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BC continues to debate increasing 8-store cap for cannabis retailers

Media Partners, Stratcann

This post is presented by our media partner Stratcann
View the original article here.

The BC government says it needs more time before it decides on previously announced potential changes to its retail cannabis rules, such as the number of stores one company can own.

Following a feedback process, the BC Liquor and Cannabis Regulation Branch (LCRB) will need additional research to decide whether it should increase the number of cannabis stores one company can operate in the province. The current limit is eight. 

“In a dedicated pursuit of continuous improvement and industry responsiveness, the Liquor and Cannabis Regulation Branch (LCRB) is committed to reviewing these market controls,” said BC Minister of Public Safety and Solicitor General Mike Farnworth in an email posted online by a board member of the Retail Cannabis Council of British Columbia (RCCBC). 

“Most recently, they concluded an engagement focused on licence cap considerations. This engagement involved discussions with industry partners and licensees, fostering a constructive dialogue to ensure a well-rounded understanding of the intricacies involved. The Ministry has now completed an initial analysis of the feedback and determined that additional research is required before any changes to current market controls, including the CRS licence cap, can be considered.”

If the government can have 39 stores then we should be allowed to. If the government doesn’t have the same rules for us and for them, I don’t find it to be a fair game.

Vikram Sachdeva, Founder & CEO​, Seed and Stone

Farnworth, who serves as the province’s lead on the cannabis file, previously told a group of cannabis industry stakeholders in April 2023 that the province was considering raising the retail cap and making changes to their tied house policies, among other possible regulatory and policy charges.  

“The Liquor and Cannabis Regulation Branch has now completed initial analysis of the feedback from this engagement. The ministry will engage further as we continue to explore this and other possible market controls.”

BC Ministry of Public Safety and Solicitor General

Under BC’s rules, a “tied house” is a connection between a cannabis retail store licensee and a cannabis producer, which is not allowed. Several other provinces have permitted this type of relationship, with a handful of cannabis producers running retail stores under the same name or through an affiliated company. 

The Ministry confirms they are continuing to look into these issues but have yet to arrive at any specific decisions. 

“The ministry recently concluded an engagement which specifically focused on licence cap considerations,” a representative with the Ministry of Public Safety and Solicitor General shared with StratCann.

“The LCRB has now completed initial analysis of the feedback from this engagement. The ministry will engage further as we continue to explore this and other possible market controls.”

The Ministry did not provide any additional information on the status of the tied house rule or any engagement; instead, it just explained the definition of tied house in response to a direct question about the engagement process.  

Industry response

A representative for the Retail Cannabis Council of British Columbia (RCCBC), representing several BC cannabis retailers who opposed raising the cap, says they are happy with the province’s decision not to make a decision yet. 

“We are pleased that the LCRB has decided to take the time to further research the potential market impacts of a licence cap increase,” Jaclynn Pehotas, the Executive Director of RCCBC told StratCann via email. “A significant majority of our membership made it very clear via member polling that an increase to the cap was not a change they were in favour of and felt that an increase would be detrimental to their businesses. 

“We communicated these polling results to the team at the LCRB with the recommendation that other market controls should be considered prior to any change in the current eight store cap. It is an unfortunate fact that the sector has seen significant negative impacts on licence holders in other provinces due to over saturation of the retail market. RCCBC feels it is critical to the health of the BC cannabis sector to protect our existing small businesses from the risk that oversaturation presents.” 

“A significant majority of our membership made it very clear via member polling that an increase to the cap was not a change they were in favour of and felt that an increase would be detrimental to their businesses. 

Jaclynn Pehotas, Retail Cannabis Council of British Columbia

Jeff Guignard, the Executive Director of BC’s Alliance of Beverage Licensees (ABLE BC), which also operates an advocacy group for cannabis retailers in the province, says he understands the province is taking its time to get the policy right. ABLE had previously advocated for the cap to be raised to 12 stores

“Given the lengthy history of BC’s cannabis culture, there are a lot of diverse perspectives on the best way forward. I think the government is working hard to understand and respect those perspectives, which is why these consultations take time. In our conversations with Solicitor General Mike Farnworth, he seems genuinely committed to making the right policy changes, which is encouraging.

“We’re encouraged that the government is working hard to understand the whole picture before it acts. For example, we’ve also been advocating for a minimum door-to-door distance criteria between retailers to be implemented at the same time as a small increase to the eight-store cap. We know from our work on behalf of liquor stores that distance rules are a very effective way to protect investments and ensure fair competition. It would make sense for those two things to be implemented at the same time.”

“A small increase to the eight-store cap would be good news for industry, especially if it’s combined with a regulated minimum distance between new stores. It would support incremental growth for businesses already at the cap, while still protecting the diversity of individual businesses at their current size. Increasing to the cap to 12 or 16 stores would give everyone room to grow while still preventing any one chain of stores from growing large enough to skew the market. Long term, increasing the cap will be essential for the financial health of BC’s cannabis retailers.”

“I understand the concerns of the mom-and-pop stores. I started out with one store, but my dreams and my goals are bigger. I want to be able to serve more communities and scale this business out.”

Vikram Sachdeva, Seed and Stone

Vikram Sachdeva, the Founder & CEO​ of Seed and Stone, a retailer with five locations in BC, says he thinks there is a need for a modest increase, especially since the BC government currently has 39 stores across the province.

“All I’ve ever wanted is a fair playing field,” Sachdeva tells StratCann. “If the government can have 39 stores then we should be allowed to. If the government doesn’t have the same rules for us and for them, I don’t find it to be a fair game. I’m not saying 50 stores or 100 stores, all I’m saying is if it’s eight, maybe double that to 16 stores.”

This kind of increase would address the concerns of those who don’t want to see large chains dominating the market, like in Ontario, where the retail cap was doubled to 150 on January 1 of this year. 

“I understand the concerns of the mom-and-pop stores. I started out with one store, but my dreams and my goals are bigger. I want to be able to serve more communities and scale this business out.”

Sachdeva adds that getting even one new store approved, given the myriad of checks and balances in place for cannabis stores in BC, plus distance regulations in many cities, means Seed and Stone even getting to 15 stores would be a considerable feat.

Omar Khan, the chief communications and public affairs officer at High Tide Inc., which owns and operates the largest chain of cannabis stores in Canada, says he believes lifting the cap in BC will help the government better displace the illicit market. 

High Tide owns Canna Cabana, with 162 current locations in British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario. It has eight locations in BC.

“Given the relative strength of the illicit market in BC, we encourage the provincial government to continue looking for ways to work with legal cannabis retailers like us to secure a sustainable and thriving legal cannabis sector in the province. This includes looking at reasonable increases to the provincial retail cannabis store cap and lowering provincial wholesale markups.”

Other regulatory changes

The province has also previously committed to reviewing the direct delivery program that allows producers to send directly to retailers, as well as the 15% service fee that applies to products sold through the program. Many in the industry say the fee, which is the same fee charged on product physically sold through the provincial distribution centre, is too high to make the program viable

However, a representative with the Ministry of Public Safety and Solicitor General could only confirm that they are continuing to look into the issue, noting that any profits generated by the LDB’s cannabis sales are remitted to the provincial treasury to support vital public services such as healthcare and education.

“The ministry is currently considering potential adjustments to the direct delivery program, including exploring changes to the 15 per cent charge that is applied to direct delivered cannabis products.”

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