Pubdate: Sat, 09 Sep 2017
Source: Ottawa Citizen (CN ON)
Copyright: 2017 Postmedia Network Inc.
Author: Marc Solby
Page: 11


The Ontario government's announcement that it's going to use some sort
of subsidiary of the LCBO to sell marijuana in the province is the
worst possible option.

Already, the province has the existing infrastructure to sell
cannabis: LCBO stores. Instead of going that route (which some
health-care advocates worry places liquor and pot in too close
proximity) or fully privatizing sales, such as with cigarettes, the
Liberals have chosen a third path. It is tremendously wasteful and
squanders a golden opportunity to make the LCBO more efficient.

First, this will enlarge the already bloated public sector in Ontario.
According to a recent Fraser Institute study, the public sector now
accounts for 23 per cent of employment in the province.

 From 2003 to 2013, public sector employment in Ontario grew 28 per
cent whereas the private sector grew at six per cent.

The LCBO is a bloated retail enterprise, wrapped in the warm cocoon of
monopoly. It has the distinction of being the largest booze retailer
in North America, but beyond that, it's incredibly costly - something
it can hide with inflated booze costs. The LCBO's CEO made more than
$300,000 in 2016; other employees easily made their way onto the
Sunshine List.

Surely, this talent could figure out how to incorporate cannabis into
the supply chain. It is indulgent to create a new provincial cannabis
agency when the province has the opportunity to significantly improve
the LCBO, in both liquor and cannabis sales.

And, considering this bloat in the LCBO itself, do we really think
that a subsidiary distributing cannabis would be any more efficient or

Lately it is fashionable to attribute "magical" health properties to
cannabis. What is magical is that cannabis is: tiny, expensive and
does not spoil. It takes up a fraction of the volume compared to
liquor in a warehouse, on a truck or on a retail floor.

Retailers think in terms of sales per square foot. How many $6 grams of 
cannabis fit into a square foot? Hint: a paper clip weighs about a gram.

Now, imagine that you own the LCBO, because you do, and you create a
cannabis shop within your store. The result is a little bit of added
cost and a lot of added revenue. You also have all the existing
systems, management, age controls and retail training to manage this
alcohol and cannabis enterprise. Magic profitability.

Considering that on Friday, the provincial ministers repeatedly raised
health concerns and age of consumption, it only makes sense to put the
sales where there is already the skill and knowledge to control that -
and that's in the LCBO.

The province's stated objective is to put illicit pot out of business.
But it's going to take the province until 2020 to open 150 stores.
Since the federal Liberals announced marijuana legalization, illicit
pot shops have proliferated at a rate the government cannot match. To
drive them under will require competition - and that requires sales

Using the LCBO gives the government more than 600 stores from day one.
That is shock and awe in the "war against drugs."

There is a public health argument that by selling alcohol and cannabis
together, we would encourage their combined use.

Yet, with the system the province is proposing, Ontarians would merely
have to cross the street from the LCBO to the cannabis store. That's
hardly a solution.

And besides, these shoppers need to be careful not to get hit by the
government gravy train while en route.

- ------------------------------------------------------------------

Marc Solby is a marketing consultant based in Toronto and an instructor 
in marketing at the University of Toronto, Continuing Studies. He is 
also the founder of the Cannabis Consumer Update, research that monitors 
cannabis users' behavior and attitudes.
- ---
MAP posted-by: Matt