Ontario annual cannabis report signals further store closures, strength in legacy market
Ontario Cannabis Store's product launch delays gets mixed reaction from pot producers
The Ontario Cannabis Store is shaking up how it plans to launch new products to the provincial marketplace, a move that could have serious implications for big and small producers alike.
The provincially owned cannabis wholesale and online retailer told pot companies whose items it sells that it will postpone the next product call, a crucial window where companies disclose what items they plans to offer the marketplace, into next April. That means that after the current call ends in mid-August, producers will have eight months until they can pitch their wares to the OCS again, a slightly longer period than for previous product calls.
Bev Altberg, vice-president of merchandising for the OCS, told BNN Bloomberg the shift would help better curate the assortment of products Canadian consumers may want to buy in the legal market instead of flooding retailers with items that may or may not sell.
"Let me understand your [company’s] innovation, what genetics are you growing now, how are you thinking about innovation and does that coincide with the trends that we're seeing in the position that we are, where we have all the access to information," Altberg said in a phone interview.
"There should be a much, much tighter alignment with our [licensed producer] partners and our category managers, which is something that LPs have been asking for. That makes sense because an LP doesn't want to sink capital and time into growing something that may or may not be accepted into the largest market."
As the main wholesaler in Canada's biggest consumer market, the OCS has a particularly outsized influence on the country's cannabis industry. Shifting around a key product launch window may have ripple effects across the sector, affecting how producers ship new releases to other provinces.
Producers will likely be reworking many of their annual plans in light of the OCS's moves, said Brazeau Seller Law Partner Trina Fraser, who specializes in cannabis legal matters.
Companies need to manage their "production capacity within their facility, their ingredient procurement, packaging materials, marketing plans and all of these things which are built around a forecast," she said.
Pablo Zuanic, research analyst at Cantor Fitzgerald, said in a report to clients Friday that improving how the OCS orders new products may be positive over the long term, notably for better-run producers.
"We realize the pick-up in retail sales will take time, as consumers adjust consumption patterns even though in-store dispensary traffic is now widely allowed," Zuanic said.
Some of Canada’s biggest cannabis producers welcomed the OCS’s new plans. Representatives from Tilray Inc., Aurora Cannabis Inc., Hexo Corp., and Village Farms International Inc.'s Pure Sunfarms applauded the decision, saying it gives them more time to launch and support new products.
"Although it does impact our planning for next year, the OCS’s interaction and feedback process is welcomed. The changes are necessary in the process and it’s the right step forward for the industry," Berrin Noorata, chief corporate affairs officer at Tilray, said in an email.
But there will undoubtedly be some disappointment among small to mid-sized cannabis companies struggling to carve a place for themselves in what’s been an extremely competitive space. While some craft producers have gradually gained market share from bigger players, they may not have the resources needed to stay afloat until the next product call window opens up.
Max Zavet, chief executive officer at Robes Cannabis, which sells the BLLRDR brand, said the OCS's changes will be "definitely frustrating" for some smaller or newer entrants.
"If we don't get any listings in, it could be very challenging for us," Zavet said. "We do get some of the products in with the OCS's product call and we are flexible enough to survive, but if we didn't, then it would be a big problem for sure."
While Altberg acknowledged that some companies may struggle for sales, she noted that these changes will ultimately benefit the cannabis industry.
"Every single partner on the phone as we ran the assignment said that short-term pain will be worth the long-term benefits of being able to longer plan out and align on innovation windows," she said.
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CANNABIS SPOT PRICE: $xxx per gram -- This week's price is up/down x per cent from the prior week, according to the Cannabis Benchmark’s Canada Cannabis Spot Index. This equates to US$2,x per pound at current exchange rates.
— The amount of Canadians estimated to purchase a cannabis product in 2030, according to ATB Capital Markets.