Cannabis industry wants rules loosened on joint in-store promotions

As legal sales of cannabis show signs of flattening in Canada, the industry is urging provinces to loosen rules that ban pot producers and retailers from collaborating on promotions.

Nearly all provinces currently prohibit direct financial relationships between licensed producers and retailers, effectively barring retail outlets from offering special prices or holding joint in-store promotional events to highlight particular cannabis brands.

After five straight years of growth following legalization, official Canadian figures show legal sales of cannabis plateaued in 2023 and the industry's economic output shrunk. Big potcompanies laid off workers, and smaller ones folded or entered bankruptcy protection.

Companies involved in the weed sector are looking for ways to woo more customers away from the illicit side of the market, and argue in-store promotions to build brand awareness would help.

"If you think about how the alcohol industry works, most people that walk into a liquor store typically know what they want to buy before they walk in, whereas in a cannabis retail store, that isn't the same," said Shakir Tayabali, CEO of the Independent Retail Cannabis Collective, which represents more than 750 members across Canada.

"Consumers aren't necessarily quite familiar with what brands are out there or what they like or what they want to try," Tayabali said in an interview. "You need to get people more aware of what the legal brands are, because that helps to combat the illicit market."

While the federal Cannabis Act sets down the overall laws about weed advertising, the provinces have the power to bring in additional rules about what is permitted in retail shops.

In all provinces but Saskatchewan, retailers and producers are barred from collaborating on promotions by rules that ban direct financial relationships, unless the retailer is owned by the licensed producer.

Ontario's regulations explicitlyprohibit retailers from accepting any payments from producers for in-store and online advertising, promotions, preferential shelf space, specialized display materials, or any gifts or incentives that fall under the definition of an inducement.

Brad Poulos, a lecturer in the Ted Rogers School of Management at Toronto Metropolitan University, says the bulk of pot marketing in Canada currently has to happen at the store level because of the restrictions on producers' advertising.

"It's very, very difficult for a brand to build any kind of relationship directly with the consumer," Poulos said in an interview. "You just don't have this natural flow of information between a brand and the consumer, like you would with virtually any other consumer packaged good."

Industry insiders say the lack of brand awareness results in many consumers basing their purchasing decisions solely on price and the amount of THC, the chemical compound in cannabis that delivers the high.

"They're looking for the biggest bang for their buck," said Tayabali. "They want the highest THC at the lowest cost."

He says retailers need more leeway to promote other characteristics of various brands of pot.

"How does it taste, how does it make you feel, does it give you the desired effect?" Tayabali said. "How do you educate the consumer on that when you don't have the ability to have them try that product?"

Chamber asks Ontario to 'modernize' pot regulations

The Ontario Chamber of Commerce is calling on Premier Doug Ford's government to "modernize" the province's regulations by ending its ban on direct financial relationships between cannabis producers and retailers.

In its official submission to the government ahead of next Tuesday's provincial budget, the Chamber says an "overly restrictive regulatory regime" is inhibiting growth in the sector and squeezing margins.

Omar Khan, chief communications officer for cannabis company High Tide Inc., says Ontario is making a mistake by banning retailers and producers from collaborating on in-store promotions.

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Canada's competition bureau says it's time for Health Canada to ease restrictions on cannabis packaging and limits on how potent edibles can be. The Competition Bureau says making legal products more attractive will boost sales and help lure consumers away from the illicit market.

"We think that it makes it harder for the legal cannabis community and the legal cannabis industry to continue to convert consumers away from the illicit market," Khan said in an interview.

"What we want is just essentially the ability to do what every other retail sector can, which is to work together with our suppliers on joint promotions so that we can build awareness around those legal products," he said.

CBC News asked Ontario government officials Tuesday for comment on the requests from the chamber and the industry. An official with the Ministry of the Attorney General sent a response that did not indicatewhere the government stands.

The ministry "continues to monitor the cannabis retail market and explore business opportunities for retailers while keeping communities safe," said a spokesperson in an email.

The push for reform is not restricted to Ontario. Cannabis industry representatives across the country are asking the provinces to treat the sector more like alcohol when it comes to promotions.

They want the ability to do the kinds of activities that you sometimes see in liquor stores, such as brands setting up a promotional table and offering samples to drinking age customers.

"If Ontario moves in that direction, it's more likely that other provinces will also move in that direction," said Tayabali.

Alberta considering retail reform

In Alberta, there are signs that Premier Danielle Smith's government could be poised to make changes.

The province's regulator, Alberta Gaming, Liquor and Cannabis, is reviewing the retail rules, including promotions, and recently completed a consultation with the sector.

"Based on the feedback we received, AGLC will be looking at possible policy changes in the coming months," said an AGLC official in an email to CBC News.

Keenan Pascal, CEO of Edmonton-based licensed cannabis producer Token Naturals, says the existing restrictions on marketing make producers reluctant to take innovative risks.

"People are hesitant on bringing new products to the market, so what you're seeing is a lot more of the same," Pascal said in an interview.

"Allow us to have those same store relationships that a Budweiser could have with the liquor store. That's really what we're looking for," he said.