- Real Estate
- Food & Drink
- Things to Do
The number of retail cannabis stores has quadrupled since the start of the pandemic, but how long can this retail boom really last?
Cannabis shops are taking over Toronto.
Nearly three years since Canada legalized recreational cannabis, retail pot shops are everywhere. There are officially 161 in the city, often in clusters of half a dozen or more within blocks of each other. Pot shops have snatched up empty storefronts at such a quick clip that it’s become a running joke: anytime a store, a bar or a coffee shop closes in a trendy or up-and-coming neighbourhood, the countdown starts to when it will become a weed store.
Neighbourhood groups, politicians and concerned citizens have been raising alarms on social media that the explosion of pot shops is homogenizing the streets, driving up commercial rents and killing the character of neighbourhoods.
With the city re-emerging from lockdown, there are suddenly dozens of cannabis dispensaries opening their doors for the first time, and Toronto looks like a whole new city – a city of cannabis.
But how concerned should people really be?
Can this cannabis retail boom last, or is this a fleeting trend? Should this be an actual urban concern, or is it just another moral panic? And how long before the bubble bursts?
If it seems like hundreds of cannabis shops suddenly sprouted up while we were all locked down at home, that’s because they have.
According to a year-in-review report by the Ontario Cannabis Store (OCS), the number of stores in Toronto has more than quadrupled from 35 in March 2020. That number will continue to rise with many more approved by the Alcohol and Gaming Commission of Ontario (AGCO) to open soon. It won’t be long before there are more than 200 stores open and operating in the city.
That’s by design.
There are currently more than 800 authorized retail stores in Ontario, which has surpassed Alberta for most in the country. The OCS is the province’s exclusive wholesaler and online retailer of legal cannabis, and its main mandate is to control the illicit cannabis market – and the best way to do that is to open up the legal market as much as possible.
“In order to ensure we are doing everything we can to reduce the viability of illegal and unregulated cannabis sellers, our government adopted a retail authorization system based on market demand,” Brian Gray, spokesperson for the Ministry of the Attorney General, told NOW earlier this year. “This is a key part of our battle against the illegal cannabis market.”
The OCS touts the cannabis retail boom as a sign their strategy is working.
In the last year (April 1, 2020, to March 31, 2021), the legal market sold approximately $840,100,000 in legal cannabis, capturing 44 per cent of the total market (which includes sales in the illegal market). Lower prices for legal weed have a lot to do with that – $6.17 per gram vs. $9.59 per gram on “illegal websites,” according to OCS. Cannabis is a boost to local economies,” the OCS writes in its Toronto fact sheet, “with local cannabis stores capturing 84 per cent of all legal sales.”
For many neighbourhoods, cannabis shops occupy storefronts that would otherwise be sitting empty. The pandemic has been hard on local businesses, and many have closed their doors. Cannabis is one of the few brick-and-mortar retail industries that is growing rather than shrinking.
The clusters of pot shops, however, have raised worries that one industry flush with cash could set the precedent for commercial rents in neighbourhoods – meaning other retailers could get priced out.
Business Improvement Area groups like Kensington Market’s and city councillors like Paula Fletcher argue that neighbourhood groups and politicians should have more say in how many cannabis shops are allowed in their areas. They say the city should be zoning for increased distance between stores as is the case in municipalities like Calgary and Edmonton.
That was never on the table here.
There is a public consultation process during the AGCO’s licensing process, but clustering is not one of the criteria for objecting. Last month, citing issues around zoning and examples from Toronto, the city of Mississauga voted to opt out of legal cannabis for the second time.
Kate Robertson, a longtime cannabis columnist and trade reporter on the business of weed (and a former NOW editor), sees the backlash over cannabis clusters as a new form of reefer madness, a “prohibition-era attitude” of the stigma around marijuana.
She points to objectors like Scarborough PC MPP Aris Babikian, who cited the safety of children as his main concern for his opposition to weed shops and got support from Mayor John Tory.
She understands where the pushback is coming from but says there’s a public misconception that there’s a coordinated effort among retailers to take over the city.
