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Could Integrated Stores Open Rural Cannabis Markets?

One of the best things about Canada is its wide-open spaces. Being the second-largest country in the world with a smaller population than the state of California, we’ve got a lot of room to spread out. While most Canadians prefer the bustling culture and economy of the big city, quite a few of us, one in five actually, enjoy the quiet and the clear, starry night skies of the countryside.

There are a lot of benefits to living in a small town, but unfortunately, they can sometimes lack in amenities, including cannabis stores. It wouldn’t be so bad if it was your daily dose of Starbucks you were missing, there’s no need for an illegal Caramel Macchiato trade, after all, but with cannabis, there may be more sinister consequences–and money left on the table.

The main reason cannabis was legalized, was to eliminate the illicit market. As of December 2019, 46% of Canadian cannabis consumers were buying legal product, but only about half of them were buying only legal product, leaving around 50% of Canadians still buying from their old sources. It could be part loyalty, but it could be argued that a lot of it is convenience, too–especially for rural customers.

For example, I grew up in a small town in rural Manitoba. If I were still living there, the closest retail store would be 150 km away.

Because Canada’s population is so spread out, it’s tough to provide access to legal cannabis to everyone. Manitoba and Saskatchewan have a lion’s share of their population in major cities, but still have a rural population of around 30%, nearly half of Canadians in Maritime provinces live outside of the urban areas, and up north, outside of the capital cities, Canadians are scattered across the tundra in small, remote communities. In places like these, it may not make sense to open up a stand-alone cannabis store, after you look at the numbers, so major retailers seem to avoid more rustic locales, leaving many rural cannabis lovers without a legal store to purchase cannabis from.

So, what is the solution? Some provinces already allow it, but few retailers are taking advantage of it: it’s an integrated cannabis store.

What is an Integrated Store?

An integrated store is pretty much exactly what you would think. It’s a cannabis store that exists within another retail space. Think McDonald’s inside of a Walmart, except the McDonald’s is behind frosted glass. The exact rules differ in each province, but essentially, cannabis stores are allowed to exist within an already existing business, as long as they can still safely lock up their product and keep it away from the prying eyes of minors.

Where is it Allowed?

So far, Manitoba, Saskatchewan, Newfoundland & Labrador, Yukon, the Northwest Territories, and Nunavut all have regulations like this.

In Saskatchewan and Newfoundland & Labrador they go a step farther, offering minors-allowed and minors-prohibited options for integrated stores.

If retailers want to give a full shopping experience with displays, smell jars, and custom décor, they can go with the minors-prohibited option, which is like a store within a store. There would be floor-to-ceiling dividers that block shoppers from seeing inside, similar to regulations for video lottery terminals.

The minors-allowed option allows cannabis to be sold from behind a specific counter, as long as it’s securely locked away and not visible, like regulations for cigarettes. With this option, sales of cannabis and its associated accoutrements can go through the same point of sale as everything else. Newfoundland & Labrador’s regulations are similar, except they add the caveat that these integrated stores can’t be in the same building as a lounge or a pharmacy.

Nunavut has an interesting take as well. Nunavut offers a Remote Sale licence along with their physical cannabis stores, which can be stand-alone or integrated. A Remote Sale licence allows a retailer to sell cannabis online or over the phone to anyone in Nunavut, provided they are over 19. Their purchases can then be mailed to their remote community or picked up at a physical store. Most provinces allow online sale of cannabis from licenced retailers but allowing stand-alone online retailers is a unique solution to Nunavut’s unique geography.

Why it’s a Great Idea

The rural market in Canada is hugely underserved. Unfortunately, there are no official statistics to show if rural Canadians consume more or less cannabis than their urban counterparts, but we only have to look in the news to see the proof.

The most sensational example happened earlier this month when Hobo Cannabis opened a store in Timmins, Ontario. Before Hobo came to town, the closest retail store was two hours away in Sudbury, Ontario and despite fears of a pandemic, they smashed through their sales goals by 11 am and ended the day with record-breaking numbers.

Delta 9, a Manitoba-owned retailer, wholesaler and producer, announced their plans to roll out Delta 9 Express locations within existing non-cannabis stores. As a company that cut its teeth in Manitoba, where 30% of the population is rural, their gross profit increase of 170% since this time last year seems to show that small-town folk like to spend money, too.

Are Cannabis Kiosks the Future?

However integrated stores may manifest in the future, they may be the best way to serve small communities and ensure that the product they are getting is safe and legal. The unfortunate part is that retailers and local entrepreneurs aren’t taking advantage of the opportunity. According to the Liquor and Gaming Commission of Manitoba, Controlled Access licences, which are their version of integrated stores, have been available since cannabis regulations were put in place in 2018, but no one has applied for one yet. If municipalities and business owners alike got on board, integrated stores have the potential to stimulate small-town economies, provide access to rural customers, and put a damper on the illicit cannabis trade all in one fell swoop.