There is unanimous agreement among cannabis advocates, consumers, and businesses that Ontario's retail cannabis strategy is doomed to fail in spectacular fashion, and fail it will in its current form.
The prior Liberal government took the province's socialist-inspired retail alcohol blueprint and gave it the Lada treatment for cannabis retail — uninspiring would be a gross understatement. Even the graphic designers were reaching for straws when they came up with the retail logo for the clinical 'Ontario Cannabis Store'.
As it stands now the physical retail cannabis footprint for Ontario will grossly underserve the population. The province of Alberta's private retail model will have one store for every 2,100 consumers versus Ontario's public retail model at one store for every 11,333 consumers.
Ontario plans to have 150 stores by 2020 and will have 40 stores in 2018. With 40 stores on launch the province's online presence will need to pick up the significant demand slack.
This amount of reliance on an untested online channel is a very big risk for the province. If operations don't go according to plan (high likelihood they won't) consumers will ultimately seek out product from the black market.
As a reminder, the black market is already fully supplying all Canadians that seek out cannabis, for the provincial retail model to thrive it must attract black market consumers. Legal Ontario retail will need to compete on both price and service with the black market and as the provincial strategy currently stands neither competitive objective will be met.
If the black market remains entrenched in Ontario during legalization it would structurally diminish the long-term commercial potential for legal marijuana producers and legal retail.
Ontario Progressive Conservative Premier Doug Ford has already committed to allowing convenience stores to sell beer which would be a seismic shift in the competitive landscape for alcohol sales within the province. He surely also understands that the public retail Ontario Cannabis Store strategy will be essentially 'broken on arrival'.
Marijuana Business Daily has reported that efforts to sign leases for Ontario Cannabis Store outlets have been put on hold by the Ford government. Premier Ford is committed to a pro-business agenda and thus a pivot to allowing private cannabis retail involvement would be in full alignment.
Ford has also been on record earlier this year in March on CBC Ottawa explicitly stating his openness to greater privatization in marijuana:
“This is a new avenue, we’re going down a path that no one really knows. Right now we’re going to sit down with the caucus and I’ve always been open to a fair market. I let the market dictate. I don’t like the government controlling anything, no matter what it is.”
Also, let's not forget there's likely no other politician in Canada that understands black market marijuana supply/demand dynamics better than Doug Ford — as he was allegedly the go-to hashish dealer in central Etobicoke (borough of Toronto) during the 80s. He understands that if black market dealers are given an opportunity to thrive, the legal retail model (private or public) will be doomed over the long run.
What Premier Ford needs is a successful private retail model to emulate and without question that model has to be the state of Nevada. Sales of legal marijuana in the state have been significantly ahead of plan in stark contrast to California where legal sales have been disappointing.
What did Nevada get right? Two things:
Low taxes
Private retail
Premier Ford has a unique opportunity to get this right for Ontario the first time — he may not get another pitch.
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