“It’s not like Starbucks, which is one big company with very sophisticated market research. This is all sorts of businesses – some are huge and corporate, others are independently owned mom-and-pop shops.”
Jana Macalik is an associate professor of environmental design at OCAD, a field that focuses on how public spaces fit within their existing environments and contexts. She says the retail market for legal cannabis is still so young that “many are still figuring out what the standards are.”
“There are a lot of start-ups run by people who might know the product or the industry very well, but aren’t as experienced when it comes to retail,” she says.
Macalick theorizes that some likely opened in areas where shops existed because there was already a market there. But with so many licences approved at the same time, many retailers didn’t know they’d be in close proximity with competition until they were already leasing their stores.
“None of us knew we were opening so close to each other until the signs were up,” GreenPort owner Vivianne Wilson told NOW this past March. “That is not great for the industry at all.”
Whether consciously or not, part of the pushback is aesthetic.
Cannabis retail bylaws prohibit consumers from being able to look directly inside a store and see what’s on display, which means the shops aren’t particularly inviting or conducive to window shopping. They have to have someone at the front of the store checking IDs before you can enter. For people who might be hostile to cannabis, the required security – and the lineups that sometimes come with it – can make the stores intimidating. Retailers have to get creative in how they meet the street.
Premier Doug Ford abandoned the initial Liberal government plan to sell cannabis exclusively out of public OCS stores with identical branding, like the LCBO. But there’s still a dominant aesthetic that identifies many of the city’s dispensaries: open spaces, clean lines, wooden floors, glass cases, wall menus and “budtenders” who take your order on an iPad.
It’s a bright and sleek, minimalist look that many have compared to the Apple Store. That’s a far cry from the pre-legalization head-shop look of hemp bracelets, Sublime soundtracks, “take me to your dealer” t-shirts and pot leaves everywhere. But it’s the sameness of the designs that critics say creates a cookie-cutter look in neighbourhoods.
Randy Simmen and Desmond Chan are designers at the Toronto-based agency SevenPoint Interiors. Since helping to open the Hunny Pot at Queen and McCaul – the very first legal dispensary in the city – they’ve designed more than 20 different cannabis shops across the province.
Some, like Scarlet Fire Cannabis in the north end, are brand new designs. Named after two songs by the Grateful Dead, owner David Ellison’s favourite band, the goal is to “transport you to an alternate plane of consciousness.” Other stores are designed using a customizable template of colours, finishes, lighting, shelving and display.
“It’s a way to create a unique space for smaller retailers on a budget that doesn’t look overly cheap or samey,” says Simmen.
Design and branding is something that some retailers overlook when rushing into the market.
“Oftentimes people will be super-excited because they’re jumping into a brand new industry and their first question is ‘Okay, what’s the quickest I can open?’” Chan says. “We’ll say, let’s take a step back here. What’s the meaning behind your brand? Who’s your target market? What sets you apart from your competitors? What’s your identity?”
Branding is a major aspect of the current legal cannabis culture because of the restrictions on advertising and packaging. The OCS also controls the price and supply of products on offer. That catalogue is growing. There will soon be a “flow-through process” to allow licensed producers to sell directly to retail stores so they can get products that aren’t stored in the OCS warehouse. But it is still limited and tightly controlled.
That leaves little room for businesses to differentiate themselves from each other. If the three stores on your block are all selling the same or similar products, there’s not much reason for you to stop into more than one of them.
Which is why some shops are positioning themselves as “lifestyle” brands with a focus on accessories. That’s the case for Edition, a “high-design” cannabis brand with shops on Dupont and St. Clair West. Designed by StudioAC, it was made to “stand next to Gucci stores in any city,” says owner Ryan Roebuck.
The store is arranged almost like a gallery or boutique, with many accessories on display like art objects. Those accessories are something Edition can offer that other stores can’t because they aren’t regulated like cannabis products.
