Industry experts warn Toronto will soon see mass closures of cannabis stores
Politicians and residents of Toronto alike seem to think that the city has too many cannabis stores, impeding the diversity of retail offerings in select neighbourhoods.
Indeed, the sector has exploded in recent months, with multiple pot shops popping up within seemingly too-close proximity of one another, pushing the market into what some speculate must be some level of over-saturation.
With Ontario having surpassed 1,000 authorized cannabis dealers in August, these shops are quickly taking over the spaces left behind by the thousands of businesses forced to shutter due to pandemic closures, with few renovations usually needed.
Those who dabble in, as Premier Ford says, doobies, are likely happy with the ramped up selection of vendors and options. But, others are getting concerned about the lack of vitality and vibrancy the trend means for their local streets.
The area is losing all its charm and culture / what a shame ... zero city planning— Natalie Daye (@nataliedaye) January 12, 2021
Ward 14 Toronto Danforth Councillor Paula Fletcher, Davenport MPP Marit Stiles and even Toronto Mayor John Tory have been calling for more stringent approval processes for such establishments, even if just when it comes to where they're located to prevent there from being so many.
But, if industry experts are right, the province may see far fewer of these storefronts in the near future, even without the introduction of any additional red tape.
It's too many. Needs to be controlled.— JR Balvin (@JuniorBalvinn) October 29, 2021
"We are worried that 2022 could be a year of retail closures in Ontario. Unless more municipalities opt-in for cannabis stores, this could lead to a (year-over-year) decline in industry sales," wrote BMO Capital Markets analyst Tamy Chen of dispensaries in a message to clients this week, per BNN Bloomberg.
A recent report on the topic from analyst Douglas Miehm at competitor RBC Capital Markets shared a similar outlook, saying that "given the cannibalization of sales from existing stores and legal pricing declines, we would expect future retail store closures as some retail stores may lose economic viability."
Miehm cited a 33 per cent drop in Canadian cannabis stores' monthly sales now compared to two years ago, which bolsters the claims of strong margin compression noted by Chen.
Impending closures would be quite noticeable in hubs like Toronto, where approximately a third of the province's licensed dispensaries are located.
More and more crop up regularly amid few restrictions from the Alcohol and Gaming Commission of Ontario that mean really anyone can get into the business, though the timing and rush of applications could mean you end up with a fellow cannabis store as your next door neighbour once you open.
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