LCBO Report on Cannabis Sales Obtained

In documents obtained by Global News in a freedom of information request, the Liquor Control Board of Ontario has spent the last several months investigating how to sell cannabis if the government hands responsibility to the retailer.

As the federal government moves forward with legalization, some provincial leaders have come forward with their plans for retail sales, including Ontario Premier Kathleen Wynne, who hasn’t made it a secret that she would prefer cannabis sold exclusively in LCBO stores.

The direction from the provincial government pushed LCBO staff to prepare an initial report on cannabis, including mention that its sale may not be the cash crop touted by some politicians and advocates.

In a presentation titled Recreational Marijuana: Issues, opportunities and the political landscape” staff look at the current cannabis system in place, saying that the medical regime of licensed producers “have failed because the dispensaries illegitimated the system.”

“We don’t yet know what his will be exactly but we had a strong sense that the Ontario government is advocating for a controlled and rigorous approach, in line with a government monopoly with tight controls like the LCBO,” the presentation stated.

Looking at the current state of the industry, the slides compare the “noble sounding names” of LP Tweed and “clinical sounding names” of LP Mettrum to street names, which the LCBO called “far more creative.”

LCBO staff wrote that before the operation can take over sales, several obstacles need to be addressed, including tracking, quality assurance and security of production; the formulation of “different formulas” and “low risk cannabis products,” which the slides describe as “vapourizers.”

The LCBO is also concerned with potency limits on recreational cannabis, saying that training its workers in cannabis to advise customers “will impose an added burden on staff.”

The provincial retailer wrote that it will need to determine how to mark-up and price cannabis in its stores, saying that this point will depend on “policy objectives” and will need to strike the right balance between “reducing the size of the illegal market” and “generating revenue from sales.”

The report stressed that “lower margins on marijuana will effect profitability” which may not change for up to 40 years. The LCBO pegged the industry to be worth hundreds of millions of dollars, not billions.

The cannibalization of existing alcohol sales is another worry for the LCBO, while the report pointed to anecdotal evidence that beer sales in Colorado actually grew due to cannabis tourism, the LCBO wrote that sales may see a decrease after legalization.

Practical issues, like theft, the creation of stage vaults, a six month shelf life for product and whether to include medical cannabis sales at the LCBO, were also touched on in the report.

The LCBO also stated that it doesn’t currently possess the needed microbiological testing equipment needed to ensure quality in cannabis sold, which will create pressure on third party labs to perform these tests.

Ultimately, the LCBO stated that it needs more information and customer feedback on sales before it can determine how it will enter the cannabis market.

At a recent meeting of the country’s premiers, Wynne dialled back her comments on the LCBO being the only place for cannabis sales in the province.

“It may not even be sold out of the LCBO. Because I’ve had people say to me we don’t want to have marijuana and alcohol sold out of the same places,” Wynne said.