The Ontario Cannabis Store’s program that allows retailers to order certain products not stocked by the OCS warehouse is finally beginning to gain traction.
In May 2021, Ontario announced that it would be introducing a new “flow-through” program. The program, which allows retailers to order products not stocked in the Ontario Cannabis Store (OCS) warehouse, has been undergoing a complicated development phase since late last year, with the OCS partnering with a handful of producers and retailers to give the program a kind of test run.
Although the program has only had a maximum of around 50 products available up until now, it will soon have around 150 new products added for retailers to choose from.
The flow-through program will allow retailers to choose selected, non-warehoused products from an OCS catalogue, with the OCS then facilitating the wholesale purchase from LPs, and the shipment to retailers. Products are not stocked by the OCS, but instead “flow through” their warehouse on a demand basis.
The goal is to allow the OCS to offer new SKUs otherwise unavailable in Ontario, and for retailers to try products that have a short shelf life, are slower-moving, or are potentially not carried by their competitors.
The initial intention was to gradually launch the program beginning in September 2021, with products added during the fall and winter. However, this has been repeatedly delayed, apparently due to the complexity of the undertaking, as reported StratCann earlier this year. Ensuring the program can work smoothly is a priority for the provincial retailer.
The platform is expected to be a competitive space, explains Daffyd Roderick, Senior Director, Communications and Social Responsibility at the OCS. The vision, he says, is one where each producer and retailer will have the opportunity to think about their strategies and how they may choose or not choose to leverage the program.
Part of the reason for the delays, continues Roderick, was because of longer than expected lead times with initial orders. The extra time vetting the program has resulted in significant improvements, though, with OCS reporting that they and their producers are now fulfilling ~96% of orders requested from retailers through the flow-through program (compared to ~94% fill-rate trend of stocked SKUs).
While British Columbia recently launched its “direct delivery” program that allows certain BC-grown cannabis products to bypass the provincial warehouse—shipping directly to retailers, and provinces like Saskatchewan and Manitoba have always allowed these types of sales (neither province has a province-run warehouse)—Roderick says he sees flow-through in Ontario as a similar opportunity for retailers in the province to access an even broader range of products.
This range of products is also the largest in Canada, and arguably the world.
According to info from a recent OCS presentation to producers, from April 1, 2021, to March 31, 2022, the number of cannabis SKUs available for sale by OCS grew from around 1,400 to about 2,000. It’s halfway through the current fiscal year and there are already more than 2,500 active cannabis SKUs in the catalogue.
So while a direct delivery system may not be in the plans for Ontario—and would require a policy decision by the Ontario government, not the OCS—Roderick says he sees flow-through as an excellent way to still meet similar needs for unique, niche products to help the nearly 2,000 retailers in Ontario distinguish themselves from each other. But he says there’s the possibility of other unique approaches to distribution in the future.
“There’s a lot of opportunity to bring some different things to market,” says Roderick. “We have the model that we have, and have been very successful in supporting a rapidly-growing marketplace. We’re looking to enable what the next step looks like and do that in a way that makes sense for everybody; the licensed producers, the retailers, and the people of Ontario.”
He also notes that the provincial cannabis distributor has now fully recovered from the cyber attack that occurred in August of this year which impacted the third-party contractor who manages their warehouse. The issue saw orders from the warehouse put on hold for over a week as the OCS took measures to protect their partner’s data and prepare to reboot their distribution system.
“We completely understand how much retailers count on us, we know licensed producers count on us, and we know that cannabis consumers in the legal marketplace…count on us, so this was very much all hands on deck until we were back to normal operations,” he adds.
“We are deeply invested in the success of the cannabis sector. We see it as our role to enable that success by allowing people to have the conditions where they can operate and be successful. That type of disruption doesn’t serve that, so we will look to avoid another one and do what we can to make sure that we’re providing frictionless customer service and, as much as possible, best-in-class wholesale.
“That’s where our focus is continuing to improve. I think everyone in this sector is improving and we’re looking to keep improving, too.”