Quebec's cannabis retailer (SQDC) would probably not obtain a larger share of the illicit market if it were allowed to pursue a more aggressive marketing strategy, said SQDC president and CEO Jacques Farcy.

The Crown corporation's scope of action is much more limited than that of Loto-Québec or the province's alcohol retailer (SAQ). Its mission is to attract consumers who buy cannabis from the illegal market, but without encouraging consumption.

The legal cannabis industry, however, wants the regulations surrounding the sale of cannabis in Quebec to be more flexible, so that the SQDC is more attractive than the illicit market.

One example is edibles, which are more varied in Ontario. The SQDC can't sell candy and falls back on alternatives such as cauliflower or dried beets.

Farcy, who was interviewed as part of the unveiling of the company's annual report, acknowledges that debates are taking place between various industry players.

The SQDC doesn't have to push "one way or the other," and leaves it to the government to establish the regulatory framework, he said.

He doubts, however, that a more flexible framework would have a significant effect on the growth of the Crown corporation.

"When you look at other Canadian provinces where the legal framework is a little different, you realize, in fact, that the amount of the illegal market captured is quite comparable, with between 50 per cent and 60 per cent of the market absorbed."

The question of capturing the illegal market comes at a time when the SQDC says it is reaching "a plateau" five years after it launched in June 2018.

"For us, this is a fairly normal stage," he said.

The SQDC now wants to focus on customer service to keep its customers buying cannabis from the legal market.

"We want to make sure our customers understand the prices that are available at the SQDC today. We sell dried cannabis for very little. Our first price is $3.43 per gram," said Farcy.

Home delivery is another way to compete with the corner drug dealer.

"We want to make sure that our delivery services are very well known. Today, we have 90-minute delivery. We also have same-evening delivery, in addition to standard Canada Post delivery."

LABOUR DISPUTE

After more than a year on strike, the SQDC and the Canadian Union of Public Employees are scheduled to meet with the conciliator this week.

Employees at 24 of the Crown corporation's 98 branches have been on strike since the end of May.

CSN-affiliated employees, for their part, have approved a June 2022 contract.

"We've been summoned next week by the conciliator assigned to the case," Farcy said. "We'll see next week what conclusions the conciliator makes about the situation of the two parties at the table."

With the striking branches operating on reduced hours, the labour dispute is having an effect on the company's revenues.

Sales, in terms of revenue and volume, remained stable in the 2022-2023 fiscal year that ended March 25, despite the opening of 10 branches.

Total SQDC sales reached $601.9 million, representing 106,526 kg of cannabis, compared with $600.5 million and 106,448 kg of cannabis the previous year.

Salary is the main stumbling block in negotiations between management and the union, said Farcy.

He is assured that salary conditions are attractive at the SQDC, mentioning that the entry-level salary at SQDC is $19.30 and that the salary "exceeds" $20 after "two or three years."

"What I also note is that these working conditions, which I see as good working conditions, are now enabling us to recruit," he said.

The annual report also revealed Farcy's total compensation.He received total compensation of $359,603 during the year.

Unlike other Crown corporations such as SAQ or Investissement Québec, SQDC does not have a long-term incentive plan or annual bonuses.

In fiscal 2022-2023, the SQDC recorded net earnings of $94.9 million, compared with $75.7 million for the same period last year.

In total, SQDC's contribution represents tax revenues of $232.7 million for the Quebec government, including dividends and taxes.

These revenues are reinvested in cannabis prevention and research and in the fight against the harms associated with the use of psychoactive substances.

This report was first published in French by The Canadian Press on June 12, 2023.