Ontario government scraps retail lottery system

New rules that are meant to "open" the market will include roughly 20 new licenses being awarded each month.
Medical Marijuana/ Cannabis And Accessories

The Ontario government is getting rid of the lottery system it previously used to award licenses for recreational cannabis stores, part of efforts to “open” the market in the province.

The government will open applications for cannabis retail licenses in January, with would-be store owners going through a more traditional process that has been used in other provinces, such as Alberta. The first licenses from the new process are expected to be awarded in April, and from there, the government plans to issue roughly 20 new licenses per month.

The cap on a number of retail locations any one operator will also be increased to 30 in September 2020 and 75 in September 2021. The government also confirmed previously announced plans to allow licensed producers to open up a store at one of their facilities. Authorized retailers are now also permitted to offer click-and-collect services – online sales were previously handled exclusively by the Ontario Cannabis Store – as well as sell other cannabis-related items, like magazines and cookbooks.

The lottery system for cannabis retail licenses in Ontario was met with criticism amid ongoing issues. Applicants faced high fees and penalties if they weren’t able to open on the government’s tight deadlines, leading many to reach franchise and licensing deals with companies looking to build cannabis retail networks. The random nature of the program meant some winners in the second lottery were located within the same shopping complex as each other, while others looking to “game the system” – despite an extensive pre-screening process that has also been scrapped – resulted in multiple winners being located at the same address.

In the first year of legalization, Ontario opened 24 retail cannabis stores (in yesterday’s announcement, the government said “some” of the 42 locations selected in the second lottery have been authorized to open their doors this month).

This week, Statistics Canada released data related to the first full year of cannabis sales, showing that nearly $217 million in cannabis was sold in Ontario – which, with a population of roughly 14.5 million, gave it the second-lowest per capita sales among the provinces. By comparison, Alberta – which has roughly 10 million fewer residents than Ontario but 176 stores open as of July – sold $196 million dollars in cannabis. In British Columbia – which initially had its own difficulties getting physical retail open following legalization, but had 27 stores by May and 57 by July – total sales in the first year were just under $50 million, roughly $10 in sales per capita, the lowest in the country.

During the first month of legalization, online sales represented 43.4% of non-medical cannabis sales in Canada. By July, when the total number of stores in Canada reached 407, that percentage had fallen to 7.4%, going down further to 5.9% in September.