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Cannabis Alberta signs supply deals for cannabis, but retail store details remain up in the air

Part of cannabis and small business and retail

A clearer picture is emerging of how recreational cannabis will be sold in Alberta, which is taking a different approach to retailing from other large provinces.

On Thursday, Alberta outlined plans to buy marijuana from 13 legal growers and said it will carry products from each in its online store when recreational use of the drug becomes legal on Oct. 17. It will also offer these items to brick-and-mortar outfits that – unlike Ontario and Quebec – will be privately owned and operated and will have to buy the cannabis they sell from the government.

Alberta’s private retail model is being closely watched. While other provinces, such as Manitoba and Saskatchewan, are planning to implement similar sales structures, Alberta is the largest market to do so. The governments of Ontario and Quebec are set to control sales directly, while British Columbia is planning a hybrid system.

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The Alberta Gaming and Liquor Commission says it has received 684 applications to open a cannabis retail shop in cities across the province, as of Monday. Of those, 141 were in Edmonton, while 216 were in Calgary. These businesses have to be approved at the municipal and provincial levels. The AGLC hasn’t issued any retail licences yet, but it expects that there will be 250 stores in the province in the initial year of recreational sales.

But it remains unclear how many stores will be open by Oct. 17, who will own them and where they will be located – let alone which brands and products they will choose to stock on their shelves.

“Quite honestly, I would love to know what the shelf is going to look like, too. I don’t know yet,” said Niaz Nejad, the chief operating officer and vice-president of gaming and cannabis at the AGLC.

“I can tell you that I plan to buy for up to 250 stores and the volume that I expect on the e-commerce channel, but I can’t tell you with any certainty how many stores will actually be opened come Oct. 17. It’s impossible for us to know.”

Ms. Nejad added that Alberta will sell more than 300 items from the 13 producers to the private retailers and to consumers who shop online. That figure will fluctuate based on demand.

The AGLC has inked supply contracts that earmark a certain amount of cannabis that may be purchased by the province. That includes six-month deals with Aurora Cannabis Inc. for 25,000 kilograms, Canopy Growth Corp. for 15,000 kg and Maricann Group Inc. for 3,375 kg, according to news releases. Aphria Inc. said it has secured an initial order for 870 kg worth of product. The other nine firms didn’t disclose quantities.

“Whatever we were able to supply, they were wanting to take and then some,” said Keith Merker, chief financial officer at WeedMD Inc., one of the 13 growers that signed with Alberta.

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“Had we more product, we would have moved more product. Folks have wanted more product than we’ve been able to allocate. It’s tough to say no, but I’ve had to.”

In May, WeedMD struck a deal to be acquired by Hiku Brands Company Ltd., which is pursuing a retail strategy across the country, and has filed applications to open retail stores in Calgary and Edmonton.

Cannabis will be sold in Alberta in a variety of formats, such as dried flower, capsules, oils, pre-rolled joints and seeds. Strains of flower will be available in either 1- or 3.5-gram packages, and sometimes in both. Private stores buy the product from the AGLC at a wholesale price and then set their own retail price. The government’s online store can sell these products for less, more or the same price.

Ms. Nejad said that each of the 13 producers are allocating a certain amount of inventory for Alberta for the first six months of sales, but the province could actually buy more or less. It’s placed orders for three months’ worth of product.

Ms. Nejad pointed out that only one of the 13 growers is Alberta-based: Aurora. She said that is because it was the only local producer with a sales licence when the government started this process.

“We’ll be adding more Alberta producers,” she said. “They’re certainly our priority post-Oct. 17.”

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Cam Battley, chief corporate officer at Aurora, which is also pursuing a retail strategy through its investment in Alcanna Inc., stressed that the deals with the provinces are what the grower has agreed to set aside for these different markets, but they aren’t guaranteed sales.

“Products have to be high-quality and popular with customers,” he said. “That’s an important caveat, and this is where we shine.”

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