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Ontario is scaling back its plans for the storefront sale of marijuana in the province due to concerns about shortages of product in the industry.

Instead of opening up the sale of cannabis on April 1 to an uncapped number of licensed retailers as previously planned, the province said Thursday it would adopt a phased-in approach that will initially limit the number of retail licences available to just 25.

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Who will hold those initial licenses will be determined by a lottery conducted on Jan. 11, according to a statement late Thursday from Finance Minister Vic Fedeli and Attorney-General Caroline Mulroney that largely placed the blame for supply shortages on the federal government.

The province had expected to license up to 1,000 cannabis retailers, and was planning to open the application process later this month.

Since recreational cannabis was legalized on Oct. 17, retailers across the country, as well as provincially run e-commerce sites, have struggled to keep their shelves stocked. In November, Alberta put a freeze on issuing new retail licences, saying it had received just 20 per cent of the cannabis it had ordered from producers.

The statement from the Ontario government blamed the federal government for the shortfall. “Taking into consideration the required investments for a prospective Ontario private legal retailer, we cannot in good conscience issue an unlimited number of licences to businesses in the face of such shortages and the federal government’s failure to provide certainty around future supply."

The change also follows decisions from several large Ontario municipalities to opt out of having cannabis stores, at least to begin with. On Wednesday, the city council for Mississauga, Ontario’s third-largest city, voted overwhelmingly against opening cannabis stores in April. That was followed on Thursday by ‘no’ votes from the Greater Toronto Area suburbs of Pickering and Markham. On Thursday night, however, the City of Toronto’s council voted to opt in to opening cannabis stores in its jurisdiction.

Ontario’s approach to cannabis retail has changed rapidly following the election of Premier Doug Ford. Shortly after coming to power, the Progressive Conservatives announced they were scrapping the previous government’s plans to have government-run stores, operated by the a subsidiary of the the Liquor Control Board of Ontario.

Several cannabis-industry firms engaged in bidding wars to secure desirable properties, and many will be left sitting on leases.

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Some members of the industry, however, are looking at what’s happening in other provinces and suggesting that a slower approach may be the right one.

“I think that a phased approach makes sense given what is happening in Alberta. The overall number of stores is lower than expected but that should ramp up quickly,” said Dave Martyn, president of cannabis retailer Starbuds. “My biggest takeaway is that Health Canada needs to speed up all forms of cultivation and micro licenses ASAP,” he added.

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