Indigenous cannabis retailers are turning their backs on the Ontario government’s plan to license up to eight stores on First Nations reserves, suggesting provincial regulation would hurt thriving businesses, cause infighting in their communities, and infringe on their sovereignty.
Last Wednesday, the Alcohol and Gaming Commission of Ontario (AGCO) announced a lottery for on-reserve cannabis store authorizations on a first-come, first-serve basis. The first eight operators who submit intent to apply documents will be invited to apply for a Retail Operator Licence and Retail Store Authorization.
The announcement also included an additional 42 new store authorizations across the province. The new stores are expected to start opening in October.
Ontario’s plan is ‘divisive’ for First Nations
The separate process for reserve communities is part of the government’s engagement with First Nations interested in developing their own approach to cannabis. A spokesperson for the Ministry of the Attorney General told Yahoo Canada Finance that officials have held more than 70 discussions with First Nations organizations on the subject.
Ontario has lagged behind other provinces in its roll out of brick-and-mortar retail stores. Citing supply concerns, the government initially capped the number of stores allowed to open at 25. Few were ready to serve customers on April 1, the first day of legal private retail sales. In Toronto, a massive line formed at the lone cannabis store that opened for business on day one.
Meanwhile, First Nations entrepreneurs have built a thriving grey-market with many on-reserve dispensaries relying on their own supply channels instead of the Ontario Cannabis Store (OCS), which has faced shortages and complaints about product quality.
Former Ontario Regional Chief Isadore Day is hoping for productive collaboration between First Nations, the province and the federal government on cannabis sales. He’s not convinced Ontario Premier Doug Ford’s government is off to a good start with its eight-store offering.
“This is divisive. In no way shape or form does it promote our First Nations working together. It’s saying, ‘Here are eight licenses. There are 133 First Nations in Ontario. You fight over it,’” Day told Yahoo Finance Canada. “It’s a degrading and deplorable tactic that we have seen time and time again. The provincial government will realize very quickly that we’re not going to take the bait.”
Day expects most First Nations will opt to maintain control of cannabis in their communities, though he admits some could be swayed to operate under the province’s framework.
Ontario’s intentions unclear, sparks skepticism
On Alderville First Nation, southwest of Peterborough, Ont., a stretch of highway has been dubbed “the Green Mile.” Seven dispensaries are up and running today. Three or four more are preparing to open, according to Rob Stevenson, owner of Medicine Wheel.
His Indigenous-owned and operated cannabis store was the first to set up shop in Alderville back in June 2017. Business has been brisk. He estimates he’s served nearly 40,000 registered clients. Not bad considering Alderville has an on-reserve population of 495, according to 2016 census data.
“My first instinct is probably no,” Stevenson told Yahoo Finance Canada when asked if he will enter the lottery for on-reserve stores.
He’s skeptical of the Ontario government’s intent, and the timing of this announcement. He points to the passage of a resolution asserting jurisdiction over all cannabis operations in First Nations territories last month at the 45th Annual All Ontario Chiefs Conference. The Chiefs of Ontario represent the 133 First Nations in the province.
Derek Roque, owner of Creator's Choice Natural Health Solutions on Wahnapitae First Nation near Sudbury, Ont., is also suspicious of Ontario government regulation on reserves. His store has been raided twice by the Ontario Provincial Police (OPP), or robbed as he prefers to put it.
“I feel like the province shot me in the back, and now they are asking me if I am okay, and seeing if I want to do business with them,” he told Yahoo Finance Canada.
Roque also has no intention of entering the AGCO’s lottery. He also believes two OCS-supplied cannabis stores in nearby Sudbury were strategically authorized by the province in order to siphon customers from his business.
“Two stores in Sudbury alone? They could have moved anywhere in the north,” Roque said. “It was definitely something to do with trying to cause a business disruption to First Nation dispensaries.”
The AGCO declined to address Roque’s allegation. The agency also declined to answer questions regarding taxation, supply from non-OCS sources, nation-to-nation cannabis trade, and the prospect of future enforcement action against non-licensed retailers on reserves.
Yahoo Finance Canada reached out to six additional cannabis retailers operating on First Nations territory. Four said they do not plan to participate in the AGCO’s lottery. One said they will. Another was not yet sure. The AGCO will begin accepting applications on July 31 at 9:00 a.m.
Ontario’s allocation of up to eight stores to First Nations communities is a major first among the provinces, said Nick Pateras, vice president of strategy at cannabis data firm Lift & Co. (LIFT.V).
“I think that’s absolutely fantastic,” he told Yahoo Finance Canada. “Is it going to be very easy or painless? Probably not. I think we need to take a step back and think about how we integrate and welcome First Nations communities into the entire (cannabis) ecosystem.”
Lift & Co. is the exclusive provider of mandatory training for cannabis store workers in Ontario.
‘I’d probably lose the majority of my customers’
Stevenson said most of the products he carries at Medicine Wheel are Indigenous-sourced. It’s a distinction that sets his business apart from OCS-supplied stores while supporting Indigenous cultivators. Switching to the cannabis available in provincially-regulated stores would be bad for business and his community, he explains.
“I’d probably lose the majority of my customers. We’ve seen a lot of the licensed producer products come through our laboratory here. To be honest, I feel they are sub-par. I don’t consider it medicine,” Stevenson said.
“We’re moving towards having a fully Indigenous stocked store. I believe these products are of very high quality. With the Indigenous cannabis industry thriving, there is a lot of entrepreneurs that have developed nation-to-nation trading networks.”
In addition to his retail operation, Roque said he is selling cannabis wholesale to the growing number of First Nations dispensaries that are opening for business.
“We’ve been quite busy filling orders and making sure we can that we can keep production levels up,” he said.
“We’ve taken the first steps forward proving that we can be successful at this. I would hate to see people reach out to the government when they could have reached out to a successful First Nations business first.”
Stevenson estimates there are currently more than 70 Indigenous dispensaries in the province, not including cultivators and other cannabis entrepreneurs.
Roque and Stevenson both take exception to the amount of packaging involved with the sale of provincially-regulated cannabis. They also have questions about the application of excise taxes, and rules that might prevent them from giving back to their communities through things like youth hockey sponsorship and supporting traditional groups.
Another concern is the coexistence of provincially-regulated and non-regulated stores causing conflict between retailers over who is selling a legitimate, safe product, and who is supporting First Nations communities.
“If you give out one license in Alderville, it is going to create divide among the people,” Stevenson said. “It is going to create infighting.”
For Day, the cannabis issue boils down to money and sovereignty.
“This is really about money for the province,” he said. “This will definitely have an impact on sovereignty in our community. If there are communities that want these eight licenses, that’s their prerogative . . . But I’m sure for the most part First Nations are going to want to assert jurisdiction. They’ll say, ‘Thanks, but no thanks.’”
Note: Since speaking to Yahoo Finance Canada for this article, Pateras announced that he is leaving Lift & Co. to join Materia Ventures.