Grocery giant Loblaws pushing Ford government to change cannabis retail rules

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Loblaws pushing Ford government to change cannabis retail rules
WATCH: As Colin D'Mello reports, grocery store giant Loblaws has been pushing the province for legal changes that would allow the supermarket giant to enter the bud business – Jan 16, 2024

As the Ford government ushers in new cannabis regulations that could dramatically scale up the number of licensed pot shops in Ontario, Global News can reveal that grocery store giant Loblaws has been pushing the province for legal changes that would allow the supermarket giant to enter the bud business.

According to internal government documents, Loblaws held meetings with Ford government officials, including the Attorney General’s office, to request changes around how the weed market works in Ontario.

Part of the Loblaws pitch to the province included doing away with government regulations that restrict the sale of cannabis inside stores where other items such as snacks and chocolate could be available for purchase.

Documents obtained by Global News using freedom of information laws show Loblaws has been pushing for the change since at least 2019, just months after the federal government legalized the sale of pot in Canada.

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Initially, the grocery giant lobbied the Ford government to allow a “store within a store” model to run in Ontario, the same way Wine Racks pop up at some Loblaw locations.

According to the Alcohol and Gaming Commission of Ontario, the regulator of legal cannabis sales in the province, a licensed store must be separated from other businesses.

The retail space “must be enclosed by walls separating it from any other commercial establishment or activity” which prevents the sale of cannabis products inside grocery stores.

Loblaws then launched a renewed push to change a slew of cannabis rules in the summer and fall of 2022, the documents suggest. Public lobbying records show that attempts to change the cannabis rules appear to be ongoing.

What does Loblaws want to see changed?

Loblaws submitted a series of suggestions in the summer and fall of 2022 as part of the Ford government’s consultations around a red tape reduction law at the time.

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The first rule Loblaws wanted to see scrapped was a regulation that banned companies that sell medical cannabis from being able to sell weed recreationally.

That change could make it easier for the grocery store, which also owns Shoppers Drugmart, to enter the cannabis market. Because Shoppers Drug Mart sells medical cannabis, provincial documents explain, Loblaws is limited in how it can sell weed for general consumption.

“This unintended consequence is both limiting investment in Ontario as well as preventing established retailers from providing strong support to the newly forming Ontario Cannabis sector,” a submission from Loblaws argued.

The grocery giant also wanted to eliminate a rule that prevented companies with existing online sales websites from offering cannabis. Those rules stop companies like Loblaws from using their online stores and inventory software systems for cannabis ventures.

While Loblaws has not succeeded in the main requests outlined in the document, including allowing a store within a store, the provincial documents suggest the grocery store is already investing in cannabis.

Under its C-Shop brand, Loblaws already runs two cannabis shops, one in Embrun, Ont., and another in North Bay. As of 2022, it had applied for “several” more locations.

Without changes to the rules, however, the stores are unable to live up to Loblaws’ ultimate ambition. While the C-Shops are located in the same building as grocery stores, the current rules mean they need separate entrances and covered windows.

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Loblaws’ push for a “store within a store,” and its request to remove rules that say cannabis products cannot be visible to those outside the store, suggests Loblaws hoped to expand its C-Shop brand and make it more accessible to its existing grocery store customers.

Welcome competition or another monopoly?

Reaction to the changes proposed by Loblaws has been mixed.

Harrison Jordan, managing lawyer at the firm Substance Law, said the changes would likely “disproportionately” benefit big-box retailers more than small retailers.

He did, however, suggest some smaller businesses like convenience stores could potentially see benefits from lifting rules around the display of cannabis and rules that forbid a store within a store.

The Ontario NDP’s critic for consumer protection Tom Rakocevic, told Global News that if Ontario granted Loblaws’ requests, it “won’t be the first time this government makes crucial public policy to favour big corporations.”

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He called for “transparency” in the process and said the Ford government was “tipping the scales in favour of big box and chain stores” through policy changes.

“Communities need to have a say in the future of cannabis retail in their neighbourhoods,” Rakocevic said.

Omar Khan, chief communications and public affairs officer for the Canadian cannabis company High Tide, said his organization would ultimately welcome the competition.

“We welcome anyone who wants to enter the cannabis market — competition is good increased access to local stores is good,” he told Global News.

Khan said he felt Loblaws would face some barriers in its potential plan, especially with strict rules in place to keep cannabis products away from children.

“The current framework is designed to ensure that only adults are able to enter and exit these stores and that these stores are not located inside of locations that sell candy and pop and whatnot,” Khan added.

“So I think that could be problematic for anyone advocating for a physical store within a grocery store at the moment.”

Loblaws did not respond to questions in time for publication.

Entries in the provincial lobby registry suggest the company continues its advocacy campaign, with several lobbyists paid by the grocery giant still targeting Ford government ministers to change cannabis rules.

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One lobbyist still registered to advocate for Loblaws appears to be working on the same file the 2022 documents summarize.

An entry on the lobbying database describes their goal as “the reduction of red tape within the cannabis sector to enable more secure retail spaces and facilitate more investment in the sector.”

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