The TDR Three Takeaways on Cannabis Regulations:
- The Canadian cannabis industry seeks regulatory changes to enable joint promotions and build brand awareness.
- Current regulations restrict direct financial relationships between cannabis producers and retailers, limiting promotional activities.
- Industry leaders argue that easing restrictions could help divert customers from the illicit market to legal cannabis brands.
After years of growth following legalization, the Canadian cannabis market has hit a plateau based on recent Government Data. This stagnation has prompted industry stakeholders to call for regulatory reforms, specifically the loosening of rules that currently prevent cannabis producers and retailers from collaborating on promotional events and offerings. The chart below from the Canadian government shows the amount of sales by month over their most recent 12 months of data.
Souce: Canada.ca
At the heart of the matter is the prohibition of direct financial relationships between cannabis producers and retailers across almost all provinces. This ban hampers the ability of retail outlets to feature specific cannabis brands through special pricing or promotional events, a marketing strategy that has proven effective in other sectors like alcohol. According to the CBC, the Independent Retail Cannabis Collective, along with other industry leaders, argues that this restriction limits consumer awareness of legal brands, which is crucial for competing against the illicit market.
Industry experts highlight the disparity between cannabis and alcohol regulations, noting the difficulty cannabis brands face in establishing a direct relationship with consumers. The current regulatory framework forces most marketing efforts to occur at the retail level, where options are severely limited. This has led to a situation where many consumers base their purchase decisions on THC content and price alone, without considering other product attributes such as taste or the specific effects of different strains.
The Ontario Chamber of Commerce has joined the call for modernization, urging the provincial government to abolish the ban on direct financial relationships between producers and retailers. This move, they argue, would not only stimulate growth in the cannabis industry but also improve the competitiveness of legal cannabis by enabling more effective marketing strategies.
However, any changes to regulations are met with caution. According to the CBC, the Ministry of the Attorney General, while open to exploring business opportunities for retailers, emphasizes the importance of keeping communities safe. This reflects a broader hesitation to rapidly alter the regulatory landscape surrounding cannabis, a product that was only recently legalized.
The push for regulatory reform in the cannabis industry is not limited to Ontario. Other provinces are also being urged to consider similar measures, with the possibility of setting a precedent that could influence nationwide policies. Alberta, for instance, has already begun reviewing its retail rules, including promotional regulations, signaling a potential shift towards more lenient policies that could allow cannabis to continue to grow. Want to keep up to date with all of TDR’s research and news, subscribe to our daily Baked In newsletter.
