“You can have the best product in the world, but if you can’t get it to your customers, then you’ll go out of business.” — common sense
When I was a kid growing up, there was a chain of stores called Consumers Distributing. It has been called “the internet company before the internet.” We just called it Consumers.
The idea of Consumers Distributing was really good. Their stores were really nothing to look at, with no decor to speak of, with standing tables holding catalogs chained to them, with small slips of paper order forms and tiny pencils. Customers would go through the catalogs, find the items they wanted, and write the corresponding numbers on the order form, and then hand the order form to a clerk behind the counter. The idea was that the clerk would return with all of your items. Most often, the clerk would return with few, if any, of your desired items.
Consumers Distributing stores were small by today’s standards, maybe a couple of thousand square feet in size. There were nearly 250 Consumers Distributing stores across Canada at one point, but they all disappeared by 1996. Even though they promised low prices (because of the low overhead), Consumers Distributing was not very good at distributing, and potential customers often left disappointed. A recession, the proliferation of Big Box stores, and the entrance of Walmart into the Canadian marketplace spelled their doom. People would rather spend their time and money at a store that had product to sell — even if it wasn’t exactly the same product, it was good enough, and maybe better.
There are countless such examples of failure. If you can’t get your product distributed, be prepared for failure.
Zero Distribution = Zero Success
Such is the plight of the cannabis industry today. The LEGAL cannabis industry, that is. The illegal cannabis industry continues to thrive, and the legalization of cannabis in Canada at the very least allows possession of the substance. Consumers of recreational cannabis no longer need to worry about arrest and a criminal record for simple possession of reasonable amounts of cannabis.
Take that as a win.
As far as the industry goes, however, this incredible bottleneck in the distribution of cannabis is poisoning the large part of the current market.
Some simple comparisons: Consumers Distributing had 247 stores for about 25 million Canadians.
As of December 2019, Ontario had 24 cannabis stores for 14 million people.
That’s 24 legal distribution points. Don’t worry, any of those 14 million people looking to buy cannabis is going to find product, but it most likely won’t be bought by a government licensed retailer.
Regardless that legal cannabis is about twice as expensive, the cost component isn’t even worth considering at this juncture since there is so little distribution of the product anyway.
Betrayal
So how is all of this affecting the industry?
In a word: betrayal.
In the same way that the glossy Consumers Distributing catalogs promised thousands of low-priced quality products but its shelves were bare, the Canadian government set up hundreds of entrepreneurs and thousands (if not millions) of investors for disappointment and failure. Not one of the first movers into the cannabis marketplace has been able to reach the (sometimes lofty) projections put forth in their investor proposals.
Billions of dollars of badly needed capital has been erased from the value of publicly traded stocks.
Hundreds of entrepreneurs have been held in a licensing queue by Health Canada, or some other government agency.
Aspiring entrepreneurs have lost everything (or nearly everything) just trying to keep their businesses afloat while the government slowly rolls out its agenda.
Much like the casualties of war, the individual tragedies get lost in the statistics. But make no mistake: many thousands of individual tragedies are playing themselves out everyday.
Yes, there are exceptions. Some people made money. A LOT of money.
Alberta: The Exception
Without question, the province that has done the most to support the growth and development of this nascent legal industry is Alberta (and the city of Calgary in particular). Alberta, Canada’s Texas, was wise to learn from the experiences of other jurisdictions, and facilitated the application and approval process for entrepreneurs.
As a result, Alberta has almost as many retail locations (i.e. distribution outlets) as the rest of Canada combined. Each retail location is an entrepreneur trying to make a living, a potential source of tax for the government, and another place for individuals to purchase product without having to resort to the black market.
The Trudeau government wanted to legalize cannabis for several reasons: quality control of product. Keep cannabis out of the hands of kids. Eradicate the black market. Other than decriminalizing cannabis, all governments (with the exceptions stated) have failed.
At least Consumers Distributing didn’t have the government standing in its way.
We will continue monitoring and reporting on this issue.
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