The small-scale operators banking on a share of Canada’s retail pot business will soon be replaced by a handful of big chains, panelists discussing cannabis legalization said Thursday.
“In five years the real players will move in, maybe Shoppers (or others) … who understand retail and stand to make a lot of money,” said Mitchell Osak, managing director of consultant Grant Thornton’s strategic advisory practice.
“It’s likely you will get a franchise-based system here as well.”
About three-quarters of Colorado’s roughly 450 marijuana stores are now controlled by five companies, although independents remain, said Osak, who has worked with 17 licensed Canadian pot producers.
The Toronto man was one of five speakers at a seminar on the implications of cannabis legalization for property owners at the Edmonton Real Estate Forum.
While Osak hopes online sales help lure the heaviest consumers under age 25 away from illegal dealers, he said many people will stay away from web weed because they don’t want to be on a government database identifying them as users.
But Geoff Herdman, director of real estate development for Edmonton International Airport, expects strong Internet sales to customers concerned about the stigma of being seen in brick-and-mortar outlets.
The Alberta Gaming, Liquor and Cannabis Commission, which will control e-commerce cannabis and distribution to private stores, has almost 500 applications to open the province’s initial 250 stores once Canada legalizes the drug this year.
Herdman anticipates the biggest opportunities will be in businesses supplying the industry, from coming up with unique identification codes for each batch of the thousands of batches of marijuana to making pot products people can apply or eat.
“Edibles haven’t been approved in Canada yet, but when that happens you will see industrial-sized bakeries pop up … We’re going to see continued growth for the next seven or eight years.”
Troy Dezwart is co-founder of Freedom Cannabis, which is building a 125,000-square-foot growing facility and extraction lab on 22 hectares west of Edmonton in the Acheson industrial area.
Although the project will cost $45 million, a site such as this with a Health Canada production licence is probably worth about $150 million, he said.
Developer Rohit Gupta, president of Rohit Group of Companies, said 90 per cent of entrepreneurs seeking to lease space for marijuana stores don’t pass credit or criminal record checks, so the field can be risky for landlords.
He foresees an initial oversupply of pot, saying companies in the greater Edmonton area alone expect to produce 200,000 kilograms a year when one estimate puts current annual Canadian demand at 750,000 kilograms.
“There’s going to be lots of consolidation, there’s going to be lots of failures, but there’s going to be lots of home runs hit,” Gupta said.
“I don’t think you have a choice as a landlord but to look at the opportunities.”