Non-profit societies active in Vancouver’s multi-million-dollar retail pot sector have reported a wide range of annual revenues, from under $80,000 for one society to more than $3.7 million for another, with those totals almost matched by substantial expenses, according to financial statements obtained by The Vancouver Sun.
At the higher end of reported revenues, the Vancouver Dispensary Society, which has two locations, saw revenues between $3.3 million and $3.7 million over each of the last four years.
Society director Dana Larsen said while the number of dispensaries increased in Vancouver over the last four years (according to the city, the number of marijuana-related businesses grew by 100 per cent per year from mid-2013 to mid-2015), the consumer market appeared to grow too, as dispensaries became more mainstream.
Compared to the roughly 75 dispensaries currently operating in Vancouver, Larsen said he believed his society was “probably in the middle somewhere,” keeping busier than some businesses, but not as busy as the largest.
“I see some places that look a lot bigger and more impressive than ours do,” he said. “I’ve been to other dispensaries that have bigger lineups than ours do, but I haven’t really discussed numbers or income.”
The Vancouver Dispensary Society charges a mark-up of roughly 30 per cent on product sold, Larsen said, and donates money to cannabis advocacy efforts.
At the other end of the scale, Medicinal Express Society reported revenues of $78,008 last year for a net loss, which its lawyer said is indicative of high costs and tough competition in the local market.
Vancouver’s retail marijuana trade, which is still illegal under federal law, is largely run by non-profit societies. Because of what dispensary owners, lawyers and business experts described as a unique feature of Vancouver’s regulations, companies are not allowed to apply for dispensary business licenses. Applicants must be either societies or personal licenses, registered to individuals. Non-profit societies in good standing can apply for a cheaper dispensary business licence in Vancouver, which costs $1,000 for “compassion clubs,” as opposed to $30,000 for “medical marijuana-related retail dealers.”
Societies in B.C. are required, under the province’s Society Act, to provide copies of financial statements to members of the public who request them. (Federally registered charities are more stringently regulated and have a different set of requirements.) But the financial information for Vancouver’s pot societies was not always easy to obtain, and directors of some societies were unaware of their financial reporting requirements.
In an attempt to better understand the scope of Vancouver’s retail marijuana industry, Postmedia contacted some of the longest-established dispensary societies working their way through the city’s licensing program and requested financial statements. Requests were made in July, to give societies time to prepare.
Yearly revenue totals for each society were almost matched by expenditures, with the cost of product as the single largest expense (most societies reported supply costs made up about 70 per cent of overall expenses), followed by payroll.
The Vancouver Dispensary Society reported revenues growing year-over-year between 2011 and 2013, before shrinking from $3.7 million in 2013 to $3.49 million in 2014, as the number of dispensaries in the city expanded rapidly and competition increased.
But the Vancouver Dispensary Society has seen an uptick in business over the last three months, Larsen said, after their July announcement they would sell to any adults over 19, regardless of whether they had medical documentation.
Urban Earth Med Society also saw business grow at a time when competition was increasing around the city. Urban Earth, which was licensed by the city this year, saw revenues grow from $686,720 in 2013 (its first full year of operation) to $1,119,392 the following year: a year-over-year increase of more than 70 per cent. Compared with the $1.11 million in revenue for 2014, expenses for the year totalled $1,096,764, including $811,328 on materials and supplies and $213,436 for wages and benefits.
For a small retail shop in a largely residential area on Renfrew Street, like Urban Earth, that is substantial revenue, said Lindsay Meredith, a marketing professor at SFU’s Beedie School of Business.
“I would be hard-pressed to find many local storefront grocery stores doing that kind of action. So what’s the deal? They’ve got a lot of product, people want it, and they’ll pay good money for it,” Meredith said.
The federal government is expected to introduce legislation to legalize marijuana sometime next year. A report last week from Deloitte said a legal market for non-medicinal pot in Canada could be worth more than $22 billion annually.
But Kirk Tousaw, a lawyer representing Medicinal Express, said: “A lot of people think of the cannabis industry as a license to print money, and that’s just not the case. There’s a lot of competition and there’s a lot of costs. … It’s a pretty highly competitive market in Vancouver right now, so if you’re not one of the big players, you’re struggling, like any small business.”
After Postmedia requested, in July and August, financial statements for 2014 and 2015 from Buddha Barn Medicinal Society, a society director said the statements would not be available after its next annual general meeting in November.
Another society declined to provide financial information after Postmedia obtained an order from the provincial government.
In early July, a Postmedia reporter phoned a marijuana dispensary called Westcoast Medicann Society, operating near Cambie and 16th Ave., and spoke with a man who identified himself as a director of the non-profit society, which he said operates the dispensary. Westcoast Medicann Society was incorporated in November 2010, B.C. registry records show.
Following the July request for Westcoast Medicann Society’s financial statements and repeated unsuccessful attempts to follow up with the society’s directors by phone and email over the following weeks, a reporter applied for and obtained a Registrar’s Order from B.C. Registry Services in August, ordering Westcoast Medicann Society to provide the reporter, within 15 days, copies of the society’s financial statements from 2010 to 2015.
Last week, Postmedia reached a director of Westcoast Medicann Society by phone, who said the society had received the government’s order but would not provide financial information.
Many Vancouver dispensary owners said they pay provincial and federal taxes.
Generally, from an income tax perspective, there is no difference between incorporating as a non-profit society instead of a corporation, said Canada Revenue Agency spokeswoman Ravinder Dhami in an email. However, non-profit organizations may be exempt from tax if they are elligible under Section 149(1)(l) of the Income Tax Act, Dhami said, which says, among other conditions, “you must be organized and operated exclusively for social welfare, civic improvement, pleasure or recreation, or any other purpose except profit,” and “you can make no income or benefits available to members.”
Starting Nov. 28, the new Societies Act comes into effect, which will mean less stringent reporting obligations for some B.C. societies. With the new act, larger societies that receive significant public funding will be subject to more stringent oversight, while “member-funded societies,” which are funded primarily by members to carry on activities for their benefit, will face less onerous requirements and be exempt from sharing financial statements with the public upon request.