OPINION: What’s Next For Ontario’s Cannabis Industry?

Article by Rocco Rossi and Perrin Beatty, Toronto Sun

OPINION: What's next for Ontario's cannabis industry? Special to Toronto Sun Cannabis products on display at the Hunny Pot Cannabis Co. retail cannabis store in Toronto April 1, 2019. REUTERS/Moe Doiron BY ROCCO ROSSI AND PERRIN BEATTY

Ontario is at an important crossroads for the province’s burgeoning cannabis industry that has implications for the broader business community, and the country as a whole.

As Queen’s Park contemplates further reforms for Ontario’s cannabis industry, successful models from other provinces have shown us what lessons can be learned in growing a local industry.

The government has passed into law, though not yet implemented, an open-allocation model under which retail licences are allocated to vetted retailers on a first-come, first-served basis.

They also modified the mandate of the Ontario Cannabis Store (OCS), allowing for privately run stores. These important reforms have opened the door to major economic growth, but only if we make the right moves now — moves that will affect thousands of jobs, the economy and investor confidence.

With only 24 stores for 14 million Ontarians, there are simply not enough locations, underscoring the need to implement the government’s open allocation retail model. In many cases, illegal cannabis remains cheaper and more convenient to access online than legal cannabis. Even with more retail stores coming online, the regulated cannabis market will not thrive unless we have the right policies in place to ensure it is competitive with the illegal market.

The OCS is currently the exclusive wholesaler and online retailer of legal recreational cannabis in the province. They are responsible for purchasing cannabis from licensed producers (LPs), setting the prices and markups, and distributing the product to retailers. This structure puts Ontario at a competitive disadvantage in cannabis and undermines the economic opportunity in front of the province. The potential for this industry is huge, but we should not take private sector involvement for granted.

Ontario is home to more than half of the recreational cannabis LPs in Canada, the majority of cannabis employment, and the largest domestic consumer market. But, just like any other business, cannabis companies must invest in activities that will generate revenue and offer a return on capital investment. If the profit margins for LPs and retailers are being squeezed by a cumbersome regulatory regime, they will invest elsewhere.

There is a simple solution: LPs should be able to directly negotiate with retailers. This model will bring prices down, remove red tape, and allow retailers to compete with the illegal market. LPs and retailers would be allowed to negotiate their product mixes, prices, terms and conditions.

The OCS, meanwhile, could maintain its oversight role as regulator.

Read the full article here.

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