DUDE, WHERE’S MY WEED?

Some 150,000 or­ders were placed with the On­tario Cannabis Store dur­ing the first week of le­gal­iza­tion, but only a frac­tion have been filled. What’s the deal?

NOW Magazine - - NEWSFRONT - By KIERAN DELAMONT News@now­toronto.com | @now­toronto

You may have no­ticed the lack of clouds of pot smoke waft­ing over ma­jor cities amidst the post-le­gal­iza­tion reverie in On­tario. That’s be­cause street-level dis­pen­saries won’t be open un­til next spring, and few peo­ple in On­tario have had their weed de­liv­ered through the On­tario Cannabis Store (OCS) web­site, the only le­gal source avail­able right now. Al­though some 150,000 or­ders were placed on­line in the first week of le­gal­iza­tion, only a frac­tion have ac­tu­ally made it to cus­tomers. What’s the deal?

GIVE A FIRST-TIME DEALER A BREAK

The most ob­vi­ous ex­pla­na­tion for the short­age is that it’s just hard to ship 150,000 or­ders, es­pe­cially when you’ve never done it be­fore. We’re ac­cus­tomed to think­ing of ship­ping as a cal­cu­lated, ma­chine-per­fected op­er­a­tion, and to a de­gree it is, but the OCS says it’s still try­ing to fig­ure out its distri­bu­tion sys­tem.

“Ef­fi­cien­cies and ways to fur­ther ex­pand ca­pac­ity at the OCS distri­bu­tion fa­cil­ity con­tinue to be made to help meet the mas­sive de­mand,” says OCS pres­i­dent Pa­trick Ford in a state­ment re­leased Sun­day, Oc­to­ber 28.

These “hic­cups” in the early-go­ing are noth­ing to stress out about, says Deepak Anand, VP of busi­ness de­vel­op­ment and gov­ern­ment re­la­tions at cannabis con­sult­ing firm Cannabis Com­pli­ance Inc. Anand says ev­ery­one from in­dus­try to re­tail­ers to con­sumers for­got about the fact that “in pretty much ev­ery state that’s le­gal­ized, this has hap­pened,” with line­ups in Colorado, Ore­gon, Wash­ing­ton and Cal­i­for­nia. “Un­for­tu­nately, I don’t think a lot of at­ten­tion was paid to that.”

PLAY­ING POL­I­TICS WITH POT

In­dus­try ex­pert Trina Fraser, a lawyer at the Ot­tawa law firm Brazeau Seller, sug­gests that the tim­ing of le­gal­iza­tion – only a few months af­ter a pro­vin­cial elec­tion that was all about clean­ing house – led to a lack of readi­ness.

She sug­gests that the out­go­ing Lib­er­als “weren’t go­ing out of their way” to make sure the sys­tem was set up to run smoothly. “In the months lead­ing up to the elec­tion, we just stopped hear­ing up­dates,” she notes.

On­tario was sup­posed to have 40 gov­ern­ment stores, but by the time the Lib­er­als were voted out, ten­ta­tive plans had only been re­leased for four. The Ford gov­ern­ment ex­ac­er­bated the sit­u­a­tion by de­cid­ing not to fol­low through on the Lib­eral gov­ern­ment’s plans to sell through LCBO-run stores, adding to the frus­tra­tion of On­tar­i­ans, who will now have to wait un­til April for pri­vate stores to open. Street-level dis­pen­saries op­er­at­ing in the grey area be­fore le­gal­iza­tion have mostly closed up shop, fear­ing stiff fines an­nounced by the Ford gov­ern­ment.

“Pol­i­tics cer­tainly play a role in this,” says Anand. “As flawed as the Wynne gov­ern­ment pro­posal was, there were

still peo­ple hired to run those stores,” he says. “Even if On­tario had those few stores that were planned, that would have helped.”

BLAME IT ON THE MAIL

The OCS has shifted at least some of the blame to Canada Post, cit­ing the “on­go­ing im­pacts of the Canada Post labour dis­rup­tions” in the form of ro­tat­ing strikes that have slowed things down “as the back­log… con­tin­ues to pile up.”

