Ontario’s pot rules could muddle retail partnerships
Cannabis producers exploring workarounds to participate in storefront operations
Companies are developing workarounds to Ontario’s ownership restrictions on pot shops, with Canopy Growth Corp. exploring a franchise model and Alcanna Inc. considering an independent company.
A corporation isn’t eligible for a cannabis retail licence in Canada’s most populous province if it’s more than 9.9 per cent owned or controlled by one or more pot producers, Ontario said in rules issued last week. Its goal is to limit the growers’ dominance of the retail market, limiting them to one location on the site of a production facility.
This could thwart the ambitions of several retailers, including Canopy’s wholly-owned Tokyo Smoke, and Alcanna, which is 25 per cent owned by Aurora Cannabis Inc.
But the companies said they were unconcerned and were already working on retail plans that would comply with the provincial rules. “McDonald’s doesn’t own every McDonald’s, but there are a lot of McDo- nald’s,” Canopy chief executive officer Bruce Linton said in an interview. “It’s really more about data and experience and I think we can get that on a franchise model.”
When asked whether he’d consider spinning off Tokyo Smoke, Linton said, “Oh God, no. It’s a great brand. I think we nailed it.”
Linton said his primary goal is to ensure repeat customers by having an educated retail staff who can provide a quality experience.
He also praised the Progressive Conservative government’s decision to push ahead with hundreds of privately run stores, instead of the governmentrun model favoured by the previous
Liberal government.
“More volume and more access turns into a much more consumer-friendly model,” he said. Edmonton-based Alcanna still fully intends to enter the Ontario market and is looking at setting up an independent company that would be 39.9 per cent owned by Alcanna, a level that would reduce Aurora’s ownership to the 9.9 per cent required under the provincial rules. The remainder would be owned by a partner with knowledge of the Ontario market and other investors, Alcanna CEO James Burns said in an interview.
“We actually have no end of options, it’s just a matter of selecting the partners,” he said. “But we’ll be there, no question.”
Ontario will begin accepting applications for retail licences on Dec. 17 and stores will begin opening on April 1, the province said Wednesday.