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Ontario opens door to suppliers of all sizes

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Unlike other provinces, Ontario has yet to lock into supply deals and is opening up its sourcing to all 90 licensed producers across the country

Ontario’s provincially-run cannabis retailer is open to sourcing product from growers of all sizes across the country, according to a spokesperson for the Liquor Control Board of Ontario.

The approach appears to be in contrast to the one taking hold in provinces such as Quebec, where the government-run Socit des alcools du Qubec recently opted to sign sizeable recreational cannabis supply agreements with a select few large licensed producers.

It was probably the most LPs that had ever been in the same room together, talking about what's likely to be the world's biggest cannabis retailer




In Ontario, “the process for procuring cannabis supply for the (Ontario Cannabis Retail Corp.) will be open to all Canadian licensed producers,” said LCBO spokesperson Nicole Laoutaris in an email, adding that “the OCRC has not yet entered into any supplier agreements.”

The comment comes a day after the OCRC, a subsidiary of the LCBO, hosted 60 licensed producers at a “supplier prep day” in Toronto. All 90 LPs across the country were invited to Tuesday’s meeting.

“It’s almost sad we didn’t take a group shot, because I think it really was historic. It was probably the most LPs that had ever been in the same room together, talking about what’s likely to be the world’s biggest cannabis retailer,” said John Fowler, chief executive of The Supreme Cannabis Company Inc., who attended the meeting at the Crowne Plaza Hotel near Toronto’s Pearson International Airport.

“I feel that every LP is going to have a chance to supply the LCBO,” he added. “There was a commitment to be an equal opportunity retailer, whether you’re big or small, in British Columbia or P.E.I.”

There’s still much that’s unknown about Ontario’s cannabis retail system, but the approach appears to be different than those taken by other provinces with government-run retail monopolies, and could allay fears that smaller LPs will have trouble gaining shelf space.

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Last week, Quebec signed supply deals agreeing to purchase at least 62,000 kilograms of cannabis from six large companies: Canopy Growth Corp., Aphria Inc., Aurora Cannabis Inc., Tilray, MedReleaf Inc. and Hydropothecary Corp.

PEI and New Brunswick have likewise inked supply deals with a small number of companies, a mix of local players and national heavy-hitters.

“It’s my understanding that Ontario is going to be looking to purchase product in line with its evolving demand curve, rather than trying to purchase large quantities of product in advance to meet projected demand,” said Fowler.

With nearly 40 per cent of the country’s population and more than half of Canada’s LPs, Ontario is expected to be the largest recreational cannabis market in Canada by a significant stretch.

It’s unclear how much demand there will be. But the fact that Quebec, with a population 40 per cent smaller than Ontario, is expecting to need at least 62,000 kilograms in the first year of recreational legalization, points to the potential size of Ontario’s cannabis market.

“The reality is supply is far short of demand in the near term, which means great opportunities for suppliers, big and small, and I think it’s going to be a transparent and fair process moving forward. I doubt we’re going to see any surprise big supply deals executed in the back room of a provincial regulator’s office,” said Fowler.

To start, the OCRC expects to have around 40 stores in cities like Toronto, Hamilton, Mississauga, Vaughan, and Brampton. More stores are expected to follow. Last week, the government announced its plan to use Shopify Inc.’s e-commerce platform for online cannabis sales and in its brick and mortar stores.

The supply framework discussed at Tuesday’s meeting “is being finalized now and more information will be available in the coming weeks,” said Laoutaris.