Ontario is behind the times when it comes to cannabis retail in Canada.
The last cannabis lottery was a complete gong show, with no new stores open to date due to lawsuits slowing down the process.
Now the province has announced a pilot project in Toronto for same-day and next-day delivery through its online retailer, the Ontario Cannabis Store (OCS).
Same day delivery will cost you $14. For $12, you can make sure your supply arrives the next day. Except it’s for a service that local Toronto dealers and illicit dispensaries are already providing for free.
The OCS, which had initially offered three-day delivery for $5, had previously put out tenders for same-day delivery. But that idea was nixed by the Ford government.
Despite having a full year to roll out cannabis retail, Premier Doug Ford announced that “It’s been an interesting time because everyone is kind of blazing a new trail and we’re going to get it down pat.”
Ontario certainly has a long way to go compared to provinces like Alberta, which has 300 stores. In Saskatchewan and Manitoba, stores are already delivering directly to consumers.
As the most populous province, Ontario accounted for the highest cannabis sales this year despite having the fewest retail outlets of any province, with 24 stores. Ontario also has the highest concentration of cannabis license holders in Canada.
The lack of retail outlets has been blamed for poor sales across Canada in the first year of legalization. That number sits at around $1 billion nationally. But sales have been declining since the fall with many consumers still buying illegal cannabis.
Meanwhile, in BC, the province is welcoming legacy retailers who were selling prior to legalization. Some 70 per cent of current retail outlets that were doing business prior to legalization have been brought into the legal fold.
Ontario promised to bring illegal dispensaries into the fold if they shut down prior to legalization, but a year later we are all still waiting. That’s why when the Ontario government announced plans to lift the current cap on the number of retail outlets last week, cannabis companies were quick to jump on the opportunity.
Lobbyists increased calls to open up retail, letters were written and politicians received tweets about lost tax revenue. Stock analysts rallied the troops, with Canopy Growth announcing before the Ontario government that the Alcohol and Gaming Commission of Ontario would be opening 40 new stores a month for a total of over 800 by 2021.
The details of that have yet to emerge, but we know a few things for sure. Customers will be able to use “click and collect” services to buy online and pick up the orders in-store.
Eventually, licensed cannabis processors will also be able to sell from one production facility, similar to microbreweries and wineries, but no farmers’ markets have been announced yet. There will be a hybrid distribution model, which opens up the existing privately-run government warehouse to additional players beyond Domain Logistics, which was awarded the contract without a public tender.
So what might a hybrid distribution system look like? We can look to the Liquor Control Board of Ontario (LCBO) for some clues.
For example, over time the LCBO created new rules to allow wine agents to sub-lease warehouse space to bring in products not carried by the LCBO. These products are small-batch, high-quality and not widely available. Not only can agents deliver them directly to restaurants, they can also ship them directly to private wine collectors as well.
Whatever distribution looks like, the existing cannabis industry is lobbying to be part of the solution. Several security companies transporting cannabis nationally want to get in on the game.
There’s also speculation that the OCS will be moving into a much larger warehouse. So there is still room for a private-public partnership to create a more efficient distribution system for cannabis across Ontario. Or is that just a fantasy?
Lisa Campbell is CEO of Mercari Agency Limited and co-chair of the Cannabis Beverage Producers Alliance.