Cannabis has become part of Canadian conversation following legalization in 2018, which has resulted in economic growth for the country. Over the last five years, Canada has seen jobs appear and a boost in tax revenues and these increases are projected to continue into the future.
But is the industry truly thriving?
Ontario experienced a 144.2 per cent increase in total sales between 2020 and 2021 but only grew by seven per cent from 2022 to 2023. On Sept. 11, the Ontario Cannabis Store, the retailer for all licensed stores in Ontario, implemented a site-wide price drop in order to compete with the still-thriving underground market.
According to TMU entrepreneurship instructor and cannabis industry expert, Brad Poulos, “It’s [the market] been oversaturated for six years! We now are in the middle of the shake-out.” Poulus says we have entered a period of cannabis retail natural selection, and those who adapt are going to survive.
It is undeniable that the market is thinning itself out, says Poulos. “I think the best way to build a mature competitive industry is to let people compete any way they want…Every big company was small once, they somehow got big! Or figure out a way to compete as a small, robust, niche player.”
Slotting fees are common in many retail industries, but until late 2022, were relatively new in the cannabis industry. Poulos isn’t surprised, “I see no reason for the government to be putting rules in place that say, how the relationship should be governed between two willing parties. If Canopy Growth wants to pay Canna Cabana for shelf space, like Nestle does to Loblaws, why should we care?” Critics claim that this practice is only advantageous to bigger companies and causes smaller brands to be at risk of closing their doors.
“That’s how it goes…. It is unfortunate, but I think you also are able to carry more things,” says Baileigh Filipe, a supervisor for The Cannabis Guys, an independent company in Brampton. She feels similarly to Poulos when it comes to slotting fees. “Like if you have a bigger budget, and you get a bigger budget when you have more customers and you get more customers when your staff and your store is up to par. So I think that’s just the game, right?”
Filipe says her location is able to do deals with brands that their company respects because of the size of their store and the shelf space they have available. She also says that some brands she is aware of refuse to do business with certain corporate retailers that mark their products lower than other retailers the brands sell to.
So what can independent retailers do to survive?
Poulos says that the stores that will succeed are the ones that have mastered the effectiveness of the sale. “How much THC can I get for how many dollars? And why did I say that? Because that’s what the consumer cares about. Much as much as we talk about terpenes and, all the other things that actually do matter, they don’t matter to the average consumer.”
Allie Donald, the vice principal of Sativa Bliss, an independent retail company with locations across Ontario, believes that focusing on cannabis education creates a better in-store experience that sets retailers apart from one another. Donald has been working in the industry since the start of legalization. She was a speaker at the Elevate Cannabis Expo and Trade Show, a 4-day event in Etobicoke run by retailers focused on comprehensive cannabis education for managers, budtenders, the public, and industry professionals.
“Our goal is for them to go to an event, have a great time, get cannabis, but also get education to further their career. Because right now, this industry is really lacking in motivation.” The panel that Donald spoke on discussed how education and deep product knowledge helps those working in the storefronts to better recommend products, and in turn, bettering their stores. “They can really come back [from industry events] more motivated with the tools that they need to better themselves [in their careers]”
Filipe agrees, one of the things that she has noticed since legalization is the change in customer base because of the legality of cannabis. “The community is definitely more open to it. And you can you see people of all different types coming in, like you see grandmas you see moms, teachers, police officers even.” Studies have shown that there has been an increase in cannabis use among the elderly, especially for pain relief or other wellness needs.
Education seems to be at the forefront of this ever-changing industry, and if budtenders and retailers are able to give educated responses that could benefit specific needs, they would be able to retain that customer base. Poulos says that in five to ten years the industry would be “Just sort of be smaller in terms of number of players and be larger in terms of dollars because it’ll be enjoying a greater percentage of the black market than it does today.”
OTR reporter 2023.
