Varcoe: Alberta shouldn’t follow Ontario down path of government pot stores

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The Notley government wants public feedback on its new plan to manage legalized pot in the province.

Here’s some free advice that could save taxpayers a boatload of cash and a chronic headache.

Don’t get into the retail business.

At a news conference in Calgary, Justice Minister Kathleen Ganley said Wednesday the province is putting together a framework surrounding who can buy and sell cannabis in Alberta.

This comes in response to the federal government introducing legislation to legalize marijuana by next July.

Much of Alberta’s strategy makes sense, such as requirements that consumers must be 18 or older to purchase product, can’t grow plants outdoors or smoke up near schools.

The Alberta Gaming and Liquor Commission (AGLC) will be the central wholesaler for the province. Product will only be sold in stand-alone stores.

But the NDP government left open the door of following Ontario down the path of setting up its own chain of provincial pot outlets.

The government contends this concept would ensure proper oversight of a fledgling sector.

It also means the government would wield a monopoly and directly control pricing. (Hooray, bureaucrats setting consumer prices, just what we need to stamp out illegal weed use.)

Ganley said the government’s other option is to establish regulatory rules for private retailers, similar to its approach for liquor, and let the private sector do its thing.

There would be “a little bit more risk and a little bit more cost upfront” with a government-owned system, she said.

“With a private model, there would be less risk and less costs, obviously, upfront. But down the road, there’s the potential in several years that the government could net increased revenues from a public system.”

If there’s one thing we’ve learned from Alberta’s experience with liquor stores, it’s that running retail operations is best left in the hands of private operators who understand consumers and the marketplace — as long as proper oversight is put in place.

Go to another province where the government runs liquor stores and see how high the level of customer satisfaction is with their hours of operation or number of locations.

There are other practical considerations.

What expertise does the government have in selecting the right retail locations in diverse communities such as Edmonton and Edson, Calgary and Camrose, Lethbridge and Lloydminster?

How much would the capital costs be for the province, particularly a government already running a $10-billion budget deficit? There’s no answer to that question.

Jeff Mooij, president of the 420 Clinic medical marijuana resource centre, which operates in Alberta and wants to move into the recreational cannabis business, has already done some number crunching.

He expects it will cost about $500,000 to open each retail location.

“You need to train and hire staff, build out all these locations. It’s not cheap,” he said.

To meet market demand, Mooij believes Calgary will require about 50 stores to begin with next year. The Liquor Control Board of Ontario is planning to create a network of 40 outlets initially, before climbing to 150 shops by 2020.

Too many stores means some operations will lose money; too few, however, could keep the black market in business. The government will look to control the number of entrants, at least initially.

The province will also regulate where pot stores can be located, such as their minimum distance from schools, playgrounds or alcohol retailers.  

Then, there’s the question of potential financial risk from operating a government-owned chain of cannabis shops. I’m sure over the long run, there’s money to be made.

But is the province prepared to endure any early losses, something that’s not uncommon in a new enterprise?

“Governments are more expensive. If you allow for a competitive system, then you have competition, which will lead to innovation and has a better opportunity of driving price down,” said Peter Pilarski, president of the newly formed Canadian Cannabis Chamber.

Alberta Health Services argues the province should control retail cannabis sales to ensure public health goals “are the primary consideration for policy development.”

A government-owned model also “allows us a little bit better control of ensuring we’re keeping it out of the hands of minors,” Ganley told reporters.

But the province already has rules in place to regulate alcohol use. Surely, it should be able to do the same for legalized marijuana.

Finally, Alberta has the experience of privatizing liquor stores to look back on for lessons going forward.

Back in 1993, there were just 208 liquor stores in Alberta with access to 2,200 different products in a provincially owned system.

Today, Alberta has about 1,400 privately owned shops across the province, with access to more than 23,000 alcoholic products.

The industry now employs about 15,000 people, according to the Alberta Liquor Store Association, which wants to be involved in selling legalized cannabis from separate, self-contained locations.

“Why spend taxpayer dollars setting up an infrastructure that already exists,” said association president Ivonne Martinez.

Ultimately, the public will decide which system to go with, Ganley said. Consultations wrap up on Oct. 27. 

If the province needs some early advice, it’s simple. 

The government will have plenty on its plate in the coming year, overseeing an array of issues arising from the birth of a new, legalized industry.

It shouldn’t be selling weed to the public. 

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@calgaryherald.com

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