For cannabis retail operators in Ontario, Christmas came early this year when the Ontario government announced that it would be scrapping the widely-criticized lottery system for awarding cannabis retail store licenses and lifting the cap on the number of store licences available. Now, Ontario is set to drastically expand its cannabis retail footprint as this policy brings an open cannabis market to Ontario for retail operators.
Attorney General Announces Open Cannabis Retail Market
On December 12, 2019, Attorney General Doug Downey announced that the Ontario government would be removing the temporary cap on the number of private cannabis stores in the province and eliminating the pre-qualification requirements for prospective retailers.1 In addition, retailers will also be permitted to sell additional cannabis-related items, such as cannabis-related magazines and cookbooks.
Previously, the Ontario government imposed a temporary cap of 25 retail store authorizations across Ontario. Prospective retailers were also required to submit the following pre-qualification documents: (i) confirmation from a bank or credit union that it had financial capacity to obtain $250,000 in cash or cash equivalents; (ii) confirmation that the retailer could obtain a letter of credit for $50,000 within five business days; and (iii) confirmation that the retailer had secured a suitable retail space. All of these pre-qualification requirements are to be scrapped by January 6, 2020.2
The stated purpose of these changes is to increase the ability of licenced producers in Ontario to participate in the retail market. Currently, Ontario has only 25 legal cannabis stores. Alberta, by comparison, has 324 retail cannabis stores.3 Despite this, cannabis retailers in Ontario sold the most cannabis of any province in Canada in the first year following legalization. Ontario accounted for $217 million in recreational cannabis sales—which represents 24% of the overall Canadian market—from October 2018 to September 2019.4 Against this backdrop, Ontario's new policy change is likely to create drastic growth in the cannabis retail market.
Download >> Blazing A New Trail: Ontario To Adopt an Open Cannabis Retail Market
Footnotes
1 "Ontario Opening Cannabis Retail Market: Province helping build safe and convenient retail system to combat illegal market" (12 December 2019), online: Service Ontario https://news.ontario.ca/mag/en/2019/12/ontario-opening-cannabis-retail-market.html?utm_medium=email&utm_campaign=SUBSCRIBERS-Cannabis-Announcem&utm_source=Envoke-English&utm_keyword=Ontario-Government-announces-m [Ontario Government Announcement].
2 "Pre-qualification documents required for Cannabis Retail Store Allocation Lottery", online: Alcohol and Gaming Commission of Ontario https://www.agco.ca/cannabis/pre-qualification-documents-required-cannabis-retail-store-allocation-lottery.
3 Amanda Pfeffer, "Pot producers implore Ontario to open more stores" (13 November 2019), online: CBC https://www.cbc.ca/news/canada/ottawa/pot-producers-implore-ontario-open-stores-1.5357101.
4 Vanmala Subramaniam, "Ontario sold the most cannabis in first year of legalization, despite low store count" (11 December 2019), online: Financial Post https://business.financialpost.com/cannabis/cannabis-business/ontario-sold-the-most-cannabis-in-first-year-of-legalization-despite-low-store-count.
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