Jul 21, 2020
Province to take $180M hit on ending pot delivery, pickup: Ontario Chamber of Commerce
Ontario to end delivery, curbside pickup services for cannabis stores
Ontario stands to miss out on about $180 million in economic activity if the province's 100-odd privately-run cannabis stores aren't allowed to provide delivery or curbside pickup services, according to estimates from the Ontario Chamber of Commerce.
However, that figure balloons to nearly $1 billion in losses if that includes the additional 450 stores which are ready to open, but whose licence applications are pending approval by provincial regulator, the business group said.
"This is coming from a time when the economy is grappling with the impact of COVID-19 measures," Daniel Safayeni, co-chair of the Ontario Chamber of Commerce’s Ontario Cannabis Policy Council, told BNN Bloomberg in a phone interview.
"Retailers in the cannabis industry have gone to great lengths to adapt and change their business models to add these services."
The Ontario government announced it would stop allowing cannabis retailers to provide delivery or curbside pickup services when an emergency order expires on July 29.
Cannabis stores in the country's biggest consumer market were allowed to open and provide additional services such as delivery in April following an emergency order approved by the provincial cabinet amid the COVID-19 pandemic.
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In addition to the potential lost economic output, ending delivery and curbside pickup for puts the jobs of the estimated 2,500 people who work in the province's cannabis stores at risk, the Chamber said.
James Jesty, president of Friendly Stranger Holding Corp., a Toronto-based cannabis retail franchise with two cannabis stores and another two set to open, said he expects the move to shift customers back to the illicit market.
"The illicit market is more sophisticated now," Jesty told BNN Bloomberg in a phone interview. "It's not the old days of calling your dealer and him arriving with a baggie. A significant part of my business will likely go back to the illicit market now."
Delivery represented about 10 per cent of the Friendly Stranger's sales, while curbside pickup accounted for about 30 per cent of revenue, Jesty said. About five staff may be let go as a result of ending those services, he added.
Emily Hogeveen, a spokesperson for Ontario's finance minister, declined to specifically comment on the Chamber's estimates, but said cannabis stores can reopen with measures in place that allow physical distancing, such as limiting the number of customers in the store and booking appointments.
Ending delivery and curbside pickup is the latest blow to Ontario's nascent cannabis retail space after facing a string of obstacles including two lotteries that issued a handful of store licences, court decisions that halted the licensing process and bureaucratic delays caused by the pandemic.
Jeremy Burke, a partner at Toronto-based law firm Aird & Berlis LLP, said in a report on Monday the Alcohol and Gaming Commission of Ontario (AGCO) is limiting cannabis store openings to just five a week despite a queue of more than 450 shops that are ready to open and already paying rent. That means that if your store was inspected by regulators last week, the earliest the AGCO will let you open your store will be next March.
"The AGCO acknowledges the serious implications this weekly cap has for operators, who will likely have just completed costly renovations and will have to continue to pay rent and incur other overhead expenses, potentially for many months, before they can begin generating revenues," Burke wrote in the report.