Don't expect many dispensaries to open next month

Legalization in the Province of British Columbia might be an indication of what we can expect on and shortly after October 17, 2018. We are likely to mimic the experience in California. Governments, it seems, are doing what governments do best – wrap everything in red tape. Canada has ten provinces and three territories and each one has a slightly different set of cannabis rules and regulations, many of which have not been formalized. B.C. will have a combination of government owned and operated dispensaries as well as privately owned dispensaries. The government will be the sole distributor of recreational cannabis by the Internet while medical cannabis will continue to be sold by Licensed Producers with delivery by mail. The government of British Columbia will also control the wholesale distribution of cannabis. So any products sold by public or private stores or the Internet must be purchased from the B.C. Liquor Distribution Branch.

Under the Canadian Constitution, the thirteen provinces and territories have created around 3,700 municipal governments each having slightly different functions. However, what is standard is municipalities are responsible for administering residential, industrial and commercial zones. The provincial government has disclosed that when recreational cannabis becomes legal on October 17, 2018, they will have one store open in Kelowna, B.C., a small town with a population of approximately 90,000 or about one-eighth of the size of Vancouver. They add that the website, based on the Shopify e-commerce platform, will be available for online purchases.

This means that each of the over 100 applications to operate private dispensaries that have been accepted by the province since early August is then passed on to a local level government for “vetting.” Each local government is creating their own license to authorize and regulate stores. This can involve rezoning, normally a 6 to 18 month process and community consultation on matters such as store hours. One key issue will be security checks that have been a major delay for applications to grow cannabis.

Some jurisdictions may choose not to allow cannabis dispensaries just as some have chosen not to allow growers. Depending on which regional government you apply to, it may take up to a year and one half to get a license. None of these applications is expected to be approved by October 17, 2018; no private stores will be built and open, no inventories will be in place, no staff will be employed.

A further complication is province wide municipal elections take place on October 20, 2018. This means new mayors and councils will be elected three days after legalization. There will likely be many council members who are new the processes and procedures of government and unfamiliar with the issues relating to cannabis.

One estimate says that the earliest a private store will be open is January 2019 and some may be delayed until the spring of 2020.

Of course, the problem in Vancouver isn’t opening dispensaries. It’s closing them. There are still around 100 cannabis dispensaries open in the city of which fewer than 20 have been issued business licenses and and another 30 have development permits which is a step on the way to a business license. Even those with business licenses aren’t legal. Vancouver has chosen to sell them a business license for $30,000 which nearly triple the cost of a Vancouver casino license and at the same time the Vancouver City Police don’t enforce the letter of the law. These outlets could become legal if Vancouver City Council aligns new regulations to the old ones. Vancouver has promised additional enforcement after October 17th with the philosophy that enforcement will increase as the number of the legal dispensaries grows. To be legal after October 17th a dispensary needs a provincial retail license, a municipal development permit and business license.

There are some general conclusions that can be drawn from this summary. First, there will be very few legal dispensaries open when legalization in Canada begins. The majority of the trade will be handled by provincial online services. Second, it will be a relatively slow process to increase the availability of dispensaries. It seems the stores will miss the Christmas season and some may even miss out on next year’s holiday spending. When shopping for cannabis from a dispensary is part of the overall experience. It involves the senses of seeing, touching, smelling and even tasting the product. Of course, even in legal dispensaries some of these opportunities will be lost. Without these benefits, sales will likely not be as high as everyone hoped.