Ontario cannabis producer choices praised for diversity, but supply concerns loom

Ontario’s sole legal online retailer for recreational marijuana signed agreements with a diverse group of producers to supply the province with cannabis when Canada’s adult-use market opens in October, but some analysts think it might not be enough.

The Ontario Cannabis Store (OSC), the government-operated cannabis retailer, entered into agreements with 26 licensed cannabis producers in preparation for the Oct. 17 launch and anticipates picking more LPs in the coming months.

But the opening of brick-and-mortar stores, expected in April 2019, will likely mean even more suppliers will be needed to meet demand in the province.

The OCS said it will begin establishing a wholesale distribution network to supply these privately owned stores once legislative requirements are in place.

“Competitive procurement through product calls will be an ongoing process with new suppliers, authorized by Health Canada, added on an ongoing basis, as well as suppliers for accessories,” OCS spokesman Daffyd Roderick wrote in an email to Marijuana Business Daily.

One industry analyst praised the chosen producers for being a mix of large and small growers but also noted the LPs may still have trouble meeting demand.

“The upside is that there’s a mix of small and large producers, showing that this isn’t being given away to just the big players, there are certainly opportunities for smaller players,” said Deepak Anand, a cannabis consultant in Vancouver, British Columbia.

However, he pointed out, at least two of the companies don’t have sales licenses and many others are fledgling commercial cultivators that may have a hard time executing on their production.

“A lot of the companies are new, they haven’t grown crops like some of the bigger ones have,” Anand said. “There are a number of execution-related risks.”

The OCS did not disclose how much total product they had requisitioned from the 26 growers.

“We have not quantified volume, but have instead focused on securing sufficient supply in time for legalization. We have not yet released strain information,” Roderick wrote to MJBizDaily.

He added that the determination of “sufficient supply is based on market insights and modeling.”

The OCS will have cannabis in its warehouse “well in advance of the legalization date,” Roderick wrote. Consumers will be able to preorder but won’t receive product until the official launch date.

The OCS is also working to finalize supply agreements with cannabis accessory suppliers.

Omar Sacirbey can be reached at omars@mjbizdaily.com