From weed to wages: Ontario marijuana producers hit by minimum pay rate hike

Aphria said in its management’s discussion and analysis that when the provincial minimum wage goes up to $15 on Jan. 1 2019, it expects overall company wages to go up by another $300,000 per year.

Southern Ontario-based pot producer Newstrike Resources Ltd. said it’s also feeling the financial pressure, and anticipates its all-in costs to sell cannabis will rise by roughly 10 cents per gram due to the provincial wage hike.

The province has both relatively high labour costs and electricity costs, which will likely weigh on producers’ decision making when setting up a new facility, said its chief operating officer Kevin Epp.

That could mean consumers will pay more for their weed.

“For a while, you could probably absorb it by having reduced margins,” Epp said. “But eventually, in any competitive industry, costs have to be passed through or people would exit the industry.”

Beacon Securities analyst Vahan Ajamian said the cost increases are meaningful. He added that Ontario’s higher pay rate will make it more difficult for marijuana producers in the province and others with rising minimum wages to compete with those in Quebec, where both labour and power costs are lower.

Ontario’s minimum wage hike, which took effect Jan. 1, has already prompted other businesses to adjust how they operate.

For instance, some Ontario Tim Hortons’ franchisees eliminated paid breaks, fully-covered health and dental plans and other perks for their workers to offset the added costs. The move drew protests at some of the coffee chain’s Ontario locations earlier this month as well as a few locations in cities across the country.

Meanwhile, Freshii chief executive Matthew Corrin said the eatery took steps to help franchisees offset the increase, such as raising prices on some items in the fall ahead of the hike.

But not all marijuana producers in Ontario are grappling with rising minimum wage rates — at least, not yet.

Beleave Inc.’s chief executive officer Andrew Wnek said its relatively smaller operation is comprised largely of specialized workers who make more than minimum pay.

However, he notes, as the Hamilton, Ont-based pot producer grows in scale and additional harvesting staff is required for larger facilities, a higher minimum wage will factor in.

“There’ll be an impact for sure,” he said. “But, again, for the smaller LPs at this point in time, they won’t see that until they get into the larger facilities.”

Companies in this story: (TSX:APH, TSXV:HIP)

Armina Ligaya , The Canadian Press

Note to readers: This is a corrected story. A previous version identified Kevin Epp as Newstrike’s chief financial officer.

by Canadian Press

From weed to wages: Ontario marijuana producers hit by minimum pay rate hike

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