Pubdate: Sat, 09 Sep 2017
Source: Record, The (Kitchener, CN ON)
Copyright: 2017 Metroland Media Group Ltd.
Author: Armina Ligaya
Page: B4


TORONTO - Ontario's plan to sell and distribute recreational pot
exclusively through a network of government-operated stores could lock
in the dominance of the country's large-scale licensed marijuana
producers and weed craft growers out of the market, industry experts
said Friday.

Two of the country's biggest producers, Aphria Inc. and Canopy Growth,
cheered the province's plan to have the Liquor Control Board of
Ontario operate a network of standalone marijuana stores as well
become the sole online recreational seller.

They also welcomed the government's pledge to stamp out illegal
dispensaries, eliminating them as potential competitors.

Aphria's chief executive, Vic Neufeld, said Ontario's plan - the first
province to announce its approach - helped bring some much-needed
clarity to the future landscape of the recreational marijuana market.

"Selfishly, I'm really glad to see that the supply chain through the
Ontario brick and mortar, and online, is coming from licensed
producers across the country," said Neufeld.

However, the Ontario government's plan to become the dominant
wholesale customer for recreational marijuana puts a vast amount of
power in the hands of one buyer, said Cheryl Reicin, chair of the life
sciences group at law firm Torys. That, in turn, will make it harder
for smaller producers to compete, she said.

"It's going to put a lot of pricing pressure on the LPs, the licensed
producers … It will be interesting to see how many players they deal
with," she said. "Whether it's going to be a whole bunch, or whether
the numbers will dwindle."

The federal government has introduced legislation to legalize
recreational marijuana by July 2018, but left it up to the provinces
and territories to oversee distribution and sales.

Ontario is the first province out of the gate with a detailed

Ontario Finance Minister Charles Sousa said the Liberal government has
not made any decisions on pricing and taxation, as these issue will be
discussed in a meeting with the provinces, territories and federal
government this fall. It will sell marijuana in as many as 150
dedicated stores by 2020, but will start with 40 next July.

The process of purchasing recreational cannabis will be very similar
to the one in place for alcohol at the LCBO, with a minimum age of 19,
Attorney General Yasir Naqvi said.

But the government's plan to start with only 40 stores in July drew
criticism for not providing enough access and spurring marijuana users
toward illicit sellers.

Jacob Capital Management analyst Khurram Malik said limiting the
number of Ontario residents who have easy access to legal pot will
make it harder for the government to shut down the black market.

Canopy Growth president Mark Zekulin said it will take some time for
the government's distribution model to scale up, but it and other
producers that already sell online can help serve those who don't have
an outlet nearby.

However, having fewer independent retailers may hamper smaller
marijuana producers in the same way that craft brewers are at a
disadvantage at the LCBO, said Dan Sutton, the founder of B.C.-based
marijuana producer Tantalus Labs.
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