Loblaws Wants In Cannabis, Urges Ford Government to Revise Retail Regulation

With a bid to enter the expanding cannabis market in Ontario, grocery giant Loblaw (TSX: L) has been actively pushing the Ford government to reconsider existing regulations, according to internal government documents obtained by Global News.

The documents reveal that Loblaws engaged in discussions with Ford government officials, including the Attorney General’s office, to advocate for changes in the cannabis retail landscape. Loblaws aimed to eliminate government regulations restricting the sale of cannabis within stores that also offer items like snacks and chocolate.

This push for regulatory amendments has been ongoing since 2019, shortly after the federal government legalized recreational cannabis sales in Canada. Initially, Loblaws proposed a “store within a store” model similar to Wine Racks in some of their locations. However, current regulations from the Alcohol and Gaming Commission of Ontario require licensed cannabis stores to be physically separated from other commercial activities.

In the summer and fall of 2022, Loblaws intensified its efforts, submitting suggestions during the Ford government’s consultations on red tape reduction laws. One proposal aimed to remove a regulation preventing companies selling medical cannabis from entering the recreational market. Loblaws, which owns Shoppers Drug Mart, argued that this restriction limits investment and hinders established retailers from supporting the evolving Ontario cannabis sector.

The grocery giant also sought the elimination of rules preventing companies with existing online sales platforms from venturing into cannabis sales through their websites and inventory systems.

While Loblaws has not yet secured its primary requests, documents suggest the company is already investing in the cannabis sector under its C-Shop brand. Presently, Loblaws operates two cannabis shops in Embrun, Ont., and North Bay, with plans for additional locations pending approval. However, current regulations necessitate separate entrances and covered windows, impeding the realization of Loblaws’ vision for a “store within a store.”

Reactions to Loblaws’ proposed changes have been mixed. Harrison Jordan of Substance Law believes the alterations may disproportionately favor large retailers, while smaller businesses, like convenience stores, could potentially benefit. Ontario NDP’s critic for consumer protection, Tom Rakocevic, expressed concerns about the government favoring big corporations and called for transparency in the decision-making process.

Omar Khan, Chief Communications and Public Affairs Officer for High Tide, a Canadian cannabis company, welcomed the potential competition but highlighted potential barriers, such as strict regulations to keep cannabis products away from children.

Despite facing hurdles, Loblaws continues its advocacy campaign, as indicated by entries in the provincial lobby registry. Several lobbyists retained by Loblaws are still actively targeting Ford government ministers, focusing on reducing red tape in the cannabis sector to create more secure retail spaces and encourage further investment.

Information for this briefing was found via Global News and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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