New Ontario cannabis rules could have ‘Amazon effect’ on industry

Small cannabis retailers are calling on the Ford government to reconsider recent changes to industry rules that some businesses fear could crush mom-and-pop operations in Ontario.

In a New Year’s Day regulation, the Ontario government increased the cap on the number of stores a licensed company can operate in the province from 75 to 150.

According to the province, the change was designed to “further support a healthy and competitive” cannabis industry in Ontario.

Independent retailers, however, fear the change will only benefit a select few businesses that are already beginning to dominate the fledgling cannabis industry.

Adam Vassos, president of the Retail Cannabis Council of Ontario, told Global News the changes had not been requested by small cannabis business owners, which make up the majority of stores in Ontario.

Vassos said of roughly 1,800 stores in the province, 1,600 are operated by independent, small business owners.

He said the changes offered no benefit to those small stores. “There’s too many other urgent matters that are out there for us,” he told Global News.

Harrison Jordan, the founder of Substance Law, a company that represents cannabis stores, said the changes would only help “half a handful” of big companies.

He said it’s difficult to succeed in the province’s crowded cannabis space and many mom-and-pop businesses are barely staying afloat.

“It’s very difficult to make it in the cannabis industry,” Jordan said. “Making it could mean not even turning a profit or a large profit, just keeping afloat.”

Not everyone in the industry opposes the changes. High Tide, the company behind Canna Cabana, the largest cannabis chain in the country, said the changes would have a “positive impact” on the industry.

“This change not only levels the retail playing field in Ontario but also creates a significant growth opportunity for High Tide and others that will help Ontario’s legal cannabis industry better compete with an entrenched illicit market,” Raj Grover, the company’s founder, said in a statement.

High Tide argues that other companies operate based on a franchisee model, allowing them to breach the 75 retail store cap and expansion will address that issue, along with potentially curtailing the number of illegal stores in the province.

While High Tide looks forward to new expansions – 100 additional stores – the Retail Cannabis Council of Ontario and its smaller members are coming up against hard times, Vassos said.

He calculated that 32 per cent of the independent stores it had represented the year before had vanished. The group cited issues including the persistence of the illegal market and rules that ban stores from displaying their products as major barriers to success. Jordan said raising the cap to 150 won’t help the vast majority of cannabis stores. Instead, the change could allow the big players to grow even bigger.

“I certainly think that there could be an Amazon effect,” he said.

A spokesperson for the Ford government said the cap was meant to reflect 10 per cent of the total number of stores in Ontario. When it was introduced, the province said the total number of stores was around 750.

“Today, there are over 1,700 retail stores; as a result, the cap of 75 stores represents only a small percentage of the total market,” the spokesperson said.

Vassos said the change was a signal from Queen’s Park that small businesses are not a priority.

“When Ontario says they’re open for business, what they really mean is, ‘We’re open for big business but if you’re a mom-and-pop (store), we’re not interested in really doing anything for you,’” he said.