The Ontario Cannabis Store updated retailers with its plans to allow licensed producers to sell directly to retailers on May 13, and let’s just say retailers are less-than-stoked on what they’re hearing so far.
First, the bad news
The OCS is still committed to opening 1000 retail stores in the province by September 1, 2021 and recently hit the 675 mark, according to slides from last week’s presentation. But they also say that wholesale orders from the OCS have dropped 30-45% each week compared to what was forecasted, which they attribute to store closures in lockdown and consumers who prefer to talk to budtenders and/or pay in cash. And contrary to earlier reports that the OCS was pushing inbound deliveries to reduce warehouse safety risks, it sounds more like the move was done for right-sizing reasons.
If we say it’s flow-through enough times, then it must be flow-through
The OCS identified a few use cases for flow-through: 1. products that didn’t fit under the General Product Catalogue, 2. slow-moving products, 3. products with a short shelf-life, 4. clones, 5. bulk products, and 6. retail store-branded cannabis products.
But even at a high level, the process is convoluted and highly dependent on the OCS: LPs would respond to a product call and OCS category managers would review those submissions and list flow-through products for wholesale. Retailers make their orders via the OCS, which places orders to LPs on their behalf. Then the flow-through products are sent to an OCS distribution centre where they are shipped to stores.
Wait — what was that about retail store-branded cannabis?
Retailers will be able to brand flow-through products themselves in partnership with LPs, but don’t get too excited yet. Starting in the summer — the concept will launch with a max of just 20 SKUs total.
Another head-scratcher: these retail store-branded products will be available to all retailers to sell. So those awesome Brand X Pre-Rolls will be available for all Brand X’s competitors to buy too.
If all goes well, the plan is to expand the number of store brand SKUs this fall, and eventually bring in the other concepts like clones, bulk and short shelf-life products.