Pot producers in Ontario will be limited to one retail store apiece

There won’t be a cap on the number of cannabis stores in Ontario, but in a setback to producers looking to develop their retail presence, they’ll be limited to one location under new rules outlined by Canada’s most populous province.

The proposed regulations, which were submitted to lawmakers Thursday, fleshed out more details of the province’s plans for pot sales as Canada marches toward legalization of recreational marijuana on Oct. 17.

“Licensed producers will be able to open one retail location,” Caroline Mulroney, the province’s attorney general, said at a news conference Wednesday alongside Finance Minister Vic Fedeli. The ministers said Ontario won’t place an absolute cap on retail licenses, but they’re considering restricting the market share of any one applicant.

“We want to open up the market place,” Fedeli said.

Ontario is one of the last regional governments to detail its plans for cannabis sales. Its Progressive Conservative government, led by Premier Doug Ford, said in August that it would allow for privately operated cannabis stores, scrapping the former Liberal government’s plans for governmentrun pot shops.

To give it time to consult with stakeholders and develop legislation, the province delayed the launch of bricksandmortar stores until April 1. Until then, cannabis will be sold online only by the governmentrun Ontario Cannabis Retail Corp., which will also act as a wholesaler once retail stores open.

The decision to limit producers to one retail location will allow independent retailers to choose what products they want to sell, opening opportunities for companies with strong brands, said Bruce Linton, chief executive officer of Canopy Growth Corp., Canada’s largest cannabis producer.

“There’s going to be a whole bunch more locations to sell product, whether or not they’re ours, branded with us, partnered with us or trained by us,” Linton said in a phone interview. “Independent retailers have no biases except they want to succeed, and you usually succeed by having what people want.”

Keeping producers to one store was surprising, said Matt Bottomley, analyst at Canaccord Genuity Group.

“This represents an overall head wind for the sector,” he wrote in a note to clients. “We believe many assumed that the Ontario model would be similar to Alberta. Although Alberta has a 15 percent cap for any one producer, many licensed producers are planning to open as many as 37 locations in the province but will seemingly be limited to just one in Ontario.”

Ontario’s legislation would establish the Alcohol and Gaming Commission of Ontario as the provincial regulator authorized to grant store licenses.