Ontario’s lottery: 'The system should be based on merit and effort, not random chance’

Established cannabis retailers were, to put it mildly, disappointed with the results announced Wednesday of the second Ontario retail cannabis lottery. Below, four retail cannabis executives share their thoughts with Cannabis Professional. The transcripts have been lightly edited for clarity.

Trevor Fencott

Fire & Flower CEO

This is predictably what happens with a lottery and we have been very clear… lotteries are just a terrible, terrible way, to bring a regulated market into place and this is just the latest example of that. While I would much rather be spending capital building stores and employing people and actually combating the illegal market, rather than paying out Ontario lottery winners, the reality is we are in business and that is the system that, unfortunately we have in Ontario so of course we will need to have those conversations.

And listen, we are open to those conversations. I think it is just unfortunate that this is the system we have because it is not a good use of capital, ultimately. It is really not an efficient mechanism at all. One thing that we also hope comes from this is we look forward to working with the provincial government to move as quickly as possible, particularly given the absurdity of… the results of this lottery system. We look forward to working as quickly as possible to get to a normal, commercially-driven privatized system where Mom and Pop, as well as larger commercial players can participate.

We look forward to working with them to get through this as quickly as possible, but let’s not learn another lesson this way, because the lesson this time was exactly the same as the last lesson. I don’t think there is any more supply issue. We are in Alberta and there are over 260 stores here with one third of Ontario’s population and there are no stock outs, so that is not a factor anymore. Let this be the last lesson we need to learn on an inefficient way to displace the illegal market and start generating some tax revenue.

Tom Dyck

CEO of mihi, and former Toronto-Dominion Bank executive

I am actually a bit surprised by the number of names that were in the lottery, five thousand is still a large number of entries, and even more surprising is it is almost two thirds sole proprietors again, which is not dissimilar to the first lottery

Clearly it is still being played as a game of chance for many folks – I am really disappointed that the government is continuing to build this industry through a game of chance.

Nine months ago there were legitimate concerns around supply but those just complete do not exist today - this is an industry that is ready to create thousands of jobs in the province and generate arguably hundreds of millions of dollars and tax revenue.

And retail is the primary vehicle for combating the illicit market in cannabis so when you add up the jobs, tax revenues and fighting crime, these are things that are completely aligned with the platform of the provincial government. Frankly, it escapes me how we are still in the business of doing lotteries versus building this industry in a thoughtful way.

We are in this market for the long run and I never assumed this venture would be an easy journey because we created a new company inside a new industry that doesn’t really exist yet. And we are setting a really high bar for ourselves and to do that, we have already invested millions of dollars.

Clearly we are disappointed that we can’t share that in very real ways with communities across Ontario, but that will come, I think, all in time.

In the meantime we are going to have to look at slowing our investments until the province comes out with the next steps in terms of how they are going to approach building this industry. And we are also going to talk with any of the lottery winners who are interested in our approach to retailing. We are making sure that if there are folks there that we know that we will reach out to them. We are sitting at 30 [leases] because we intend to be Ontario’s largest, if not certainly the best retailer for cannabis and we have developed really strong relationships with major landlords across the province

[Provincial officials] has been quite consistent publicly talking about the fact that they are committed to an open market in Ontario. The rationale has always been that once supply is secured and they are able to support the market properly, and I think everyone would acknowledge that we are definitely there if not past that point and that it is time to move quickly.

Raj Grover

CEO of Canna Cabana parent High Tide

We have already been contacted by two winners since the results came out this morning and we expect many more to do the same due to our retail expertise and three great performing stores in Ontario. Winners should all feel welcome to reach out to us to assist them to open in the timeline required by the AGCO.

Dave Martyn

President and founder of Starbuds

We did not have any winners in the mix. Based on our understanding, round one operators are not able to participate in round two, so we expect to hear from the sole proprietors who won and are likely to need franchising assistance with setting up their business.

In general this lottery continues to be a very ineffective way of handing out licences. It appears that we have winners beside already open cannabis stores, multiple winners at the same address, black market operators and so on. The system should be based on merit and effort, not random chance. Ontario continue to miss out on the positive economic and social benefits of cannabis retail​.