As we approach Jan 22nd 2019, municipal councils will have the weeks ahead to debate on whether to opt in to cannabis retail. This should raise some good conversation over the holidays, as they sift through the various pros and cons of the Ontario’s retail structure. We believe this to be a final stage, as federally and provincially most of the approvals and oversight have been completed. At this point if a municipality declares they are against retail it will leave their residents to continue to shop online for Cannabis or have to travel longer distances to other storefronts. We believe the councils should look at this as an opportunity economically and socially, rather than a burden. Here are 3 good reasons why!
1: A safer community!
Socially, having government approved retail stores does a couple key things for the community. Firstly it regulates the age of shoppers, to ensure no kid under 19 can enter the store. We believe the average cannabis consumer is highly under represented, as many don’t realize these individuals are usually young professionals or baby boomers with substantial yearly income and post secondary educations. In this industry and under these regulations, non-adherence retailers that sell to kids will lose their license, while the growing market of recreational users will be served. There really is no better interest in protecting people than an economic interest. It doesn’t end there, as black markets will also suffer proportionally, relative to the number of retail stores available. We can predict that most people will shift to legal buying to avoid sketchy black market encounters, and a potential criminal record. By opting out, policy makers are basically encouraging consumers to continue to purchase the product illegally. We can look to communities in California that have banned retail sales, despite recreational cannabis being legal, they have created continued pockets of outlawing. This got so bad that the state had to override the laws and take a step in. We hope Ontario doesn’t have to go down a similar path, with much wasted time and resource along the way.
2: Licensed retailers will offer only Health Canada approved products and deliver cannabis information and education.
With the Opioid epidemic taking place across Ontario, legal retailers will do everything in their interest to operate under their licensee rules and regulations. This means ensuring the safe and quality distribution of the crop and the careful inspection for containment. Without these regulations people are at risk of product coming in contact with exposure to other dangerous compounds. One of the main concerns for parents is that they do not know where products are coming from in the black market. There are many devastating stories of families impacted by illicit pot bulked up with other compounds to make it weigh more, or potentially laced with dangerous additives like fentanyl.
In addition, it is in the interest of licensed producers to build their brands and monitor their marketing activities. This means providing retailers with the most in depth information and education on their cannabis products. This should over time, create a better, well educated class of consumers. Overall an educated consumer can feel free to have more fun with the product, while still staying responsible. This is what our province truly needs.
3: Financial Upside!
Deloitte’s 2018 Cannabis Report estimates that the total cannabis market in Canada is “expected to generate $7.2 billion in total sales in 2019 with overall consumption jumping 35% as legal channels come on stream.” Most importantly, the province has also promised to share a 50% surplus with the opt-in municipalities when the federal excise duty on recreational cannabis exceeds $100 million (In the first 2 year). We are willing to bet that Ontario’s take far exceeds $100 million so municipalities will have some large upside from the booming cannabis markets, and some more power in time for negotiation.
In sum, if embracing private retail stores in your community sparks the process of dismantling an overdue illegal market, improves the quality of our cannabis, increases safety in our towns, and provides provincial tax revenue which, in turn, funds municipal transfers… then we see no reason for municipalities not to opt in. Ontario continues to experience the social impacts similar to Oregon and California. Both those states show that the model works, and most importantly it is proven to decrease opioid addiction, allowing police to focus on more violent crimes. In our opinion, these pros far outweigh any social, nuisance or impacts being expressed from the out dated views of some politicians.
Stay up to date with the discussion! Happy investing.
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