Hundreds of new pot stores vie for survival even as prices drop

Ottawa is expected to see a tenfold increase of cannabis retailers by next year a cause for concern among some who aretrying to make a go ofthe business in a still fragile legal market.

"I think we should cap it," said Karen Nguyen, the chief operating officer of Collective Growers, which has a store open in Pembroke, Ont., and Ottawa, with pending approvals to open three more in the nation's capital.

Those stores are among several dozen listed on the Alcohol and Gaming Commission of Ontario (AGCO) website that are still awaiting some regulatory hoops, but expected to open by year end.

There were adozen retail cannabis stores in Ottawa this January, and that number is expected togrow to about 126 next January.

"I think by the end of the year, whoever has an application in, we should stop there," Nguyen said.

• Rapid growth of Ontario cannabis stores will likely result in some closures: OCS

The growth in retail pot stores in Ottawa reflects a provincewide trend.

Last year, Ontario scrapped its previous lottery system which limited the number of stores that could open. There were 52 cannabis retailersin March 2020; that number grewto 572stores open by March 2021, according to the most recentOntario Cannabis Store (OCS) annual report.

In the report released late June, David Lobo, the interim president and chief executive of OCS, suggested 1,000 cannabis stores are expected to be operating in Ontario by September.

Cannabis sales grew from $41million in March 2020 to $103millionin March 2021.

Though sales more than doubled, each new store is getting a thinner and thinner piece of the retail sales pie, explained Craig Wiggins, an industry analyst with TheCannalysts.

"There's no way they all survive," said Wiggins, about the prospects for new owners. He noted Alberta saw some stores shutter in a market which expanded before Ontario's.

"Capitalism is a very fickle mistress at times and what we're going to see is this saturation drive some players out."

At the same time, prices for cannabis have been falling steadily, in some cases, cut in half from pre-pandemic levels. Theprovince also wants to continue lowering prices to cut into the illegal sales market.

Statistics Canada and OCSreport legal sales are beginning to close in on illicit sales.

Ottawa Coun. Mathieu Fleury has already expressed concern about the number of stores opening in some neighbourhoods, advocating for stricter oversight.

The province currently has few limits on the location of storesas long as they follow AGCO restrictions like how far a store must be from a school.

• Number of Ottawa pot shops could quadruple in 2021

The hundreds of stores in the province listed on the AGCO website still winding through the last hoops before openingface a set of additional challenges.

Finding contractors to set up store space in the midst of the pandemic has proven very difficult, said Nguyen.Many new owners also made choices about location based on pre-pandemic understandings of what would make an ideal spot, she added.

Nguyenhopes to make a location on Sparks Streetthe company's flagship store,hoping for businesses and tourists to return downtown.