Ontario Cannabis Store: Growing competition may result in store closures

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Retail access to legal marijuana has improved significantly in Ontario over the past year, shrinking the average distance between consumers’ homes and regulated stores, according to provincial wholesaler Ontario Cannabis Store’s new annual data report issued Tuesday.

However, all those new retail access points may come at the cost of store closures and retail consolidation, Ontario Cannabis Store (OCS) interim President and CEO David Lobo wrote in his introduction to the report for the fiscal year ended March 31.

“Unfortunately, this rapid growth will likely result in some retailers being faced with increased competition and a crowded marketplace, which could result in some closures and market right-sizing,” wrote Lobo.

“Other retail stores may choose to participate in mergers and acquisitions to increase their size and scale, and presumably drive down their operating costs,” he continued.

“However, at the core, all retailers will be challenged to further drive a relentless focus on targeted consumer segments and differentiating themselves from others.”

MJBizDaily has previously reported on the anticipated shakeout in Ontario’s rapidly-growing regulated marijuana retail sector, which is expected to hit the 1,000-store mark by September.

OCS said Ontario had 572 cannabis stores as of the end of the wholesaler’s fiscal year on March 31.

By April 20 Ontario had 613 stores, surpassing Alberta to have the most marijuana outlets of any Canadian province.

As of last week, that number had grown to 800 authorized retailers open for business, according to OCS.

The average distance from consumers’ homes to a licensed marijuana store decreased from 9.5 kilometers (5.9 miles) in the third quarter of OCS’ fiscal year to 6.5 kilometers at the end of March, OCS reported.

“This demonstrates smaller and unserved communities opening more authorized retail stores,” said the report.

OCS also sells directly to consumers through its online-only retail operation.

The government-owned corporation said the average price per gram for dried cannabis flower from its retail business declined to 6.17 Canadian dollars ($4.98) at the end of the fourth quarter versus CA$8.87 per gram at private-sector brick-and-mortar stores.

OCS said it received a total of 12,873 complaints about product quality during its fiscal year, 72% of which were regarding vape products, which OCS identified as “(demonstrating) an opportunity for improvement.”

The OCS report includes lists of Ontario’s top-performing retail marijuana stores by region, as well as the top brands in private stores and on the OCS retail website.

The report can be viewed here.

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.