Private sector has role to play
Marijuana producers push back against Ontario monopoly plans
GEOFF ZOCHODNE
Canadian medical marijuana producers are pushing back against the e-commerce plank of Ontario’s plan to monopolize recreational cannabis sales in the province, with companies touting potentially lower costs to the taxpayer as part of their campaign to claim a share of the coming legal retail market.
Ontario announced last week it will use the province’s liquor control board to manage the recreational cannabis market when the federal government legalizes it next summer. The province’s plan involves setting up a single retailer with approximately 150 brick-and-mortar stores by 2020, as well an online retail service that will launch by next July.
But, some producers have pointed out that there is already a federally managed mail-order system in place for medical marijuana in Canada. They have also noted comments made by the federal government that suggest Ottawa may set up a delivery system for recreational cannabis if provinces can’t meet the July 2018 target date for legalization.
“I just think it’s duplication,” said Greg Engel, chief executive of OrganiGram Holdings Inc., a New Brunswick-based licensed producer of medical marijuana. “Why create something that is going to be, and is in place already, just for the province of Ontario?”
Ontario, however, says that it is playing it safe when it comes to controlling the new market.
“The experience of other jurisdictions such as the U.S. has shown us that it is better to start with strong controls, and you evaluate the system over time,” Ontario Finance Minister Charles Sousa said Friday.
Ontario’s approach isn’t surprising given its policies for selling alcohol, said Sylvain Charlebois, a professor of food distribution and policy, as well as a dean of the faculty of management at Halifax’s Dalhousie University.
“Private-sector marijuana retailing seems to be off the table, which in turn will allow a governmentrun crown corporation to distribute and sell this commodity to the public,” wrote Charlebois.
But, Canopy Growth Corp., Canada’s largest licensed pot producer, suggested Friday that the private sector should still have a role to play in the province come recreational legalization. The Smith Falls, Ont.-based company has revamped its online operations in anticipation of recreational cannabis sales, launching what it has referred to as an “Amazon-like” site.
“Including e-commerce is a key aspect of this announcement, particularly given the province’s tiered retail storefront roll-out plan,” said Canopy in a statement, referencing Ontario’s proposal for 40 marijuana stores by 2018, 80 by 2019, and 150 by 2020. “We encourage the government to consider allowing existing licensed producers to continue their e-commerce sales if this can allow for a more costeffective, expeditious, and varied sales model for Ontarians.”
Canopy also announced Monday that it is branching out into Europe, striking a deal to provide a license to use certain marijuana strains and seeds to Spanish drug company Alcaliber, S.A.
“Entering this agreement with a large, well-recognized European partner like Alcaliber, with a proven background in controlled substances and an ability to produce plant-based medication solidifies our commitment to diversified production capabilities not just in Canada, but also new and emerging cannabis markets,” said Canopy chair and chief executive Bruce Linton in a release.
Medical marijuana is already distributed in Canada through federally licensed producers, ordered online or over the phone and delivered via mail. Ontario has no plans to tinker with the medical model, the province says.
However, federal Finance Minister Bill Morneau said earlier this year that Ottawa would oversee mail-order sales of recreational cannabis for provinces that can’t meet the July 2018 target date for legalization.
Medical producers are still holding out hope that they’ll be allowed to go directly to the recreational consumer in Ontario, Canada’s most populous province and biggest marijuana market. In recent years, Ontario has done so for alcohol retail, allowing for the sale of beer and wine in grocery stores.
“We hope that the Province will allow for private retail sales alongside government owned stores,” said the Cannabis Canada Association, an organization representing licensed producers of medical marijuana, in a statement. “A competitive market model would provide the Province with a predictable, low-risk revenue stream without the taxpayer burdens of up-front capital expenditure exposure and operational risk.”
The Ontario government has said it is expecting modest revenue at first with recreational marijuana sales, but expects business to pick up over time. The in-store experience would be in line with the federal government’s expectations, including restrictions on advertising and keeping products out of sight from young people.
Engel said that, on the medical side, Ontario makes up about a third of his company’s business, and bristled at the province planning for a tobacco-like retail environment in its stores. Like others, OrganiGram has been working to ramp up its production capacity before the end of pot prohibition.
“Consumers would not have a very good experience,” he said. “Why have a retail location if you’re going to have everything behind a closed shelf or something like that?”