What’s the one simple action the OCS can take regain retailers’ trust?

You know that one person in your life, that even if they surprised you with a coffee from your favourite cafe in the morning, your internal auto response would be a table flip because you just know they somehow screwed it up. Of course, you know this might be an unjustified response to a lovely act of kindness - you just have baggage with this person. It also means that if this person were to spill your coffee, you might need to take the rest of the day off to cool down. You can’t logic your way through an emotional reaction because of some combination of things they did in the past. If prompted, you might have a tough time explaining exactly what it is they did to you. And sometimes, the reasons you think are causing this irrationality are actually the symptoms of the core problem, which is more difficult to define. 

This sort of feels like the relationship cannabis retailers have with the Ontario Cannabis Store (OCS): they’re starting on the back foot, no matter what happens. But, unlike the person you thought of while reading the previous paragraph, the OCS has the ability to change this narrative quite easily, in my opinion.

As we all know, when recreational cannabis was federally legalized in 2018, each province was given the opportunity to individually define how distribution and sales of cannabis would be offered to consumers. Some provinces kept tight control of every gram distributed, like Quebec, who sell all recreational cannabis products in Quebec through SQDC: licensed producers (LPs) sell their products to the SQDC and the SQDC sells to consumers online or in provincially operated stores. While there were others that took a hands-off approach to distributing recreational cannabis, like Saskatchewan, who allows the LPs to sell directly to independently owned and operated stores, who then sell to consumers. Both models have their respective merits: the tighter the controls, the more revenue that can be directed to the province and the more consistent the offering can be to consumers; whereas the more lenient the controls, the faster the development of the retail network for consumers, as there’s more revenue to be made by private businesses. From a pricing perspective, it means Quebec can set a uniform price for any product being purchased, whether it’s being sold in Montreal or in Saguenay - the same cannot be said for Saskatchewan and each retailer ends up with unique costs with the LPs, depending on their size.

Some provinces, like Alberta, went for a hybrid approach: LPs sell products to a central warehouse run by Alberta Gaming, Liquor and Cannabis (AGLC), who then sells product to all retailers. This ensures a consistent cost to each retailer and it means all LPs are represented by one delivery to stores, making it easier for individual store owners to order and manage labour (it was not uncommon for some random LP to deliver to our store in Saskatoon at 8pm on a Friday night - this fixes that problem). It also means the AGLC takes a markup on the products being sold to stores. This is ok, if done correctly, as one of the three goals of cannabis legalization was to increase tax revenue from the legal distribution of recreational cannabis products. With the stores selling products in their own competitive regions, it meant that they could theoretically select the product that met their market needs and price it accordingly. BUT, even though the AGLC wasn’t technically setting prices, in reality, they were: they controlled direct to consumer delivery via AlbertaCannabis.org. So not only were they competing with stores in Fort McMurray and Calgary at the exact same time, they were inherently setting a province-wide pricing strategy, since every consumer could check AlbertaCannabis.org before going into their local store. There weren’t an incredible number of sales going through AlbertaCannabis.org webstore, only a couple percent of the total, but the impact on the independent store operators was immense. PLUS, running the ecommerce business was a money-losing venture for the AGLC!

So in March 2022, the AGLC dumped AlbertaCannabis.org and allowed stores to deliver directly to their communities. This will save the AGLC massive amounts of money in the coming years from eliminating the ecommerce line of business. And it will build trust with their customers, the retail store owners, by removing the central price setting. So when the AGLC makes a mistake in the future, the resulting reaction might be slightly less “table flip” and slightly more understanding.

The OCS can take a page from this book: when an honest mistake happens in the warehouse that impacts the entire network, customers (retail stores) might be more likely to understand IF the OCS wasn’t competing in online sales and setting defacto province wide pricing standards with the OCS.ca. Focus on distributing to retail stores and get out of the direct distribution. Support stores that invested millions in making this dream a reality, build trust, and actually make a profit on the massive tax revenue. The OCS legitimately has a lot of positive attributes, but those are unfortunately sullied by the OCS.ca competition - eliminating this distraction would be valuable to all stakeholders.