ARMSTRONG: Why better transparency at the OCS will help beat the illegal market

Michael Armstrong, Associate Professor of Operations Research in Brock’s Goodman School of Business, wrote a piece recently published in the Globe and Mail about the impact more stores would have on Canada’s legal marijuana market.

Armstrong writes:

“Last Friday, almost 11 months after legalization, the Ontario Cannabis Store (OCS) released a financial report. A loss of $42-million was partly for reasons beyond its control, but compared with other provincial cannabis agencies, its performance looks underwhelming. And its large inventories imply it could support many more stores.

Almost one-third of the loss was owing to the provincial government’s decision to let private businesses handle storefront retailing. The OCS consequently had to cancel four store leases, write-off renovations and equipment, and terminate employees. That cost the OCS some $12.6-million, not counting $1.1-million of lease payments it already had made.

Another problem was the agency’s high cost structure. It paid $55.5-million in operating, administrative and financial expenses during 2018-19. Only $36.8-million went to buy products for resale.

In other words, just running the place consumed 60 per cent of its regular spending. That’s a lot for a warehouse and a website.”

Continue reading the full article here

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