New Brunswick

Who knew? Lower prices trigger higher sales at Cannabis NB

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Sales in December at government owned stores climb for the fourth month in a row

Cannabis NB experienced long lineups on the first day of legalized sales in October 2018 but those soon dwindled. Many consumers complained of high prices and continued to buy product on the black market. (Julia Wright / CBC)

Cannabis NB launched believing low prices were not required to succeed in New Brunswick but after consumers taught it a hard lesson on that point, the Crown corporation has adopted a different approach — aggressive price discounting.

And it appears to be working.

Last week Statistics Canada reported legal cannabis sales in New Brunswick in December were $4.1 million, an 18.4 per cent improvement over November. It's the fourth straight monthly increase in sales in New Brunswick, where per capita purchases at government cannabis outlets have overtaken those in Nova Scotia.

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In January Cannabis NB's Tom Tremblay credited lower prices - which the agency initially dismissed as unimportant - for much of the improvement.

"We've been able to offer competitive pricing and a consistent value offering and this has attracted new customers and more consistent traffic in our stores," he said following the release of positive sales figures in November.

Once home to Atlantic Canada's highest prices on almost every cannabis product, Cannabis NB's website is now full of rotating deals, promotions and volume discounts that in many cases offer the lowest prices in the region - if consumers buy enough.

In Nova Scotia this week the best price offered on the Durga Mata 2 cannabis flower by the brand Namaste is $10.33 per gram (tax included) in a 7 gram package. But Cannabis NB has it on sale for $5 per gram (tax included) if consumers buy a full ounce (28 grams) for $140.

It's an aggressive pricing strategy aimed at regular users who care about prices, a major change in the agency's business model.

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When sales were first legalized in Canada in October 2018, Cannabis NB did not offer a single product for less than $8 per gram, the only retailer in the region to set its lowest price that high.

Cannabis NB's website featured 121 discounts and other promotions on products this week including $5 pre-rolled joints from Edison, 33 per cent off the regular price (Cannabis NB)

Then-president of Cannabis NB, Brian Harriman, said the Crown corporation was expecting to be undercut by illegal dealers on price but he was betting it would not matter to consumers.

"We're not going to get into a price war with the black market," Harriman said during a CBC interview the week before legal sales began.

"For similar reasons people don't go to bootleggers anymore when you have the opportunity to come in to a Cannabis NB store with 250 different products available with an educated person there to help you make the right choices and its legal and it's safe, we think that shopping experience should be better than the current illegal one."

The experiment failed early, but for a time Cannabis NB did not accept its high prices were a problem, instead blaming supply problems and product shortages in early 2019 for the lack of consumers.

Neighbouring provinces like PEI had stronger sales and lower prices than New Brunswick in the first year of legalized cannabis retailing. Cannabis NB has closed those gaps considerably in recent months. (John Robertson/CBC)

At the time the cheapest product Cannabis NB carried sold for $8.57 per gram.

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"Price point is not the driver of sales shortages — lack of supply is," Cannabis NB spokesperson Marie-Andrée Bolduc said in a statement in May 2019. That was immediately after first fiscal year end sales were reported to have come in 58 per cent below projections and were well behind neighbouring provinces.

That eventually triggered plan B - deep discounts.

Cannabis NB now offers multiple deals for consumers who buy cannabis by the ounce - prices between $140 and $160. The up front cost can be significant but the per gram price of between $5 and $5.71 is often the lowest in Atlantic Canada and half the product's regular price.

Former Cannabis NB President Brian Harriman said a better shopping experience, not low prices, would win consumers over from the black market. It didn't work and in its first year Cannabis NB sales were 58 per cent below Harriman's projections. (Maria Jose Burgos/CBC)

There are also smaller deals on smaller amounts.

Pre-rolled joints that could only be bought from Cannabis NB for $7.50 each last year are now often on special for $5.00. This week Cannabis NB had the best price in the region on Indica Aces pre rolls by Aurora at $5.20 each if bought ten at a time. That's 16 per cent cheaper than the lowest price available on the same product in Nova Scotia

On Thursday 308 products were listed for sale on Cannabis NB's website, 121 of which had a promotional price, volume discount or other offer attached.

The relationship between product discounts and improving sales is undeniable according to Cannabis NB's Sarah Bustard.

"We have been continuing to implement a number of competitive pricing initiatives for our customers and are seeing an increase in our sales (primarily flower) that's been generated by these lower price points," Bustard said in an email to CBC News.