Some Ontario producers stepping back from their “farmgate” applications, others say they’re close to opening

At least a few licensed producers in Ontario say they hope to open their new, on-site “farmgate” retail locations in the coming months.

Thrive Cannabis in Simcoe says they are putting the final touches on their retail store, with hopes of opening by April 20. Dykstra Cannabis in St. Catharines says they hope to have their own on-site retail store open by the end of this year, while Medz Cannabis just outside Toronto says they are just waiting for final approval from the province and are ready to open.

Meanwhile, others say they are pulling back from their initial application because they don’t see it as worth their while at this time, as the rules currently stand. A representative for Tweed says while the company still hopes to open a retail store at their 1 Hershey Way location, they’ve temporarily halted the process due to the pandemic. Muskoka Grown and AB Laboratories are also both reconsidering their applications.

I find that farmgate, while it will be great for some, isn’t going to be beneficial for everybody.

John Fowler, Muskoka Grown

Tweed

“Right now, Canopy Growth isn’t pursuing a farmgate license for its Smiths Falls Visitor Centre location, largely due to the COVID-19 pandemic,” a company spokesperson told StratCann.  

“We currently have a retail store located at 1 Hershey Drive in our Visitor Centre, although it is not currently a licensed farmgate, and is temporarily closed due to COVID-19. We hope to resume pursuing a farmgate license by applying for a Retail Store Authorization for our facility in Smiths Falls, although at this time those plans have been temporarily placed on hold until later in 2021.”

Muskoka Grown

John Fowler, the President at Muskoka Grown, a mid-sized producer originally licensed in early 2018, says the company has rescinded their “farmgate” application as he no longer sees it as a viable option. 

Although the company originally applied last year for a retail licence at the location of their production facility, they have since reconsidered. As the rules currently stand in Ontario, he says, an on-site retail store wouldn’t make sense for Muskoka Grown. 

For Fowler, farmgate would just mean competing with local retailers who already carry and support their products and brands, and the profit margins don’t make it worthwhile. 

“In the big picture, I believe that a functioning and producer-friendly farmgate program is going to be essential to preserve the livelihood of many smaller licensed producers and processors across the country,” explains Fowler. “That said, especially in its current regulations in Ontario, I find that farmgate, while it will be great for some, isn’t going to be beneficial for everybody.”

This, combined with slim retail margins even on their own product, he says, makes it not a viable option for his company and their retail neighbours. 

“We have a lot of great retailers in our neighbourhood,” he continues. “We have multiple retailers within a twenty or thirty-minute drive, including more than one in downtown Bracebridge, and those folks have been great to us. They carry our portfolio, they work with our consumers, they engage with our team, and at the end of the day there would be some level of competition if we put up our own farmgate, particularly because in order to be viable as a small producer our farmgate would have to sell more than just our own product.” 

For farmgate to be viable, he says there will need to be changes that make it more worth a grower’s time and bottom line. 

“I hope that over time the Ontario government and provincial governments everywhere continue to take a more pro-cannabis view and go from facilitating a small amount of on-site sales to actually creating a program that can be the difference between survivability and sustainability for micro and craft producers.”

Dykstra Greenhouses

Larry Dykstra of Dykstra Greenhouses in St Catharines, Ontario says his business is still working their way through the process. Dykstra Greenhouses submitted their application in 2020 and currently hopes to open by the end of this year.

We are hoping to be a place (where) customers can come to see the plants as well as buy the products.

Larry Dykstra, Dykstra Greenhouses

Unlike Fowler, who says the security design of Muskoka Grown’s facility made a retail setup not realistic, Dykstra says the design of their facility was made with visits from the public in mind, similar to how many local wineries operate.

“We are hoping to be a place (where) customers can come to see the plants as well as buy the products,” he says. “We are designing the store to have a glass wall that will look into the greenhouse so the plants (at different stages of growth) can be seen. We are also on the wine route here in Niagara so we may want to do some promoting to get people in that way as well.”

Dykstra says that in addition to other cannabis products, they are interested in potentially selling live cannabis plants, the logistics of how this would work under Ontario’s rules are still unknown. 

How it works

Ontario’s “farmgate” system works similarly to how brewpubs and some vineyards sell their own product. Once a cannabis producer is licensed for a retail store on the same property as their production licence, they still then have to “sell” their product through the Ontario Cannabis Store, although only virtually. Treating the order like any other lot they would be selling through the provincial distributor, the producer lists it with the OCS but stores it in a specific area on-site in their own production vault. 

