Ontario will rely on private sector to sell recreational cannabis

The Ontario Cannabis Store will also keep its standing as the sole wholesale distributor for private marijuana retailers who make the grade.

“The government of Ontario will not be in the business of running physical cannabis stores,” Finance Minister Vic Fedeli told a news conference Monday, acknowledging the change is a “significant departure.”

“Instead, we will work with private sector businesses to build a safe, reliable retail system that will divert sales away from the illegal market.”

Attorney General Caroline Mulroney said private stores will be “tightly regulated” and stressed the government will make it clear to consumers that marijuana “is still a drug that poses risks to health and safety.”

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The turnaround on retail sales – which Ford had previously mused about — was welcomed by the cannabis industry as a more practical solution, which Green party Leader Mike Schreiner said should “save money” over building government stores.

“This puts everything back in play,” said Darren Bondar, founder and chief executive of Alberta-based Spiritleaf, which hopes to sell franchises in Ontario and expects a surge in applications.

“We’re so excited for the opportunity. We’ve been working on this for 18 months and we’ve identified 123 potential territories.”

The government could not say how many stores are expected in the province, what price will be set for weed or what the criteria will be for retail licences.

But Fedeli had a message for marijuana dispensaries that will remain outside the law after Oct. 17: “We won’t want to do business with people running an illegal business.”

Marijuana products will be sold with an official seal to help consumers identify legitimate retailers. The seal pictures the official Ontario trillium flower logo — not a marijuana leaf — below the words “Ontario Licensed.”

The province will soon begin consultations on rules that retailers will have to follow, including hours of operation and guidelines for training staff.

Fedeli pledged a zero-tolerance policy with “severely escalating fines” for pot retailers operating in illicit markets on the side. Any store selling to minors will be “done,” he added. Pot sales in Ontario will be restricted to those 19 and older.

Municipalities will be given the power to opt out of having any pot stores within their boundaries.

With local elections across Ontario this fall, “it’s going to be a ballot question in many cities and towns,” predicted Liberal interim leader John Fraser, who raised concerns that regulating dozens or hundreds of private stores will bring “greater challenges.”

The New Democrats said Ford’s Progressive Conservatives should have stuck with government-owned stores, but opened more outlets more quickly than the Liberals had planned, in order to curb the illegal market.

“The safest, most responsible way to sell legal cannabis is through the public sector,” NDP Leader Andrea Horwath said in a statement.

“Doug Ford needs to make sure that the promised consultation on the private retail model is open, transparent and thorough and includes the voices of as many Ontarians as possible.”

B.C. cannabis activist and entrepreneur Jodie Emery urged the province not to stack the deck in favour of big companies.

“We hope Ontario to be a truly free market where a young married couple will be able to open up a cannabis store as easily as they could a coffee shop or a craft beer parlour,” she told the Star.

It makes sense to delay pot stores until next year, others said.

“Pushing the launch date from October to next April for bricks-and-mortar cannabis retailers was the right call, in our view,” said Ed Collins of Toronto-based Cannabis Compliance Inc., a consultancy that assists private firms seeking to enter the emerging Canadian market.

“It gives extra time for private retailers to get ready while giving the government time for its regulatory due diligence. We know there’s going to be a massive flood of individuals wanting to get into the private marketplace in Ontario, and this timetable lets that unfold at a reasonable pace.”

Unlike Alberta, which has placed a cap on private retail operations that limits individual sellers to a 15 per cent share of the marketplace, and unlike B.C., where private retailers will be permitted a maximum of eight store locations, the Ontario rules are expected to allow private retailers to seize market share without limits, industry players said.

Five other provinces — British Columbia, Alberta, Saskatchewan, Manitoba and Newfoundland — plan to allow private stores to sell recreational cannabis.

Rob Ferguson is a Toronto-based reporter covering Ontario politics. Follow him on Twitter: @robferguson1