Minimum wage increase may hurt pot industry

Coffee chains and restaurants aren’t the only businesses under pressure from Ontario’s minimum wage hike — marijuana companies say the higher provincial pay rate is driving up the cost to produce and sell cannabis products as well.

Licensed medical marijuana producer Aphria Inc. has calculated that the province’s 21-per-cent minimum pay jump from $11.60 to $14 per hour would add another $600,000 to its overall wage costs each year.

“If this increase had been in effect in the current quarter, the company’s ‘all-in’ cost of sales of dried cannabis per gram would have increased by approximately $0.12 per gram,” the Leamington, Ont.-based company said in recent financial documents.

That’s an increase of nearly six per cent from its all-in cost of $2.13 per gram during the quarter ended in November.

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.