The Ontario government is reportedly considering major changes to the province's retail cannabis framework.
What is the proposal?
According to a Globe and Mail report, the Ontario government is contemplating changes that would allow retailers to purchase cannabis products directly from federally licensed cannabis producers (LPs). Currently, only Saskatchewan allows direct sales from LPs to retailers. While this may not be exactly what the Ontario Chamber of Commerce recommended in its recent report Supporting Ontario's Budding Cannabis Industry, it nonetheless remains an overhaul of the current distribution model.
Under Ontario's current cannabis retail regime, LPs are not permitted to sell cannabis directly to retailers or consumers. Instead, LPs must sell cannabis to the government-run Ontario Cannabis Retail Corporation, which wholesales cannabis to private retailers (as well as directly to consumers). This central distribution model is used by other provinces including Alberta and BC.
What should LPs be thinking about?
If these changes do come into effect, LPs may have the opportunity to become wholesale distributers to retailers in Ontario. In that case, LPs will need to consider creating a sales force and adapt their marketing strategies in order to manage sales to these retailers.
When will these changes happen?
It is not clear when (or if) this change to the current distribution model will be made. According to the Globe and Mail, the consultation process is expected to begin in the coming weeks and the Ontario cannabis agency is expected to report to the government on this issue in early November.
We are monitoring the situation and will continue to provide updates as more information becomes available.
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