15 months post-legalization, millions of Ontarians still living in “red zone” areas

Bethan Rose Jenkins, Cannabis News Writer/Editorial

Ontario might have already legalized cannabis for recreational purposes, but not everyone has access to legal bud just yet. The second-largest province in Canada, which is home to 2.8 million people, comprises numerous communities that have opted out of retail cannabis sales. In fact, approximately a fifth of Ontario’s population is not currently able to purchase weed from licensed vendors.

Following the legalization of recreational cannabis in Canada on October 17, 2018, the residents of Ontario were unable to find any licensed retail stores for over a year. In comparison with other legal weed provinces, the rollout of retail stores in Ontario has been moving at a snail’s pace.

On the plus side, approximately 20 cannabis business retail licenses are expected to be issued on a monthly basis from April onwards, with a goal of issuing 1,000 in total. Meanwhile, in the Canadian province of Alberta, 420 cannabis licensees can be found. Currently, the province is believed to be serving approximately a third of Ontario’s total population.

Some of Ontario’s largest municipalities opted out of retail cannabis stores 

Towards the end of 2018 through the beginning of 2019, hundreds of communities throughout Ontario were forced to decide whether or not they would permit cannabis retail sales in their provinces. Bans were voted for by some of most densely-populated municipalities, thus creating a dent in prospective revenue that could have been earned from Ontario’s legal cannabis market. 

In January 2019, it was confirmed that 77 out of 414 municipalities in Ontario had opted out of legal retail sales; a population equivalent to the combined inhabitants of Manitoba and Saskatchewan, or the number of people residing in Atlantic Canada. Examples of some municipalities that opted out of cannabis retail sales in Ontario include Markham, Mississauga, Oakville, Pickering, Richmond Hill, Vaughan and Whitby.

With so many provinces opting out, Ontario inevitably endured a weed shortage pretty much directly after legal sales commenced. As a result, store licenses were limited to just 25 throughout the east-central Canadian province. Product shortages are expected to recover when more stores open their doors. 

Black market for cannabis in Ontario continues to flourish

The population of Mississauga – where cannabis retail sales have been forbidden – is more than that of New Brunswick. What this means is that Ontario is missing out on significant revenue that could be gleaned from Mississauga’s consumer demographic. City councillor Karen Ras is hoping to overthrow the ban and start capitalizing on legal sales. 

“I think we have an obligation to revisit this issue on a number of fronts,” she says. “We’re seeing the black market thrive in Mississauga. You can download an app that shows you where the black market is thriving. The other thing is that this is an industry that provides good-paying jobs, and we want to make sure that our residents have access to a legal product.”

One such example of a province that has reversed its decision to ban retail sales is Milton; the province changed its mind in October of last year. It is understandable why Milton made this choice — a lack of licensed stores was pushing consumers in the direction of black market dealers. 

With low prices enticing consumers to the black market, Ontario’s legal market is struggling to contend. Due to years of prohibition, many regular consumers have strong ties with black market dealers and cultivators who distribute their own personal supply. With that being said, breaking the loyalty that illegal dealers share with Ontario’s consumer demographic is sure to be a challenge; unless consumers are presented with a cheaper alternative in the legal sector.

I would argue that 80 percent is illicit in Ontario,” said Chris Damas, who assumes the role of editor for cannabis stock-focused newsletter The BCMI Cannabis Report. “If you want to get into the weeds – no pun intended – for Ontario, I think Ontario probably has a lot of illicit cannabis that’s being consumed, just by the fact that there’s only 24 stores,” added Damas. “And Ontario is probably the second-largest illicit grower in the country, after B.C.”

Based on figures released by Statistics Canada, the average per-gram price of legal cannabis in Canada rests at around $10.23. In comparison, the average per-gram price of black market cannabis comes in at $5.59.