A New Era Begins For Retail Cannabis In Ontario

A New Era Begins For Retail Cannabis In Ontario
A New Era Begins For Retail Cannabis In Ontario
cannabis retail (cover) by is licensed under Adobe Stock

On January 6, 2020; the province of Ontario officially began a new framework for the licensing of cannabis stores.

This alone will be greeted with raucous cheering by both Canadian cannabis companies and cannabis investors. It’s no secret that Ontario’s previous (laughable) “lottery system” for awarding cannabis store licenses was an unmitigated disaster.

The result?

Fifteen months after recreational cannabis became legal in Canada, the province of Ontario (population 14.5 million) has only 25 licensed cannabis stores.

In comparison, Canada’s retailing leader, Alberta, now has approximately 350 retail cannabis locations. This is for a population of approximately 5 million people.

The failure of Ontario to license cannabis stores as effectively as Alberta is estimated to have cost the Canadian cannabis industry CAD$325 million in lost sales, just in the first year of full legalization in Canada. But (hopefully) those days are now in the past for Canadian cannabis companies.

The new licensing framework is expected to lead to approximately 20 new cannabis store licenses per month. These new stores should then begin to open by April of this year. Altogether, the number of licensed cannabis stores in Ontario could multiply by nearly a factor of ten in 2020.

Opening new cannabis stores doesn’t merely meet existing demand. It helps to stimulate new demand for legal cannabis.

In Alberta, the broad availability of legal cannabis led to a 25% increase in the number of cannabis consumers over the first year of legalization. The new stores that are opening in Ontario won’t merely meet existing demand. They will stimulate additional cannabis demand, in Canada’s largest province.

The timing of this could not be better with respect to the launch of Cannabis 2.0 – Phase 2 of cannabis legalization in Canada. These cannabis derivative products that are now legal (edibles, vapes and tinctures) are expected to generate 3 million new consumers of legal cannabis products.

This would represent roughly a 50% increase in the total number of cannabis consumers in Canada.

Based on population, more than 1 million of these new consumers will be in Ontario. Because of Ontario’s centralized cannabis distribution, Cannabis 2.0 products still haven’t reached store shelves in Ontario.

These initial product offerings are still just a fraction of the total product lines that will be available to consumers as manufacturing and distribution ramps up. Ontario will be matching this roll out with a steady stream of new retail cannabis stores (starting in April).

The biggest drag on Canadian cannabis sales in 2019 could become the biggest growth driver of cannabis sales in 2020.

British Columbia is now also accelerating the opening of new cannabis stores. This will leave Quebec as the long laggard in opening up cannabis retail among Canada’s most populous provinces.

With Canadian marijuana stocks still hovering near 2+ year lows, many cannabis investors will see 2020 as the year of opportunity for cannabis investing.
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