“Our focus is on lifestyle accessories that are a little bit elevated,” Roebuck says. “It’s not your traditional rolling tray, for example, but something that can sit proudly on your coffee table instead of something that you have to hide in the closet.”
It’s a weird time for weed in the city.
As tempting as it is to compare it to the post-prohibition bar scene or second-wave coffee, this is a totally unique set of circumstances: an illegal product suddenly becoming legal and lucrative, an “open for business” conservative provincial government allergic to regulation and – oh, yeah – a global pandemic that has killed so much local retail across the city.
Nearly everyone I spoke to for this story admits the growth is unsustainable. Retail cannabis will last, but it’s unlikely so many shops can survive in such close proximity. Toronto is number one in Ontario in total retail sales, says the OCS, but only number 18 in per capita sales (number one is North Bay).
And even they admit the bubble will eventually burst.
“Unfortunately, this rapid growth will likely result in some retailers being faced with increased competition and a crowded marketplace, which could result in some closures and market right-sizing,” writes OCS interim president and CEO David Lobo in an opening letter in the year-in-review report. “Other retail stores may choose to participate in mergers and acquisitions to increase their size and scale, and presumably drive down their operating costs,” he adds.
It’s already starting to happen.
Long-standing pre-legalization cannabis culture shops like the Friendly Stranger and Hotbox Cafe have been acquired by major brand Fire & Flower, while other corporate giants like Tokyo Smoke and Spiritleaf are expanding across the city and country. In an open and unregulated market, the big multi-store players will always be at an advantage over the independents and mom-and-pops. They have more buying power, lobbying influence and better margins.
If the market will correct itself, as so many in the industry are predicting, then many independents will likely have to close or sell to their bigger competitors. It might not be fair to treat cannabis shops as a monolith or compare them to Starbucks, but a Starbucks of cannabis may still emerge.
With the OCS catalogue expanding, there may be even more specialization – not just shops selling lifestyle brands, but the CBD store, the wellness outlet, the indica shop, the sativa shop, the premium flower store. The key for retailers will be to know your demographic.
You have to fit into your surroundings, says Macalik. You can’t just pave over what’s already there.
“I think of the Vegandale debacle,” she says. “One restaurant brand [the 5700 Inc.] came into Parkdale and tried to rebrand the whole neighbourhood. They rebelled. The [residents] said ‘What in the hell are you talking about? You can’t just ignore what’s already here.’ And then, of course, half the restaurants ended up closing.”
Legal recreational cannabis might be a new industry, but the city has a long history of sustaining a legacy market in both back-channels and on city streets with compassion lounges and head shops.
Tyler James is a community outreach coordinator for Cannabis Amnesty, a campaign to pardon individuals who have been convicted for possession of cannabis prior to legalization.
As Ontario was passing the bill to establish the retail cannabis licensing scheme scheme, James made a deputation proposing a“merit-based” system that would take neighbourhood demographics into account and give people from marginalized communities a chance to be entrepreneurs.
According to a Toronto Star investigation in 2017, Black people with no history of criminal convictions were three times as likely to be arrested by Toronto police than their white counterparts. A Vice investigation also found that Black and Indigenous people were overrepresented in cannabis possession arrests across Canada during Justin Trudeau’s reign as Prime Minister.
There are programs in states like California, Colorado and Massachusetts that build equity into their legal cannabis framework. Evanston, Illinois, for example, is using its weed tax to fund the United States’ first government reparations program. So this can be done.
Right now, James argues, the government isn’t doing enough to engage with the legacy market. Instead, they’re just trying to compete.
He suspects the OCS is overstating its share of the legal vs. the illegal market because he sees many in the legacy business still thriving. He argues that if they gave those people a way to transition into the legal market, including their long-standing skillsets of growing and selling diverse products, the whole industry would thrive.
“The government is counting on a market correction, but what that really means is people will be losing jobs and money. They might be looking at the number of stores and saying that’s a success, but how I look at it is: Ontario is not a place to grow if you’re working in cannabis right now.”
No matter how the industry evolves from here, there’s one thing for certain: it won’t look the same as it does right now.