There’s a stretch of rural road in the town of Innisfil, north of Toronto, that’s home to a small collection of businesses: a boat seller, an RV dealer, Herbert’s Boots & Western Wear. Come this fall, three new businesses could open on Commerce Park Drive, all of them cannabis stores, within a couple hundred metres of each other in a sparsely populated region.
This oddity is only one curiosity in the botched rollout of cannabis retail stores in Ontario. The province this week announced the results of a second lottery for the chance to apply for a licence. The first was in January. In both cases, the results were flawed – and each time highlighted how poorly conceived the whole idea to grant the right to apply for licences by lottery was in the first place.
The arrival of legal cannabis in Canada has been marked by ups and downs. That was not unexpected. It’s a huge public policy change. Canada is the second country in the world to legalize pot, after tiny Uruguay.
A shortage of legal cannabis was an immediate issue; that hasn’t been entirely fixed but the pressure has abated. But a shortage of places where people can legally buy said legal pot remains.
Ontario’s original plan was to sell the drug through government-owned retail stores. Within the first two years of the Oct. 17, 2018, legalization date, the province planned to open 150 cannabis stores. That low number was the plan’s main flaw; it wasn’t enough stores to displace the long-established illegal market.
Then Doug Ford and his Progressive Conservatives were elected. Mr. Ford decided on a private retail market – and this page agreed. To give the province time to ready itself, April 1 of this year was picked for the opening of retail stores, with online sales in the interim.
As legalization arrived, supply problems jumped to the fore. In Quebec, which chose a government-run retail model, stores at first were closed several days a week. In Alberta, where the province licensed private retailers, the government pressed pause on the issuance of new licences.
Those worries over supply sent Ontario in the wrong direction. The Ford government claimed it could not “in good conscience issue an unlimited number of licences to businesses.” Instead, the lottery was announced in December.
The first lottery was for just 25 stores across a province of 14 million people. The winners were mostly individuals with no experience in cannabis or retailing. The licence lottery winners might as well have been playing Lotto 6/49; the drawn-at-random winners were suddenly worth millions of dollars, as existing cannabis players sought to partner with them.
Ontario adjusted the rules for its second lottery of 42 licences, adding hurdles such as access to $250,000, but the impression left is that this time the system was gamed by deep-pocketed applicants working to exploit loose rules. A Globe and Mail analysis found one cannabis firm won at least six of the available licences. Two licences were awarded to a single Oshawa address – which featured on 169 applications.
There could be about 75 stores open in Ontario this fall, a year after legalization, making the legal retail market a weak competitor against the illegal market (except, perhaps, in Innisfil). This self-inflicted mistake piles on top of other issues that include a thriving illegal online market, and the fact legal weed is more expensive than its illegal cousin.
Before the lotteries, there had been predictions of more than 1,000 private stores in Ontario by around 2020, which would be a fair number compared with the alcohol market, or established cannabis markets such as Colorado.
Ontario has yet to outline what licensing will look like after its lottery experiment. This week there was only a brief reference to an eventual “open marketplace.” Ontario should look to Alberta, where any hopeful retailer can submit an application, one that features background checks, requirements and approvals. Alberta navigated supply problems by freezing the issuance of new licences for about six months, from late November through the end of May. Alberta is Canada’s cannabis retail leader with 270 stores.
Ontario’s lottery system hasn’t worked. It is time to open up legal cannabis retailing in the province as Mr. Ford promised, instead of entrenching the illegal market while enriching a few lottery winners.