Price matching, loyalty programs adding to race for lowest cannabis prices

Sean Kady is co-owner of Cosmic Charlies, a Toronto cannabis company that uses a punch card loyalty program to draw in consumers. THE CANADIAN PRESS/HO-Charles Lady

TORONTO — It’s hard to miss the smattering of cannabis store signs aiming to lure in customers with deep discounts and flashy membership programs along the stretch of Front Street East leading to Toronto’s St. Lawrence Market.

Outside Civilian House of Cannabis, one sign promises 15 per cent off and encourages membership to the Club Civilian loyalty program, which offers even more savings on marijuana and access to special events at owner Ink Entertainment’s Rebel nightclub.

A few doors down at Canna Cabana, discounts are even steeper, hitting 70 per cent on accessories. The store promises “unbeatable” prices and Canna Club members routinely pay anywhere from a few dollars to $50 less than market prices on some items.

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While welcomed by customers, the promotions playing out along that strip — and in many neighbourhoods across Canada — signal an intensifying war on prices in the cannabis market.

The push to slash prices is so significant industry members worry how independent retailers and even some franchisees can stay in business.

“There’s a lot of independent retailers who have mortgaged their house, they put all their savings into their store, and it’s such an oversaturated competitive market,” said Lisa Campbell, cannabis marketing company Mercari Agency’s CEO.

“Price is the key to success in these areas, and we’re seeing quite a few stores close as a result of lowering margins for the retailers.”

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In some regions, like Ontario, stores must order cannabis from provincial pot distributors like the Ontario Cannabis Store, but have flexibility over how much to charge consumers.

The average price for cannabis was $11.78 per gram at the start of 2019, shortly after legalization, but fell to $7.50 per gram in 2021, a November report from Deloitte Canada and cannabis research firms Hifyre and BDSA said.

The average price for vape cartridges has similarly fallen by 41 per cent from $32.02 per gram around legalization to $19 per gram a year later.

The report showed price is the leading factor contributing to Canadian cannabis sales, with 34 per cent of consumers naming it their top consideration.

Though much of the push for lower prices is led by an industry desperate to squeeze out illicit dealers and dispensaries, the explosion of pot shops is also a trigger.

Ontario alone has 1,333 stores and with all hawking the same items, standing out has never been tougher and loyalty programs, which are mostly free to sign up, have never made more of a difference.

Canna Cabana, for example, found same-store sales rose by 48 per cent since its loyalty program’s October launch.

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