In October 2018, Canada became the first G20 country to legalize the recreational use of cannabis. Over the past three years, the province of Ontario – just to name a Canadian jurisdiction – has moved away from a significantly under-served retail market that is overly saturated.
The Cannabis Act (Bill C-45) provided rules and regulations surrounding the production, distribution, sale and possession of cannabis. However, there are significant differences in the retail structure of each province and territory – private, public or hybrid – and the legal age for consumption, purchase options and limits of personal possession.
Rollout successful or unsuccessful? When analyzing the evolution of the illegal-to-legal retail market, our recent study found considerable consumer dissatisfaction with at least one province’s cannabis retailing approach. Our research examines how consumers have responded to cannabis retail sales in the province of Ontario.
The two-year period following the passage of Bill C-45 was largely defined by the policy rollout, which affected both cannabis users and emerging cannabis businesses. In 2017, Ontario’s Liberal government decided on a fully public model, whereby the state-run Liquor Control Board of Ontario (LCBO) would operate 150 brick-and-mortar retail cannabis stores.
Following the provincial election in 2018, in which the Conservatives came to power after 15 years of liberal rule, these policy developments were phased out in favor of a dual retail model: the public (online only) and the pseudo-private sector (offline only).
Until the day before the legalization of cannabis on October 17, 2018, the only legal way to purchase cannabis was through an online Ontario Cannabis Store.
Then, in December 2018, the Conservative government announced that a pseudo-private-sector cannabis retail model would be implemented through a lottery system, which would award licenses to brick-and-mortar retail stores, with the total number of licenses only. 25 locations. province.
Although the federal and provincial governments introduced legislation to allow the legal operation of privately owned cannabis shops, municipalities in Ontario were able to opt out of the law and not allow cannabis shops to operate within their community boundaries. Was.
In our study, we analyzed all tweets mentioning an Ontario cannabis store on Twitter and found significant consumer dissatisfaction during the first year of legalization.
Stringent government policies and eligibility criteria created significant issues around ordering, distribution and product availability to obtain the necessary licenses to sell cannabis products.
Strict licensing protocols resulted in an under-served market, forcing the Ontario cannabis store’s website to function beyond capacity. Higher-than-expected demand, along with limited brick-and-mortar stores, caused significant problems with major delays in online sales and delivery.
Unprecedented demand for cannabis products further exacerbated supply issues. Twitter users demonstrated that restrictive buying options (due to government policy) led to a shortage of sales locations, leaving consumers unable to purchase the products they desired.
In addition, the stringent producer licensing application process in Canada that requires several steps to ensure health and safety standards posed a significant barrier to entry for some potential producers.
As a result of these shortcomings, Ontario limited the number of retail stores that were allowed to open. In addition, 17.6 percent of all municipalities in Ontario opposed setting up brick-and-mortar stores, leaving many consumers with no choice but to buy products online from Ontario cannabis stores or turn to the black market. These and other governance-related issues can be attributed to changes in provincial policies, which resulted in the transition to a conservative government.
cutting red tape
To deal with these supply shortages, the provincial government removed the red tape associated with licensing protocols for brick-and-mortar stores. Since then, the cannabis market in Ontario has gone through a significant retail expansion, growing from 25 locations in the first year of legalization to more than 1,000 locations so far.
This increase is now causing major concerns with store cannibalism. With many cannabis retailers competing for the same market share, it is becoming increasingly difficult for some of these retailers to remain profitable.
Since recreational cannabis legalization went into effect, Canadian provinces and territories have introduced a diverse regulatory framework to manage the distribution and sale of recreational cannabis across the country.
While Canada is one of the first countries to legalize recreational cannabis nationally, it will not be the last. 33 US states and several European countries, including Italy, Portugal and the Czech Republic, seek to legalize recreational cannabis. That means Canada’s experience serves as a lesson for other countries as this newly emerging retail sector takes off.