In the Canadian cannabis realm, farmgate retail is a provincially authorized retail store owned by a federally licensed cannabis producer, conveniently selling its own products next to its production facility. Policies are within the bounds of each province’s own legislation for cannabis sales, and each province seems to be taking a different approach.
In British Columbia, talk of farmgate cannabis retail is in the works, but only traditional cannabis retail stores are permitted, selling products sourced through British Columbia’s Liquor Distribution Branch. This means that the actual growers responsible for putting British Columbia on the map, as a go-to for high-quality cannabis, are not yet benefitting from legalization.
In Alberta, Alberta Gaming Liquor and Cannabis (AGLC) allows cannabis retail stores to operate at licensed cannabis production facilities, only as separate entities, with direct consumer sales mediated by the AGLC. Products must first be physically shipped from the producer to an AGLC warehouse, before the same products can be ordered, purchased, shipped back, and stocked as inventory by the farmgate location. This requires a licensed producer to ship products based on an AGLC order, then attempt to recoup said products when they hit the buy sheet, with no guarantee of being able to buy as much as they would like back, as other retailers can purchase from the same inventory.
A retailer source in Alberta states, “As a smaller independent, the current model for farmgate puts us smaller retailers up against the buying power of an LP, leaving us with less product to pull from and supply our consumers with consistent inventory.”
Saskatchewan has perhaps the most transparent rules to establish farmgate retail in Canada. With no government-run wholesaler, Saskatchewan licensed producers and authorized cannabis retailers maintain direct relationships. Cannabis products can be moved directly from a producer’s federal inventory to their provincial inventory without any third-party involvement other than reporting both sides of the transaction to the Saskatchewan Gaming and Liquor Authority.
Saskatchewan has perhaps the most transparent rules to establish farmgate retail in Canada.
In Ontario, the cost to open a cannabis retail store alone is expansive. It requires a Retail Operators License, a Retail Store Authorization, and must be managed by a person possessing a Retail Manager Licence. Ontario Cannabis Store (OCS) enables licensed producers to sell directly to consumers through an on-site store at their processing/growing facility. This means licensed producers with a farmgate store supply their store by designating a section of their secured storage area as part of the OCS warehouse. Paper transactions confirm store orders, replacing the need to ship cannabis between the farmgate site and the OCS.
Retail owner, Zaira Gaudio Fry concedes, “I have concerns about the overall direction of the market if farmgate stores are allowed to contribute to the creation of near-monopolies in the cannabis space. Mandating that farmgate stores carry product from other licensed producers means that they are effectively operating no differently than any other retailer in the province, but with lower overhead and wider margins.”
Concerns are beginning to mount with the vast inequalities between licensed producers and independent cannabis retailers.
On the one hand, farmgate sales are a new consumer option offering the opportunity to buy direct from the producer, engaging in a curated experience that may soon be comparable to wineries, breweries, or distilleries. While on the other hand, concerns begin to mount with the vast inequalities between licensed producers and independent cannabis retailers in any given province, save for Saskatchewan.
Opening a cannabis farmgate store at a production facility offers a creative farm-to-table experience for LP’s (and their potential robust brand offerings). However, there are missing mechanisms at an operational and regulatory level in many provinces that may lead to a very uneven playing field. Provincially, the development of tailored farmgate programs would only elevate the cannabis industry, and lobbying provincial governments for policies in support of a true farmgate business model will ultimately level the playing field.