With the first anniversary of nationwide cannabis legalization just two weeks away, it’s safe to say that the last year has been a series of ups and downs for the Canadian cannabis industry.
On the one hand, sales in the country have totaled over $600 million since they became legal, with the federal and provincial governments raking in over $186 million in tax revenue in the first 5 and a half months alone. Canadians now have access to safe, legal cannabis flower, and none of the anarchy predicted by naysayers has come to pass.
But the whole experiment has also come with a number of problems, many of them unexpected. Supply issues in the early days plagued (and continues to plague) the country, the black market has persisted thanks to price discrepancies, and a major scandal rocked one of Canada’s largest cannabis companies.
Much to the surprise of many observers, one of the biggest success stories over the last year has been Alberta. The province has earned the distinction of being Canada’s leading market for cannabis, with Albertans purchasing over $120 million worth of legal pot – despite only being the fourth largest province in the country.
And the fact that they have outperformed their counterparts so well despite their relative size begs the question of what they’ve done that others haven’t.
The Alberta Model
Like most provinces, responsibility for Alberta’s pot has been delegated to the provincial liquor and gaming authorities. The Alberta Gaming, Liquor And Cannabis Commission (AGLC) is responsible for the distribution, regulation and licensing of cannabis, and has laid out the framework for sales.
Under the current setup, Alberta allows for a system of free market licensing. Businesses that want to sell at a private retail location must apply for a license through the AGLC. The commission offers a thorough, detailed application process, which takes approximately 2-4 months to complete.
Once they’ve received their license, these retailers are required to buy exclusively from the AGLC, which acts as the province’s wholesaler and gets its stock directly from Canada’s licensed producers (the province also offers direct online sales to its residents).
The fact that responsibility for pot has been offloaded to liquor and gaming authorities is significant. Unlike every other province in the country, Alberta not only allows for privately owned and operated liquor stores, but relies on them exclusively, eschewing the use of provincially-run retail operation, and (with the exception of online sales) has chosen to adopt the same model for cannabis.
What Makes Alberta Different?
The fact that Alberta has chosen to exclusively go with private retailers doesn’t necessarily make it unique – British Columbia, Manitoba, Newfoundland and Labrador, Ontario and Saskatchewan all make use of physical, private pot shops (with a number of them doing so at the expense of government sites).
What makes Alberta unique is the fact that they’ve adopted much more of a free market approach than many of the other provinces. With the exception of the temporary moratorium by the AGLC following legalization last year, provincial authorities have been fairly liberal with issuing licenses. They’ve also benefited tremendously from having pulled off a comparatively smooth, efficient rollout back in 2018.
This is a far cry from what’s happened in other parts of the country. Ontario, which switched from a planned system of government retail sales to private ones following last year’s provincial election, has set caps on the number of licenses issued. Combined with a disorganized system of online sales following legalization, and the result early on was a massively underserved market of consumers in Canada’s most populous province.
British Columbia has also really struggled to find its footing. Trying desperately to combat a deeply entrenched black market, and still reeling from a slow start in getting private stores up and running, they now have the lowest per-capita sales of legal cannabis in the country.
Bumps In The Road
None of this is to say that Alberta’s experience with cannabis has been entirely pain free. Consumers and retailers will recall that supply issues were a major problem in the early days, leading to the aforementioned moratorium by the AGLC on licensing in November of last year (much of this was caused by a backlog in licensed producers receiving federal approval from Health Canada).
The situation, however, seems to have stabilized. The AGLC lifted the moratorium this past May, and additional licenses have been granted, with over 250 being issued since October 17th.
While that may not seem substantial for a province of over four million people, it’s significant if you compare it to its counterparts. Ontario, with over 14 million residents and the largest province in the country, has yet to even break 100, while British Columbia currently serves its population of nearly five million with just 80 private retail stores.
All things considered, the fact that Alberta is so far ahead is shocking, and an indication that it has gotten a lot of things right.
The Current State Of The Cannabis Industry In Alberta
While Alberta certainly has a number of other advantages working in its favor, their hands-off approach has no doubt been one of the contributing factors in the recent flourishing of entrepreneurial activity in the industry.
Edmonton is home to Aurora Cannabis, one of the largest licensed producers in the country. In the retail space, companies like ALCANNA and Fire & Flower have all seen massive success, opening multiple locations throughout the province.
In addition, the sheer quantity of licenses being issued has created opportunities for a number of independent shops to get started as well.
The situation, of course, isn’t perfect. One potential problem could be the issue of smaller companies being shut out. An example of this are the roadblocks facing micro cultivators encumbered by AGLC regulations. Alberta’s cannabis companies could also face challenges in the future as they compete against the larger markets who may find their provincial regulatory situations improve.
But with the way things stand now, the industry currently shows no signs of slowing down as the first year of Canada’s legalization draws to a close.