The producer then “buys” that product back from the OCS in order to be able to move it from their vault into their retail store to sell to consumers. This is in addition to other products they would sell from other producers across Canada that the farmgate store would still physically order through the OCS. 

A representative for the AGCO confirmed that there are six licensed producers who have been approved for a Retail Operators Licence (ROL) so far, out of the 14 who applied. This is one more approval than when StratCann first reported these numbers in January. The ROL applicant/licensee must also submit an application for a Retail Store Authorization (RSA) for a proposed location. The AGCO also confirmed that they have now received nine RSA applications so far from licensed producers as of January.

Medz Cannabis

One producer who says they are also very close to opening, Medz Cannabis, located in Etobicoke, near Humber College and the airport, are excited to begin offering their own product to consumers. 

Karly Marsico, the Business Manager for Medz Cannabis Inc, says they have completed their site inspection and received their ROL in December and are now just awaiting final approval to open. 

“We know we’re near the completion, there are no pending outstanding items for us to obtain,” says Karly Marsico, the Business Manager for Medz Cannabis Inc. “We’re as ready as we’re ever going to be for the pre opening inspection. Our store is completely built out, our POS is completely set up, we’re ready to go, we’re just waiting for this RSA to start purchasing cannabis material and stocking our shelves.” 

She says the whole team is looking forward to being able to discuss their own products directly with the consumers.  

“Being on the back end and being able to see all the hard work and the small details that go into every crop it’s very exciting to be able to communicate that directly to the customer instead of relying on the feedback from other retailers and other bud tenders,” says Marsico.

AB Laboratories

Marc Ripa of AB Laboratories near Hamilton says he was one of the first Ontario cannabis producers to apply for an on-site “farmgate” retail licence in early 2020, but has recently decided to put his application on pause. While he was initially quite excited, as says he has 90% of his store built out, as the regulations currently work with the Ontario Cannabis Store (OCS) in their role as distributor, he says it doesn’t make sense to deal with retail. 

Not only are we paying to buy our own product back, we also have to pay the taxes on that and then wait for 60 days for the province to pay us back for the product we already paid for through the production.

Marca, AB Laboratories

Although the licensing process with the AGCO was positive, he says, the fact the OCS is making him buy his own product back from them doesn’t make sense to him. 

“This was supposed to be a benefit to us,” says Ripa, referring to cannabis producers. “But now you’re making us pay for our own product, and then you’re going to make us wait sixty days for that (payment). Which would be normal if they’re actually distributing it, but obviously they’re not.” 

“Not only are we paying to buy our own product back, we also have to pay the taxes on that and then wait for 60 days for the province to pay us back for the product we already paid for through the production.” 

At this point, he says he wishes he had looked at a way to just open his own retail store at another location if there’s no real advantage to having one on-site. Ontario’s rules currently do not allow a licensed cannabis producer to own more than 25% of any retail location. 

“A retail store doesn’t have to pay for the production of the plant, they just pay to buy it from the OCS,” argues Ripa. “Now we’re paying to buy it from the OCS and paying for the production of it as well as waiting 60 days for our money as well as having to pay the excise tax on it.”

Since his store is closed to finished he says he hasn’t ruled it out entirely, but at this point he wants to focus on growing and selling wholesale, only.  

“We’re all ready to go, we would have probably been open already, but we’re kind of fighting the system,” he says. 

Thrive Cannabis

Back in Simcoe, Thrive Cannabis says they are currently putting the final touches on their brand new retail store on the site of their cannabis farm, with hopes of being open in time for 420, maybe sooner. 

Thrive is an outdoor cannabis producer that received their ROL in December. With a large outdoor cannabis farm in the Simcoe area, they say they hope to be able to provide consumers a chance to see the farm where their cannabis is being grown. 

While hoping to distinguish themselves with unique Thrive-exclusive products, as much as that is allowed within Ontario’s rules, Bubba Nicholson. Thrive’s Director of Channel Management, who has visited hundreds of retail locations across Canada, says another way they hope to stand out is by how much the retail store is built to feel like it’s part of the farm.

“We’re really trying to pull all the things that we’ve seen across the country that are working to help us elevate that retail experience while still keeping that hometown flair we’re so proud of here. It’s going to be a real country, hometown feel.”


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