Exclusive: OCS Will Allow Private Sector to be Involved in Storing, Distributing Cannabis

Article by Vanmala Subramaniam, Financial Post

Exclusive: OCS will allow private sector to be involved in storing, distributing cannabis Response to 'feedback' provided from producers to Ontario Cannabis Store A man holds a young cannabis plant seedling inside a growing facility in Canada.Cole Burston/Bloomberg Vanmala Subramaniam

The Ontario Cannabis Store will move ahead with a “hybrid” wholesale model that will allow the private sector to be involved in storing and distributing cannabis, according to an e-mail obtained by the Financial Post, sent by the Crown Corporation to licensed producers on Tuesday evening.

The move comes in response to “feedback” provided from producers to the OCS, many of whom had demanded more involvement in the distribution of cannabis  — which is now controlled solely by the OCS — to maximize cost efficiencies.

“The OCS is moving ahead with expanding its privately-operated third-party centralized distribution network and will introduce flow-through capabilities to the network over time to maximize choice for consumers,” the e-mail stated.

“It is expected that these activities will continue to drive cost efficiencies for the industry and result in ongoing expansion of product assortment and service levels.”

The OCS had been consulting with licensed producers over the past month on various changes to the current system, which designated the OCS as the exclusive wholesaler and distributor of legal recreational cannabis in Ontario. This system was designed under the previous Ontario government of Kathleen Wynne, as a way in which to ensure the transportation and storage of legal cannabis is strictly monitored and controlled by one entity — the government.

But licensed producers have increasingly become frustrated with the OCS monopoly, arguing that having the province as the middle-man increases the per gram price of legal cannabis, which is currently about 30 per cent higher than the black market price. Major producers have also started reported declining revenues, due in part to pricing adjustments they have had to make to account for supply-chain bottlenecks.

Saskatchewan is the only province in the country that currently allows the private sector to control the wholesale supply of cannabis to retailers altogether. Retailers in the province, such as Fire & Flower, have lauded the system as “efficient,” and have called on Ontario to follow suit.

But the OCS will still continue to be involved in wholesaleing, according to a person familiar with the matter. “It is a hybrid model, that will allow private involvement,” the person said.

Read the full article here.

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