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 are trying to make a go of the business in a still fragile legal market.

Some call for cap in saturated market as number of Ottawa cannabis retail shops grow

Karen Nguyen is the chief operating officer of Collective Growers, which opened its first store in Pembroke, Ont., and has a second in Ottawa. The company hopes to open three more in Ottawa by January 2022, but worries the market is quickly getting over saturated. (Amanda Pfeffer/CBC)

Ottawa is expected to see a tenfold increase of cannabis retailers by next year — a cause for concern among some who are trying to make a go of the 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 a dozen retail cannabis stores in Ottawa this January, and that number is expected to grow to about 126 next January.

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

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 retailers in March 2020; that number grew to 572 stores open by March 2021, according to the most recent Ontario 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 $41 million in March 2020 to $103 million in 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. The province also wants to continue lowering prices to cut into the illegal sales market. 

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

Nguyen at a gutted bar on Sparks Street that will be transformed into a cannabis retail store by January 2022, but finding contractors has been challenging post-pandemic. (Amanda Pfeffer/CBC)

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 stores as long as they follow AGCO restrictions like how far a store must be from a school.

The hundreds of stores in the province listed on the AGCO website still winding through the last hoops before opening face 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.

Nguyen hopes to make a location on Sparks Street the company's flagship store, hoping for businesses and tourists to return downtown.

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