As of March 31st, Alberta has the most retail stores in the country, and as such we have the most experience of any province when it comes to the legalized cannabis industry. Here’s a synopsis of what we’ve learned in Alberta, what’s working great, and what opportunities exist to further develop the industry in Alberta.
An independent regulator is important. The AGLC in Alberta has decades of experience in creating, enforcing, and maintaining a fair and competitive marketplace for liquor. They’ve proven that their model of arms-length regulation safeguards the integrity and intention of the regulator and ensures its effectiveness.
Cannabis, however, was handled differently. While AGLC remains the regulator, it is also the sole legal online retailer. This has created some confusion and frustration among retailers who want to compete with the illicit market online, but more than anything it has led to some licensees questioning the motivation of certain AGLC decisions or policies. This question often arises: “Is this for the betterment of the market and consumer, or is it to safeguard AGLC’s own monopoly?”
While we recognize there is no conspiracy within the AGLC to undermine the industry, the opportunity to even question the motivation of the regulator undermines the integrity of an arms-length regulator. Once that crack opens it could continue to grow until it causes huge and unforeseen issues in the relationship between industry and the regulator.
Moreover the inability for retailers to compete online has brought an unexpected consequence. Major search engines, when presented with a query for “Alberta cannabis online” will never provide only one result on their search page. They’ll of course fill the results page with options. And when only one website can sell cannabis online, the remaining 9+ results found are therefore not legal retailers.
The monopoly of the AGLC website online has created a competition vacuum that the illicit market is more than happy to fill. And they have done so with gusto.
We are hoping to see this situation change in Alberta. Licensed retailers have proven their ability to conduct business fairly, professionally, and within the rules and regulations set out by both AGLC and Health Canada. We believe that AGLC and the Government of Alberta, have recognized the professionalism of the license holders and are ready to work with industry to open up this important aspect of competing with the illicit market.
Hopefully 2021 brings the option of multiple online retailers, making it harder for illicit companies to get that valued search result space, providing safer and more diverse product to Albertans, and even more employment within our province.
Relationships with Manufacturers
In most industries, the relationship between the retailer and manufacturer is an important part of the market’s checks and balances.
When a car manufacturer builds a great car, the retailers are the channel through which everyone purchases it. That makes sense. But when they make a terrible car that nobody wants, the direct relationship allows the manufacturer to offer rebates, incentives, and returns that help the retailers stay financially viable and ensures they offer an inventory of desirable products.
Currently in the cannabis sector in Alberta, this is not the case. When a retailer has an undesirable product in their vault, there is no medium through which the licensed producer (LP) can subsidize, incentivize, or take back the product.
This means that many retailers, most of whom are small businesses with tight cash flows and margins, are stuck with product they can’t sell. Their buying equity is tied up, meaning they can’t buy the desirable products being produced. The entire supply chain feels the impact.
Likewise, it is exceedingly difficult for LPs to promote their products in stores. The amount of effort needed, both by the LP and retailer, makes promoting product simply not worthwhile. Therefore, consumers aren’t being educated about the good options before them and everyone suffers. The brand identity of nearly every LP is limited now to “how much THC” and “how much CBD” is in each product.
Working with the AGLC, we are hoping to see this relationship change. We value the professional relationship between LPs and retailers. Moreover, we recognize that there needs to be an open relationship between them for the industry and market to thrive.
We are hoping to see a model of relationships that is much more open. LPs need to be able to support the retailers, and retailers need to be able to return product or engage with the LPs, so the collective result will be a healthier industry with a more educated consumer who will be drawn to product for reasons beyond THC or CBD content.
John Carle is Executive Director of the Alberta Cannabis Council.