- Canada has officially legalised marijuana, but people across the country have had a tough time accessing the product legally.
- Canadians are turning to the black market to pick up where provincially run retailers have dropped the ball.
- In Toronto, Canada’s most populous city, the black market has seen “new life breathed into it,” a founder of a cannabis-accessories brand told Business Insider.
TORONTO – Canada officially legalised marijuana on October 17, but Canadians across the country have had a tough time getting their hands on the product – legally, that is.
Patrick and Michael, 26, roommates in downtown Toronto, have had a somewhat typical post-legalization experience. (Their last names withheld because they purchased marijuana illegally.)
Patrick, who works at a tech startup, and Michael, who’s in commercial banking, recently ordered $US75 worth of marijuana from the website of the Ontario Cannabis Store, the provincially run body that supplies Ontario residents with legal marijuana.
The OCS sent the roommates a confirmation email saying their order would be processed and delivered to their condo in one to three days. It would come just in time for Friday-night festivities.
Friday came and went, and they heard nothing from the OCS.
“It’s brutal,” Patrick said. “No confirmation or updates or anything.”
That delay in communication forced the pair to hit up an illegal marijuana dealer, who met them at a restaurant on Ossington Street within 40 minutes of the text. Patrick and Michael bought $US40 worth of a potent strain, and the dealer threw in a free joint.
Business, the dealer told Patrick, was “booming” after legalization.
It’s a strange conundrum. Selling the marijuana to Patrick and Michael was illegal, but once it was in their possession, they could legally consume it.
Patrick and Michael said that in the grand scheme of things, waiting a few extra days to get their marijuana wasn’t really a big deal. But for people who need their medical marijuana daily – and for the global financial community eagerly watching how this all plays out in Canada – it’s not a good look.
The OCS finally delivered Patrick and Michael’s marijuana on Tuesday morning, days after it was supposed to arrive.
The rollout of legal marijuana in Canada has been bumpy
In Ontario, under the former Liberal Premier Kathleen Wynne, the government set up a plan to open several brick-and-mortar OCS outlets throughout the city of Toronto and across the province – Canada’s most populous – on October 17.
When Doug Ford took over the provincial government as premier at the end of June, his Conservative Party scrapped the Liberal plan entirely.
The party settled on a strategy to run marijuana sales only online on October 17, with a plan to allow private retailers to open pot shops in April.
Under provincial law, the OCS is the only vendor allowed to sell marijuana until retail licenses are processed and issued next year.
The OCS has also created strict packaging rules for the marijuana products it sells.
Before legalization, there were several “medical” marijuana dispensaries in Toronto where people could purchase marijuana, albeit under a murky legal framework. They ranged from sketchy to surprisingly upscale, with a deep product inventory and knowledgeable sales reps.
To send a message, the Toronto Police Service raided five of them earlier in October, forcing many to close to avoid jeopardizing their chance of getting a coveted retail licence.
And while regulators figured Ontarians could make do with online-only sales until April, there were, as with any massive shift in social policy, some unforeseen variables.
Canada Post goes on strike, and customers are left in the dust
As the OCS contended with a flood of more than 150,000 marijuana orders during the first week of legalization, Canada’s postal service decided to begin rotating strikes. As a result, there was no one to deliver packages to Ontario residents who had ordered marijuana legally.
On top of that, some of the licensed producers in Canada had warned that there would be supply-chain issues in providing the amount of marijuana the provinces requested, the Financial Post reported. And a quick scan through the OCS store on Saturday showed that was the case – most products were either sold out or had a limited supply left.
I visited one dispensary – decked out in psychedelic colours – where a few guys in their mid-20s were sitting behind a counter.
“We have nothing to sell you, bro,” they said, unprompted. “We’re all out in the back. We’re hoping to get a licence so we can reopen next year.”
A dispensary on Queen Street East, one of Toronto’s major thoroughfares, felt like an illicit drug market. To get in, you buzz a door while being evaluated on a security camera. Once through, you hold your ID up against a small window with bulletproof glass.
Then another door is unlocked, and you enter a small interior room, where two young employees – behind more bulletproof glass – preside over jars of marijuana labelled with names like “Alien O.G.” and “Bubble Kush.”
This was not a legal operation, nor one that would bring any new customers into the fold.
Customers are irate – and so are analysts
All this has led some customers to file formal complaints with the Ontario government. Others are speaking out on social-media platforms about how OCS dropped the ball on their orders.
The OCS released a statement on Sunday saying there was “adequate product supply” and pinning some of the blame on “the mail and package backlog” at Canada Post.
“Efficiencies and ways to further expand capacity at the OCS distribution facility continue to be made to help meet the massive demand,” the OCS said. “Our staff continues to work around the clock to fulfil customer orders and respond to customer inquiries from calls and emails.”
A Twitter user responded: “Canada Post was never the issue here though… This is all just bulls— they keep feeding us using them as an excuse.”
The story is the same in other provinces. In British Columbia, the only legal dispensary open for recreational consumers on legalization day was not in Vancouver, by far the province’s most populous city, but in Kamloops, a town of about 90,000 people more than 200 miles from Vancouver.
In Quebec, the province’s provincial retailer said on Friday that it would close all 12 of its stores between Monday and Wednesday until the supply-chain issues were ironed out, after reports that Quebec residents waited hours in line only to enter a store with few products on the shelves.
GMP Securities, an investment firm based in Toronto, blamed the recent sell-off in Canadian pot stocks on the rocky rollout and distribution issues.
“The extremely limited distribution network in many provinces, fulfillment challenges in Ontario, inventory shortage in Quebec and LPs coping with limited availability of excise stamps may take several months to be resolved,” a GMP Securities analyst, Martin Landry, said in a note to clients on Monday.
“It becomes increasingly clear that recreational cannabis sales in 2018 will be much lower than previously expected,” Landry added.
Canada’s still working out the kinks
The whole point of marijuana legalization in Canada was to eradicate the black market and make it harder for kids under 18 to access the drug.
“The grey market” – the dispensaries and dealers capitalising on the murky area between legal and illicit sales – “is getting a little bit of new life breathed into it,” Emma Baron, the founder of Milkweed, a cannabis-accessories brand based in Toronto, told Business Insider.
“The province has set the bar as low as it possibly can,” Baron said. “To be fair, they also haven’t been in the marijuana-dealing business before. They’re working out the practicalities.”
But still, she said, it’s given savvy dealers a leg up.
“Your go-to guy from way back is powering up his mobile phone again,” Baron said.
According to Jay Rosenthal, who runs Business of Cannabis, a business-to-business news and policy platform for Canada’s cannabis industry, the rocky rollout was to be expected.
“This is a transformational social-policy shift,” Rosenthal told Business Insider. “These are such early days. How could you not work out the kinks?”
Read more of Business Insider’s cannabis industry coverage:
- The top 12 venture-capital firms making deals in the booming cannabis industry that’s set to skyrocket to $US75 billion
- The CEO of the biggest cannabis company in the US reveals what’s next following a $US682 million acquisition
- Hedge fund legend Leon Cooperman is investing in the marijuana industry – and it’s another sign the sector is heating up