Canopy's Linton says Ontario's pot shop launch will 'be like Oct. 17'

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With just over a week until bricks-and-mortar cannabis shops can open their doors in Ontario, the head of the world’s biggest cannabis company said the first day will “be like Oct. 17 all over again.”

Bruce Linton, co-CEO and chairman of Canopy Growth Corp. (WEED.TO), said he expects long lineups, parties and strong sales on April 1, the day that the province will allow licensed pot shops to officially open, more than six months after Canada legalized recreational use of the drug.

“I was at the first store in the first province and the lineup was long. I imagine the same thing is going to happen here,” said Linton said in an interview with BNN Bloomberg, referring to the opening of Canopy’s Tweed store in St. John’s on Oct. 17. “One of the most frequent questions I keep getting is, ‘When can I go? When can I buy some cannabis?’”

Amid that pent-up demand, the rollout of legal pot has suffered growing pains in Canada since it was legalized. The nascent industry has faced inventory shortages, quality issues, and prices that are still above what the illicit market offers. Those hurdles may be most prevalent in Ontario, where the only place to buy legal cannabis has been online through the provincially-owned and operated Ontario Cannabis Store (OCS). In addition, the province is only allowing 25 stores to open next month, following a hotly-contested lottery for retail licenses.

While the rest of the country has the ability to walk into bricks-and-mortar cannabis stores, Ontario residents have so far needed to wait about two days for their legal pot to deliver. As a result, sales in the province have been essentially flat, with Statistics Canada reporting only $8.95 million in Ontario cannabis sales in January, a figure that’s little changed over the prior two months. Meanwhile, sales in Alberta have nearly doubled to $14 million in January since cannabis was legalized in October.

“We think these stores, once they’re open, are going to lead to a big spike in per capita spending in Ontario,” Linton said. “For the guys in the puffy coats, there’s suddenly going to see some competition.”

Canopy aims to open two cannabis stores in Ontario on April 1 after reaching agreements with two license lottery winners, although the Alcohol and Gaming Commission of Ontario has yet to issue a retail operator licence to the planned locations. In fact, it’s becoming clear that not all of the 25 planned stores will open on day one, as more than half have yet to receive their licence from the AGCO.

Of Canopy’s two stores, one location, a Tweed-branded outlet, will be in London, Ont., while the other – a Tokyo Smoke shop that will be housed in the former HMV superstore building in the heart of downtown Toronto – will be the company’s flagship store in the province, Linton said.

“Having those stores start in April, and more to follow, is going to be a key indicator of what our summer sell season is going to be like,” Linton said. “People like going into stores. They can ask people questions. If you go onto [the OCS] website, good luck figuring it out.”

Still, it is unclear how these new shops will face off against the illicit market, which has continued to thrive despite legalization. Statistics Canada said annualized Canadian household spending on cannabis totalled $5.9 billion in the fourth quarter of 2018, with the black market accounting for $4.7 billion of that figure and the legal market estimated at $1.2 billion.

Linton said he expects the launch of legal edibles and other extractable products later this year will make a significant dent in the industry’s competition with the black market. Canopy previously said that it expects to sell a variety of cannabis edibles form factors, including non-caffeinated chocolate, five different kinds of beverages, and vape pens with new cartridge technology once Health Canada formally legalizes them.

“If you allow innovation and the creation of products that are consistent, completely different and better – now we're not competing on the ingredient price. We’re comparing finished goods that don't exist in one segment,” he said. “That’ll fight the illicit market.”

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