Pot shop real-estate race is on
With the move to allow private businesses to operate cannabis stores in Ontario, the race is on to secure storefronts.
Actually, it began before the Conservative government announced Monday that it was abandoning plans to sell pot at stores run by a subsidiary of the LCBO.
Officials at four major cannabis companies contacted by this newspaper say they anticipated the possibility of a policy shift to privately run pot shops and had already begun scouting locations.
The companies are now building cannabis stores in Western Canada and say they will be ready to jump into Ontario with multiple locations.
Three of the companies have Ottawa-area connections.
Canopy Growth Corp. is in Smiths Falls, National Access Cannabis has headquarters in Ottawa and Fire & Flower is partly owned by Gatineau cannabis grower Hexo (formerly Hydropothecary). The fourth is Aurora Cannabis based in Western Canada, one of the country’s largest cannabis growers.
All four companies have a shot at becoming the “Starbuds” of Ontario pot.
But it’s still early. Industry experts expect there will be a huge demand to operate stores, from both from big companies and small entrepreneurs.
Ontario is the country’s largest market, said Jeffrey Lizotte, chief executive of Next Wave Brands, a cannabis consulting company.
“Ontario will become the premier target, the primary battleground for cannabis retail.”
Lizotte predicted that major retailers will also want to set up franchises in Ontario, noting that food giant Loblaw has already won the right to set up stores in Newfoundland and Calgary.
Which companies might dominate also depends on the rules — which haven’t been decided — governing the operation of private stores. The provincial government has promised wide consultations before introducing new legislation.
Ontario Finance Minister Vic Fedeli said the province will also learn from the experiences of Manitoba, Saskatchewan and Alberta, which have adopted private-store models.
Alberta plans to issue about 250 store licences in the first year of legalization but has limited the number that can be awarded to any one company to 15 per cent of the total to prevent market domination. Saskatchewan held lotteries to award licences.
In Ontario, municipalities will also have a key role. Councils elected during the fall municipal elections will have a one-time chance to opt out of having cannabis stores in their jurisdictions.
Municipalities will also probably have a say in where private stores are located. It’s likely that stores will not be welcome close to schools, parks, community centres or other places where young people gather.
That all creates multiple layers of uncertainty.
But entrepreneurs who want a piece of the retail market aren’t waiting to lock down locations.
Alcanna, a huge private liquor store operator in Western Canada and Alaska, has already identified more than 100 potential retail locations throughout Ontario, said a spokesperson for Aurora, which has a licensing deal with Alcanna. The stores would operate under the Aurora name.
Aurora’s chief corporate officer, Cam Battley, declined to say whether the company has signed any leases, saying he didn’t want to give his competitors an edge.
At Ottawa’s National Access Cannabis, CEO Mark Goliger said the company is working with a real estate broker but also declined to say whether any leases had been signed. His company plans to apply for the maximum number of stores allowed in Ontario.
National Access Cannabis is opening at least 10 stores in Manitoba, has applications pending for 37 stores in Alberta, and applications for another eight stores in B.C. Most will be under the Meta Cannabis Supply Company brand. The company plans a second brand name for stores in rural areas.
If the company gets the nod to set up in Ontario, some stores might be in former Second Cup cafés, he said. The company has a deal with the coffee chain to convert some shops into cannabis stores.
There are 130 Second Cup outlets in Ontario, and some would be prime candidates for conversion, Goliger said.
He estimated that Ontario needs between 700 and 1,400 cannabis stores to compete with the black market.
The subsidiary of the LCBO the former Liberal government created had planned to open 40 stores initially and 150 stores by 2020.
The Conservative government has not decided how many privately-run
stores it will allow.
Private operators will be able to build stores quickly and offer more variety, Goliger said.
“Why do we have so many different burger joints, and so many different pizza joints, and so many different coffee cafés? Consumers want diversity, and if you don’t give it to them, they are likely to seek it elsewhere.”
However, governments are trying to balance competing goals. They want legal stores to be attractive enough to lure people way from dealers and illegal dispensaries, while at the same time not promoting the use of pot, especially among young people.
Canopy is also well situated to be a major store operator in Ontario. It recently bought Hiku, the parent company of Tokyo Smoke, which runs five hip coffee and cannabis accessory cafés in Toronto. Canopy also has several Tweed Main Street information and education outlets that might be converted to stores.
Canopy CEO Bruce Linton has long said he would like to operate a store at the headquarter plant in Smiths Falls.
The company will operate stores under the brand name Tweed.
Linton said he thought Canopy had already signed some conditional leases for storefront property in Ontario, but company officials could not be reached on Tuesday to confirm.
As for what privately operated stores will look like, consider the examples from Fire & Flower, which has a prototype store built in Edmonton, and artist renderings provided by National Access Cannabis and Aurora.
The stores are modern, hip and hooked up with electronics such as iPads so customers can research the products.
They won’t be like liquor stores, though. The merchandise will be sold in plainish packages from behind the counter, and no one under 19 will be allowed in.