Uncertainty reigns as Ontario moves to private pot retail

The cannabis industry welcomed Ontario’s plan to privatize in-store sales of recreational cannabis, but starting fresh raises new complications over how the model will be rolled out in cities and towns across Canada’s largest province.

Many marijuana companies say the move will lead to more stores, better choices and an improved experience for consumers, while cannabis activists who have been advocating for better access and a chance to be legal sellers claimed victory. But Ontario and its municipalities will have limited time to decide how retailers obtain licences and permits, where stores can be located and how operators will be vetted, with less than three months to go before recreational cannabis becomes legal on Oct. 17.

The group representing the province’s municipalities, however, says it hasn’t even been consulted on the new plan.

“We certainly have a concern that Oct. 17 is coming very quickly and municipal governments up to now thought that the issue surrounding business licensing and zoning bylaws was going to be dealt with provincially,” said Lynn Dollin, president of the Association of Municipalities of Ontario (AMO). “I’m not saying that we can’t do it. I’m just saying that the timeline is very tight.”

Ontario’s Progressive Conservative government is expected to announce as early as next week the province’s plan to scrap the existing public retail model and allow the private sector to own and operate bricks-and-mortar cannabis shops. A senior government source told The Globe and Mail the province will still control the wholesale and distribution of the product to the stores and manage online sales.

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Ms. Dollin called the lack of consultation “unfortunate.” She noted that one of her major questions for the province is about funding. The AMO said the previous Liberal government estimated it would earn roughly $100-million from cannabis over the next two years, with at least $40-million of that earmarked for municipalities.

But the new system will require more involvement and higher costs to municipalities. The Liquor Control Board of Ontario, which was tapped to manage recreational sales by the former Liberal government and created an arm to do this called Ontario Cannabis Stores (OCS), isn’t subject to municipal zoning laws. Private enterprises will be, though.

Will Stewart, a vice-president at Hiku Brands, which recently agreed to be acquired by Canopy Growth Corp., said would-be retailers are waiting for the province to detail its plans so municipalities can also start making decisions about where to locate stores.

“There are a lot of things that governments still have to do, so it’s not just whether the private sector can get a store open or not,” Mr. Stewart said.

Alcanna, an Edmonton-based chain of liquor stores that’s also looking to open cannabis stores in its home province, has been scouting real estate in Ontario since Premier Doug Ford’s June election win, a source familiar with the company said. Producer Aurora Cannabis owns a large stake in the chain.

The Ontario system is expected to mirror the Alberta model, which will allow for privately run cannabis stores to sell cannabis with licences granted by the liquor commission. Trevor Fencott, chief executive of Fire & Flower, an Edmonton-based company that is going to be a cannabis retailer in Saskatchewan, has applied to do so in Alberta and is now eyeing Ontario.

“I don’t think Ontario is at an insurmountable disadvantage here,” he said. “Alberta’s done the hard work. If Ontario’s open, there’s an opportunity not to reinvent the wheel. That could speed up the process.”

Mr. Fencott added that many cities in Alberta got really serious about cannabis in late June after the federal government set Oct. 17 as the start date for legalization. British Columbia, which will allow a mix of private- and government-run stores, only opened its application process for licences in early July.

Bruce Linton, CEO at Canopy, Canada’s largest grower, said Ontario will face challenges as it transitions to private retail sales.

“There’s been quite a lot of private sales in this province. They’ve just all been illegal,” Mr. Linton said. “Part of the challenge that they’re going to have to face is how to make sure that parties who are doing the sales are in fact lawful operators who are selling legally available product.”

A spokesperson for Mr. Ford declined to expand on the government’s privatization plans on Friday. “The federal government has put us in an unprecedented situation and we are reviewing the current structure to ensure we deliver on our commitment,” Simon Jeffries said in an e-mail. “Our government will do everything in its control to make sure our roads are safe from drug-impaired drivers and our children are protected.”

The Globe contacted five municipalities in Ontario on Friday to ask whether the provincial government had consulted them regarding privatization. A planning manager in London, Ont., said the city had only been in contact with the previous Liberal government about an OCS location and a spokesperson for the City of Hamilton said the province had not reached out regarding possible updates.

A spokesperson for Toronto Mayor John Tory said he will be "reviewing this proposal,” while Ottawa Mayor Jim Watson “has not been in direct discussion with the Province of Ontario in regards to the privatization of cannabis sales,” according to his spokesperson.

Warren (Smokey) Thomas, president of the Ontario Public Service Employees Union, slammed the move, asking “What on earth are they smoking at Queen’s Park?” Mr. Thomas, whose union represents LCBO workers, said the policy shift “would be a bonanza for organized crime.”