The cannabis industry is often compared to alcohol in that the two have experienced periods of prohibition and are both now legally available, though highly regulated and taxed.
As well, during their respective prohibitionist periods, both alcohol and cannabis generated significant economic activity.
For example, Canada’s Bronfman family, one of the most successful in the country’s history, made a fortune selling distilled spirits to organized crime during prohibition. This criminal enterprise transitioned seamlessly into the legal market, birthing the Seagram Company.
By comparison, cannabis has suffered from years of demonization that has made the post-legalization road rockier. The distorting effects of stigmatization, a cautionary regulatory environment, a burdensome tax regime, and speculative capital, have all presented unique challenges.
Where do we stand now? Both industries provide employment and generate significant revenue, but the governance business models vary, and the societal costs are dramatically different.
Comparing the governance economics of alcohol and cannabis in Canada is a tricky business. Each provincial and territorial system has unique models for both, and it can be hard to draw direct comparisons.
In Alberta, for example, the Alberta Gaming, Liquor & Cannabis (AGLC) regulates both alcohol and recreational cannabis. In 2023, the AGLC registered $850 million in alcohol net revenue and $38 million in expenses, with other revenue bringing the total to $825 million. By comparison, net cannabis revenue was $60 million, with $49 million in expenses. With other revenue added, cannabis turned an $18 million profit.
Why would cannabis expenses be 29% more than those for alcohol when alcohol net revenues are more than 14 times higher than cannabis?
“The variance is mainly due to the differences in the Alberta liquor and cannabis system models,” says Karin Campbell, a spokesperson with the AGLC. “AGLC is the wholesaler for non-medical cannabis in addition to regulating and distributing cannabis on behalf of the Alberta Government. Alberta’s liquor model is privatized—liquor retailing, warehousing and distribution are all managed by the private liquor industry.”
This helps explain the $558 million cost of sales for cannabis, though at over 90% of revenue, that’s steep. That said, in Alberta, cannabis expenses are 7.9% of the top-line revenue of $619 million, which is favourable compared to other provinces.
In Ontario, the Liquor Control Board of Ontario (LCBO) has both a wholesale and a retail role. Though Ontario allows for a varied retail model for beer and wine, the LCBO is still the largest alcohol retailer in Canada.
The Ontario Cannabis Store (OCS), by comparison, has a legal monopoly as the province’s recreational cannabis wholesaler but has no stores itself, much like the AGLC.
Last year, the LCBO reported revenue of $7.41 billion and net income of $2.46 billion, with $1.19 billion in expenses. All told, expenses represented 16.1% of revenue.
By comparison, the OCS reported revenue of $1.47 billion, a net income of $234.2 million, and selling, general, and administrative (SG&A) expenses of $103 million. Here, expenses represent 7% of top-line revenue and are in line with Alberta’s 7.9%.
“As the sector becomes more stable, the OCS’s SG&A expenses have stabilized to align with industry growth,” says Amanda Winton, an OCS spokesperson. “As a result, the OCS is starting to experience more consistent SG&A spending as a percentage of revenue year over year.”
In Manitoba, the Manitoba Liquor & Lotteries Corp. (MLLC) sources and distributes recreational cannabis...
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