Ontario has roughly 4% of the legal cannabis points of sale it needs to put it on par with markets which are successfully extinguishing illicit channels, and Quebec is not doing much better, according to a researcher.
A shortage of points of sale for adult-use cannabis in Canada’s two largest markets was cited in January 2019 as one of the industry’s biggest pending issues – a hurdle which remains far from being cleared.
Last week, CIBC Capital Markets, the investment banking subsidiary of the Canadian Imperial Bank of Commerce, trimmed almost a billion dollars off its 2020 forecast for cannabis sales, in part because of issues stemming from the slow rollout of stores.
Chris Damas, editor of Ontario-based BCMI Cannabis Report, estimates that Ontario would need an additional 1,400 points of sale to reach the one-per-10,000 person mark observed in Colorado and Alberta.
Ontario, which has pledged to ramp up new store authorizations this year, started accepting open market applications on Jan. 6.
As of April 29, Ontario authorized almost five-dozen stores.
Quebec is not faring much better than its neighbor.
Damas estimates that province’s cannabis point of sale deficiency at 95% – meaning it is roughly 800 stores shy.
Alberta’s 449 points of sale exceed what the province needs, Damas said.
Over 180 stores have opened in British Columbia, making it 65% deficient in points of sale. B.C. needs 507 points of sale to bring its store count to one per 10,000 people.
Saskatchewan, which recently started accepting cannabis store applications for small communities, could use about 70 more points of sale.
Damas forecasts 2020 adult-use sales will reach of CA$2.1 billion ($1.5 billion).
“Pretty much every province except Alberta needs more stores in some form,” said Brock University business professor Michael Armstrong. “Stores absolutely do matter.”
But whether that is one point of sale per 10,000 people or something else depends on many factors, he said, including the regulatory parameters established in each jurisdiction, applicable taxes and the breadth of products retailers are able to sell.
“If they can only sell cannabis, then the number they can support is going to be smaller,” he said.
Ontario’s liquor store model provides applicable comparisons for cannabis policy.
The province has 660 liquor stores in communities that can support standalone points of sale, plus another 400 smaller points of sale inside other properties, like grocery and convenience stores.
“If governments would allow (cannabis) stores to sell other things, at least in rural areas, then that would support much creator store numbers,” Armstrong said. “That would allow legal products to reach a much wider market in areas that are more sparsely populated.”
“Stores are definitely important in making the legal product accessible and the legal industry successful,” Armstrong said.
Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at [email protected].