Could marijuana sales save Canada Post in digital age?

New report says post office could capitalize on legal pot sales through delivery and direct retail sales.

TheStar.com
Sept. 12, 2016
By Vanessa Lu

Could legalizing pot save Canada Post?

Canadians looking to use recreational marijuana could help boost the post office’s revenues and be part of the answer to its financial woes, a new report suggests.

“Through its currently unparalleled national delivery network, Canada Post stands to capture a large part of the recreational shipment volume,” says Canada Post in the Digital Age, written by the task force for the Canada Post Corporation review, released Monday.

The 94-page report noted that Canada Post is already the sole agent for delivering medical marijuana across the country, and its more 6,200 post offices and retail outlets could potentially serve as storefronts for weed sales.

An estimated 88 per cent of consumers live within 5 kilometres of a postal outlet.

“We don’t know what the details are yet, but we put it on the table,” said task force chairwoman Francoise Bertrand, estimating that marijuana sales could generate $10 million to $20 million a year in delivery fees.

“There’s not a huge amount of money.”

Details on whether legal marijuana sales will be regulated federally or provincially are not yet known, but the report said Canada Post is well positioned to benefit from increased distribution revenues, as it now delivers alcohol for the LCBO, under its new online shopping program introduced in July.

A separate marijuana task force, which is examining how pot could be legalized, has highlighted the mail service, noting it provides “reliable, low-cost delivery to all parts of the country in a discrete manner that does not encourage increased usage.”

But the union representing postal workers said delivering pot or selling pot alone is not the answer.

“The idea that selling pot is going to save Canada Post is patently ridiculous,” said Mike Palecek, national president of the Canadian Union of Postal Workers.

“They need something that will generate significant revenues and services that people need,” he said. “The report is rather disappointing as it concludes postal banking is not the best way to go,” which the union has been lobbying for.

The report said Canada Post’s current business model, which reflects the 20th century, needs to be realigned with the rapidly changing technological realities and the changing postal usage of Canadians.

Even with drastic changes, the report added: “Canada Post will not be positioned to operate in the future on a financially self-sustaining basis over the long term,” pointing to the steep drop in letter mail and flyers.

Even though demand for parcel delivery has soared, it can’t make up the shortfall. And the post office faces huge pension liabilities.

The report said the crown corporation could take different actions to cut costs and raise revenues, including hiking prices, considering alternate day delivery or levying annual fees to maintain door-to-door delivery.

Other ideas include turning postal outlets into community hubs, possibly handling government services or offering Internet access in rural and remote communities. It also suggested lifting a ban on closing or franchising rural outlets. Or it could sell advertising on its delivery trucks and in its postal outlets.

In 2014, Canada Post began switching customers to community mailboxes, though it received some complaints, especially from groups representing seniors and disabled Canadians.

But last October, just as the federal Liberals, who campaigned to restore door-to-door delivery, were set to take power in Ottawa, Canada Post suspended conversions. In all, 830,000 households out of 5 million were switched over.

The report estimated that to restore those customers back to door-to-door delivery would cost $1.2 billion.

The task force was appointed by Public Services Minister Judy Foote to develop an initial discussion paper that would then be submitted to a House of Commons committee for the second phase of the review, which will include public consultations that begin later this month.

In a statement, Canada Post said it welcomes the report, adding that it has reaffirmed the challenges facing the postal system and the path the corporation was taking to secure its future for Canadians.