While it is true that em­ploy­ees in the GTA did par­tic­i­pate in a strike ac­tion once last week, Fraser doesn’t buy that it’s what’s caus­ing the en­tire de­lay. “I was dis­ap­pointed that they were try­ing to cast the blame on Canada Post and the labour dis­pute is­sues,” she says. “A bet­ter ap­proach would be to say we just weren’t ready for this kind of vol­ume. The world is gen­er­ally quite for­giv­ing if you’re will­ing to take re­spon­si­bil­ity for your mis­takes.”

A Canada Post spokesper­son says they are “at­tempt­ing to min­i­mize the im­pact of the labour ac­tion on cus­tomers.” Even the con­ser­va­tive think tank C.D. Howe In­sti­tute agrees that it’s hard to say how much of the blame Canada Post ac­tu­ally de­serves.

But Anand ar­gues the gov­ern­ment should have had al­ter­nate de­liv­ery mech­a­nisms in place. “On­tario knew very early on that it was bank­ing on e-com­merce,” he says.

A SYS­TEM DE­SIGNED TO FAIL

If you be­lieve some of the con­spir­acy the­o­ries on­line, the OCS’s fail­ure to launch could be part of a larger plot by the Ford gov­ern­ment to semi-in­ten­tion­ally tank the gov­ern­ment’s out­let for sell­ing cannabis in or­der to let the pri­vate market, when it is in­tro­duced, have carte blanche over the multi-bil­lion-dol­lar in­dus­try. This is not that hard to be­lieve, al­though the gov­ern­ment specif­i­cally chose to be re­spon­si­ble for on­line sales.

“Ev­ery­thing that’s come out of this gov­ern­ment has come out of an in­ten­tion to main­tain a mo­nop­oly on on­line sales,” says Fraser. “It would be coun­ter­in­tu­itive for them to want to have a mo­nop­oly and run it in­ten- tion­ally poorly.”

But what ex­actly do we mean when we say the sys­tem is work­ing poorly? If your met­ric is how many peo­ple have the weed that they’ve paid for, then, yes, the sys­tem isn’t do­ing well. But if the met­ric is how many peo­ple are try­ing to buy weed from you, then the prob­lem the OCS is ex­pe­ri­enc­ing is symp­to­matic of too much suc­cess (i.e., too many peo­ple try­ing to buy weed legally), not too much fail­ure.

It would’ve been a worse fail­ure, if you think about it, had the OCS had few or­ders. That would mean more peo­ple were stick­ing with their il­licit market dealer.

“If any­thing, I’m quite pleased that the de­mand for le­gal cannabis prod­ucts has been so sig­nif­i­cant,” says Fraser.

THE CRIM­I­NALS AREN’T BE­ING HELP­FUL

Min­is­ter of Fi­nance Vic Fedeli has blamed drug deal­ers. He sug­gested to re­porters at Queen’s Park last week that “the crim­i­nals lied” to the gov­ern­ment about what de­mand would look like.

“All of the cannabis store as­sump­tions were made… based on il­le­gal data, il­le­gal in­for­ma­tion from il­le­gal sales,” he said. “And guess what? The crim­i­nals lied to us. They did not prop­erly re­port their sales, if you can imag­ine that hap­pen­ing.”

Fedeli’s bizarre ex­pla­na­tion only led to more ques­tions: had the PC gov­ern­ment un­der­taken a con­sul­ta­tion process with black-market deal­ers? Why was the gov­ern­ment trust­ing the word of peo­ple who it calls “crim­i­nals?” Fedeli did not re­spond to NOW’s re­quest for clar­i­fi­ca­tion.

Econ­o­mist Ros­alie Wy­onch of the C.D. Howe In­sti­tute sug­gests Fedeli is blow­ing smoke. “Just look­ing at the On­tario prices and de­mand from Sta­tis­tics Canada es­ti­mates, I re­ally don’t think that the de­mand is that much higher,” she says.

In­deed. The prob­lem for the OCS isn’t sup­ply, but de­liv­ery. Though in­ven­to­ries were def­i­nitely thinned out, On­tario hasn’t run out of weed the same way Que­bec has, for in­stance.

Over­all, though, Wy­onch says that peo­ple shouldn’t lose their heads right away. “This is a new market, and there are go­ing to be grow­ing pains.”

“As flawed as the Wynne gov­ern­ment pro­posal was, if On­tario had opened the few stores that were planned, that would have helped.”

On­tario was sup­posed to have 40 gov­ern­ment cannabis stores in place for le­gal­iza­tion.

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