Ontario Chamber calls for reform of province’s cannabis wholesale monopoly

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Shipping delays at Ontario’s government-owned cannabis wholesaler underscore an “urgent need for reform,” the Canadian province’s Chamber of Commerce said.

The business lobby group said the delays hurt retailers and cannabis cultivators, especially smaller companies, that might still be unable to stock their shelves.

The Ontario Cannabis Store suspended deliveries to stores on Aug. 5 after a cyberattack on the parent company of contractor Domain Logistics, which operates the OCS distribution center.

That meant roughly 1,600 cannabis stores were unable to place wholesale orders. One week later, the government-owned cannabis wholesaler resumed some shipments to retailers.

“This situation underscores the inherent risks of having the Ontario Cannabis Store (OCS) act as the province’s only wholesale purchaser and distributor of legal cannabis,” Daniel Safayeni, the Chamber’s vice president of policy, said in a statement.

Safayeni is also chair of the Ontario Cannabis Policy Council (OCPC).

“The ongoing delivery issues triggered by a cyberattack was also flagged as a risk in the Auditor General’s 2021 report, which outlined a range of vulnerabilities including how the OCS manages data and oversight of their delivery service partner,” Safayeni said.

The Chamber is calling for the Ontario government to allow licensed marijuana producers and store owners to have direct commercial relationships, “enabling them to negotiate their own product mixes, prices, and delivery terms, which would mitigate the risks inherent to the current system.”

Currently, all regulated cannabis stores in Ontario must buy their wholesale cannabis from the OCS, which adds a significant markup to most products, even though it’s merely a middleman in the supply chain between producers and retailers.

Earlier this year, the OCS’ credibility was called into question by experts after sensitive industry data was misappropriated and leaked.

That breach, which included sales, inventory levels and other sensitive information for hundreds of cannabis stores in Ontario, prompted the Ontario Provincial Police to open an investigation.

The Chamber established the Ontario Cannabis Policy Council in 2019 to advocate for the growth of the industry and businesses.