Ontario’s cannabis retail industry is about to explode.
The province announced late Thursday it was scrapping the controversial lottery system and moving towards an open market starting January 2020.
New rules also kicked in Dec. 12, allowing retailers to sell cannabis-related non-perishable items, like weed cookbooks, and allowing licensed producers to own or control up to 25 per cent of a retail store. Previously LPs were limited to owning 9.9 per cent.
These changes will not affect the 42 cannabis stores selected through the province’s second lottery system, most of which are set to open their doors late December.
“We have said all along that opening more legal stores is the most effective way to combat the illicit market, protect our kids and keep our communities safe,” Attorney General Doug Downey said in a statement. “That is our number one priority.”
New licensing process kicks in Jan. 6, 2020
Starting Jan. 6, 2020, the retail lottery system and the First Nations reserve allocation process are thrown out the window.
Applicants, including LPs, will be able to get pre-screened by submitting a retail operator license application to the Alcohol and Gaming Commission of Ontario. The province’s current restrictions on the total number of stores and their regional distribution will stick around till March.
On March 2, 2020, it’s an open-er market. Restrictions on the number and spacing of stores are lifted and applicants can apply for their retail store authorization. Proposed retail locations will have development notices posted on site and neighbours will have 15 days to give feedback to the AGCO.
Similar to tasting rooms at vineyards, LPs will be able to apply to set up retail stores at their production facilities.
The open application process should be authorizing new stores as early as April 2020 at an initial rate of around 20 per month, according to the Ontario government website.
The government will still limit how many shops a single retailer can operate. Until Aug. 31, 2020 a retailer can have 10 stores, which increases to 30 September 2020 and then jumps to a maximum of 75 stores September 2021.
Spiritleaf planning aggressive expansion into Ontario market
That’s a strategy Inner Spirit Holdings Ltd. (CSE: ISH) president and CEO Darren Bondar plans to capitalize on. He runs Spiritleaf, the first Canadian cannabis retail store franchise, which is set to open its 42nd store by the new year, Bondar said. There is only one Spiritleaf location in Ontario, but that’s all about to change.
Spiritleaf will be opening as many stores as quickly as the AGCO allows, Bondar said, adding the company already has franchise partners and retail locations set up in every major city in Ontario. In some locations, the company has been waiting for more than a year to get a licence and open the store, he added.
Superette plans more cautious expansion
It’s a slightly different story for Superette, a privately-owned pot shop in Ottawa.
“We’re not a publicly traded company with endless cash,” Superette co-founder Drummond Munro said. “We have to be really thoughtful with site selection … these things take time and money and you have to be thoughtful in the process.”
Breaking into the Ontario cannabis market under the lottery system meant Superette had time to experience its growing pains in a less competitive market, Munro said.
“All the other groups that haven’t done that. Less people know them. They don’t have any presence in Ontario. We already have the relationships with all the various parties and now we get to do what we wanted to do initially, which is open more Superettes,” he said.
Munro said Superette is aiming to open around 10 new locations across the province within a year.
The lack of product selection and small number of legal cannabis stores have been huge contributors to the black market, he added, so opening up the legal market like this will be a huge step towards eradicating illicit sales.