An additional 50 cannabis retail stores in Ontario won’t be enough to bring down the price of pot products for consumers, says one industry watcher.
The Alcohol and Gaming Commission of Ontario, the province’s marijuana retail regulator, is holding a second lottery in August to award 42 retail licences to open stores beginning in October. Another eight licences will go to First Nations communities.
Sudbury has two pot stores already in operation — Highlife at 1299 Marcus Dr., and Canna Cabana Sudbury, 2019 Long Lake Rd.
Cannabis consumers can expect prices to drop as the market matures — just like what happened in Colorado, the first U.S. state to legalize recreational pot — but not in the near future, said professor Michael Armstrong of the Goodman School of Business at Brock University.
“It won’t happen with these next 50 stores and it probably won’t happen for quite a while yet, at least not in Ontario,” said Armstrong, who studies the cannabis industry.
“It comes down to supply and demand. So as long as the market has a shortage of product, that is to say, that there’s more demand than there is supply, prices can go up.”
Ontario has taken a phased-in approach to opening marijuana retail stores, citing a Canada-wide supply shortage. The federal government says it’s working with licensed pot producers on supply and is making progress, but critics like Armstrong are skeptical of that claim.
A handful of the first 22 brick-and-mortar stores — three of the initial 25 still haven’t opened — have cut back their hours because they were running out of stock.
All stores were allowed to buy 100 kilograms of cannabis products prior to opening, with each outlet now allowed to buy 25 kilograms per week.
“The economics say the prices will go up until you’re no longer selling out, or you just barely sell out,” Armstrong said.
“Where prices will go down is when you start to have enough stores and enough product per store, where you get to the end of the week and you have stuff left over.”
A gram of dried cannabis sells for $9 to $15 plus tax at most legal retail stores or through the Ontario Cannabis Store (OCS), the government-run delivery service and marijuana wholesaler.