A budding concern: The growth of pot-shop clusters in Ontario

On Augusta Avenue, Hotbox Cannabis Shop and One Plant operate directly across the street from each other. The Alcohol and Gaming Commission of Ontario is also reviewing applications for the Kensary, Ninja Cannabis, the Bend Cannabis Co., Hot Buds, and Premier Cannabis — all of which are hoping to open just one street over.

“The neighbourhood doesn’t need that many dispensaries,” says Bang, chair of the Kensington Market Business Improvement Area and the owner of Lola, a neighbourhood bar. “I do think we should be thinking about proximity and the density of the neighbourhood.”

Kensington Market is one example of what some are calling a budding problem with Ontario’s approach to cannabis retail. Two years after the federal government legalized recreational cannabis, pot-shop clusters are emerging across the province. In many municipalities, there are neighbourhoods — and even intersections — with multiple competing dispensaries.

Local politicians, BIAs, and residents say these clusters threaten the diversity of neighbourhood main streets at an already difficult time for local businesses.

In Toronto’s west end, the corner of Lansdowne Avenue and Bloor Street West will soon have three competing cannabis retailers. “As other businesses have gone under and more shops have opened up, what kind of businesses have an opportunity here?” says Marit Stiles, NDP MPP for the area, who’s noticed multiple clusters across her riding. “We have an industry that’s just getting going, so they’re moving in — and that can be very positive. I have no problem with the cannabis industry at all. But we are seeing the potential to lose some of the diversity in our main streets.”

In the city’s east end, Councillor Paula Fletcher says, many of her constituents are upset about a two-block stretch of Queen Street East, where one dispensary is already operating and five others are awaiting AGCO approval. “Over 20 people sent a letter to the AGCO saying, 'Stop. Enough already.’ Nobody's opposed to the legalization of marijuana. They're opposed to the over-concentration of shops for a regulated substance."

Experts say this trend is likely to continue. The AGCO is now processing roughly 80 applications each month, up from 20 before last September. The commission had received more than 1,300 applications and had issued 305 approvals as of December. There are currently 269 authorized cannabis stores operating in the province.

Bang worries that an influx of dispensaries could make retail space in neighbourhoods such as Kensington unaffordable. “It’s not affordable right now anyway,” she says. “If our landlords decide to end our leases, they'll just wait for dispensaries, or dispensaries will just come in and take over because they can do it. There are a lot of big companies that have a lot of investment to do that [and] are capable of renting out spaces that cost that much.”

Experts say these clusters can be traced back to the province’s cannabis-retail-licensing framework, developed in 2018. While municipalities can pass bylaws restricting where people can smoke, they can’t control where pot shops open. Cities and towns have 15 days to comment on each retail application, and, while they can issue guidance for dispensary locations, the AGCO does not have to follow it.

Hamilton city council, for example, recommends that dispensaries be kept at least 300 metres away from schools, recreational centres, libraries, addiction centres, and other dispensaries. But, according to Councillor John-Paul Danko, the AGCO ignores those criteria. “Out of, I think, eight applications in Ward 8, there was only one that met the city’s criteria that I didn't object to. All the others I objected to, but it doesn’t count for much.” He says there are 80 stores either pending or approved in the city.

In late November, Stiles tabled a private member’s bill that would allow municipalities to treat dispensary applications similarly to liquor licences. She says it would help even out the disparity between neighbourhoods. “There are other considerations in urban planning and community planning that need to be taken into account,” she says. “And that’s where I think communities know best, and they need to be able to have some say.”

Nicko Vavassis, spokesperson for Attorney General Doug Downey, tells TVO.org via email that the ministry is “mindful of the important role of municipalities in the effective implementation of cannabis legalization and value[s] their role as essential partners in the process.”

The AGCO, which operates independently of government, “accepts and reviews comments from the local community and municipality before determining if the location is appropriate and in the public interest,” writes Vavassis, adding that the province’s free-market system was designed to keep children safe, ensure retailers behave with integrity, and weed out illegal and unregulated cannabis sellers.

Harrison Stoker, vice-president for brand at Donnelly Group, which owns the cannabis retail chain Dutch Love, is conflicted about the proposed amendment. The company has locations in three provinces, including 12 in Ontario. He says that, in British Columbia, pot shops are required to be at least 300 metres away from one another, which can make it harder to source locations. But at least two of Dutch Love’s Ontario outposts face nearby competition.

“Take Queen Street West as an example. Let’s say there are 100,000 people that are cannabis users in Queen West — every net new open shares that pie,” he says. “Whereas in British Columbia, you can draw a circle around your store and that's your direct community, and therefore you can develop a stronger, more consistent customer base.”

However, he says, Ontario retailers signed on to a free-market model and are ready for a “battle royale” for customers. “We’re absolutely prepared for that — that's second nature to us.”

Katy Perry, founder of Toke Cannabis, which currently has locations in Toronto, Niagara, and St. Catharines, is happy with the current system. She compares dispensary clusters to a mall food court, where not every customer wants the same kind of food. “Obviously, it would be ideal if there was one store in the entire neighbourhood and they would take all of the clients,” she says. “But, this way, it just makes us have to be more competitive and better than the neighbouring store.”

Perry says she worries that giving municipalities more say in the retail-authorization process could lead to bias or favouritism: “The way it is now, it’s very equal and a level playing field for everyone who wants to be involved. That's what we fought for when we were fighting for legalization — equality in the marketplace.”

Stiles is sympathetic to Perry’s concerns but warns against letting cannabis shops duke it out until only a few are left standing. “It’s entirely likely it might just be large chains emerge and smaller independent distributors could be shut out,” she says. “Let’s try to find ways to allow for that diversity in terms of the cannabis industry itself and the diversity of our community.”

“I don’t think there's a problem with four stores opening up on the same corner,” Perry says. “Let the best man survive.”

https://www.tvo.org/article/a-budding-concern-the-growth-of-pot-shop-clusters-in-ontario