannot talk to Quebec, we are not entitled to any state aid, it encourages the stigmatization of our products and it excludes us from traditional bank financing, ”he says.
It is certain “that the industry cannot progress and that we cannot fight the illegal market”, he adds.
At the SQDC, we are witnessing this debate by staying on the sidelines.
“I need an industry in good health if I want to be able to carry out my mission”, is content to say Jacques Farcy.
He acknowledges, however, the difficulties the cannabis industry is going through.
“It is sure that from a citizen point of view, I recognize that it is a pity that we are not more open to that in Quebec,” he said.
He remains positive: the cannabis industry in Quebec will eventually convince the authorities that it makes sense. For the moment, this is not the case.