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Saskatchewan Gets It Right

You don’t usually hear much about Saskatchewan. It’s a prairie province with a population of about 1.17 million people and it isn’t in the news much, but it is one of the top five contributors to Canada’s GDP. Its wide-open spaces give ample room for growing the majority of Canada’s grain as well as other seeds and beans, and beef cattle. Agriculture, along with mining, and oil and gas has solidified Saskatchewan as the province where everyone works hard and keeps their heads down.

Now, provincial regulators all over the country seem to be looking to Saskatchewan for another reason: their cannabis retail model.

The province offers an almost entirely private model for its cannabis market. The Saskatchewan Liquor and Gaming Association (SLGA) provides licences for retailers and wholesalers as well as some rules for them to follow, but other than that they tend to stay out of it. Unlike other provinces that have a public body that plays middle man between distributors and retailers, Saskatchewan’s model allows retailers to have their own relationships with distributors.

According to Daniel Safayeni, Co-Chair of the Ontario Cannabis Policy Council, this is essential to a healthy market. “One of the main advantages is that it allows a model in which LPs can directly negotiate with retailers,” says Safayeni. “This is extremely important to help with bringing prices down and coming up with more competitive and innovative products, but more broadly it provides a structure that would lead to a more competitive and innovative marketplace as a whole.”

He says that in Saskatchewan, companies are able to not only successfully supply their own stores with a wholesale deal negotiated to work for them, but also supply other retailers with warehouses built from private capital—not taxpayer dollars. This makes the market more efficient and competitive and could potentially save consumers money at the same time.

George Smitherman, President and CEO of the Cannabis Council of Canada, seems to agree that cutting out the middle man could have a positive outcome on the industry. “Directly shipping to retailers eliminates the handling of products. Considering that products have limited shelf lives and that handling costs money, we may find over time that the Saskatchewan model is more cost-effective,” Smitherman said. “Cost is, of course, a very big aspect of our ability to move more cannabis consumers across the line from the legacy market.”

On top of keeping their hands out of distributor-retailer relationships, Saskatchewan also allows e-commerce and delivery of cannabis products.

Ontario retailers got a taste of this earlier this year, however, that policy was rescinded in July. According to Safayeni, small retailers who invested a lot of time and money into getting their e-commerce and delivery systems in place are now having trouble staying afloat due to the pandemic. Calling it a relatively basic service that every retailer is entitled to, he estimates that around $180 million per year in sales are lost without e-commerce in Ontario, and when you account for the stores that are waiting to open, that number goes up to approximately $1 billion per year.

The SLGA has issued approximately 44 retail licenses to small businesses and large cannabis conglomerates alike. The retail stores seem to be spread evenly across the southern half of the province and to encourage integrated stores in smaller communities, applications from communities under 2500 people were accepted between April and September only. Statistics Canada reported that it earned $11.1 million in sales in June, making it one of the highest earners based on population.

Will provincial regulators eventually take the hint and loosen their control on cannabis distribution? Safayeni sure hopes so. “Saskatchewan works for the little guy,” he says. “There needs to be a regulatory backdrop where small independent businesses can see a path forward.”

Tags: Cannabis Council of Canada (28), Cannabis Retail (390), Daniel Safayeni (5), George Smitherman (27), Ontario Cannabis Policy Council (1), Saskatchewan cannabis retail (6), SLGA (8)