In Ontario, Canada, a change of plans about how to regulate cannabis retail sales led to $10 million in government funding wasted on leases, construction, and hiring for a series of state-run dispensaries that never materialized.
According to a new report from Global News Canada, in the wake of nationwide legalization last year, the Ontario government had planned to operate the province’s legal marijuana industry as a state-run business, much like the local distribution of liquor. In anticipation for that business model, the Ontario Cannabis Retail Corporation (OCRC) spent $10.2 million on leases, construction, and hiring. But before those state-run stores could even build out dispensary shelves, Ontario officials changed their mind, and opened retail sales operations up to the private sector — essentially wasting those multi-million dollar investments.
“They are basically writing off all the renovation expenses that they had incurred, and the equipment that they’d purchased for the stores,” Brock University business professor Michael Armstrong told Global News.
By the time province officials made the official switch from state-run dispensaries to privately-owned pot shops, the OCRC had already leased and began commercial build-outs on four properties and started initial hiring for dispensary management and staff.
“The costs to the OCRC related to transition between mandates included $8,694,289 for store fixtures required to stand up a full network of retail stores,” spokesperson Daffyd Roderick said.
Gallery — Legalization Day in Canada:
The OCRC still runs all of Ontario’s wholesale and online cannabis sales, but the province’s expected pot profits have been slow to matriculate. In addition to the wasted public funds, cities like Toronto are still fighting back against a horde of illicit dispensaries that continue to undercut and undermine their fully-licensed counterparts.
But even with the false start on Ontario’s state-controlled sales structure, finance experts like Armstrong expect the provincial cannabis industry to bounce back soon enough. It is, after all, a cash crop.
“I think it will look better a year from now,” Armstrong told Global News. “We won’t have that termination cost, $13 million or whatever. You’ll have a full year of sales. Some of those costs from the last year were for 12 months of owning the business but only six months of being able to sell anything.”
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