An employee holds a dried marijuana supply inside a cannabis store in Ottawa. (Chris Wattie/Reuters files)
The son of one of Aphria Inc.’s co-founders and a corporation registered to the address of unlicensed cannabis store Cannabis and Fine Edibles (CAFE) are some of the winners of Ontario’s second cannabis lottery, which named 42 applicants who will now be eligible to apply for a licence to operate a cannabis store in the province.
The Alcohol and Gaming Commission of Ontario — which is in charge of regulating the cannabis retail sector — received over 4,800 applications for the lottery. But unlike the last lottery round, the AGCO imposed stricter requirements for applicants, insisting that they had secured retail space and could provide a letter of credit of $50,000 to the regulator.
There were 13 winners named to open stores in the Toronto region, including 11180673 Canada Inc., a corporation whose address is listed as 104 Harbord Street, one of CAFE’s former cannabis dispensary sites which was shut down by law enforcement in July.
CAFE, which has operated a chain of unlicensed dispensaries in Toronto since 2016, continued to keep their stores open after legalization took place — that effectively bars the owners, or any entity affiliated to them from operating a legal store, according to provincial rules.
“I’m assuming that the AGCO is going to take a very close look at who the winner of that site is affiliated with,” said Trina Fraser, a cannabis lawyer and partner at Brazeau Seller Law. “Having said that, it’s not necessarily a bad business strategy to secure a location that already has a customer base and is known for being a dispensary,” she said.
An applicant by the name of Cory Floyd Cacciavillani was also named as a winner to open up a store in Burlington, Ont. According to a friend of the family, Cacciavillani’s father is Cole Cacciavillani one of the founders of Leamington-based licensed producer Aphria, who is no longer with the company but remains a large shareholder.
Another winner was Najla Guthrie, whose store is registered to an address in Toronto’s Beaches neighbourhood. Guthrie is the CEO of KGK Science, a research organization that conducts clinical research into nutritional products and cannabidiol. KGK Science’s parent company is Auxly Cannabis, an entity founded by industry pioneer Chuck Rifici.
There were seven winners in Ontario’s East Region, 19 in Toronto and the Greater Toronto Area, five in Ontario’s northern region, which includes additional stores in Thunder Bay, and 11 winners in the province’s western region. Like the first lottery round, most of the winners appeared to be individuals or sole proprietors with little connection to the cannabis industry, whether legally or illegally.
“It was pretty skewed in favour of sole proprietors, which was surprising to me given the tougher requirements this time around,” Fraser remarked.
Three of the seven winners in the east of the province all have locations in the same retail complex in Innisfil, Ont, a situation which Fraser says is bound to create problems for those business owners. “Two of those owners are going to have to move somewhere else. There can’t be three cannabis stores in the same location in a small Ontario town, when there are just 3 locations right now in all of Ottawa,” she said.
According to the AGCO, applicants now have until Aug. 28 to apply for a Retail Operator Licence and a Retail Store Authorization, upon which the regulator will undertake an eligibility review to determine if licenses can be dispensed.
A key contention between lottery winners and the AGCO in the first lottery round was a criteria that forbid the winner from ceding control of ownership to a larger entity such as a licensed producer. The provincial government has long indicated its preference for cannabis retail stores to be operated by small business owners.
In the weeks following the first lottery in April, there was a rush by veterans of the cannabis industry to partner up with the 25 largely unknown lottery winners — in some cases industry participants were bidding millions to secure deals with winners that would see them get a piece of the cannabis retail pie, while not violating AGCO ownership requirements.
There are currently 24 legal cannabis stores in operation in Ontario — 13 of them are in the Greater Toronto and Hamilton area, and five of those 13 are located in Toronto proper. By contrast, Alberta has issued close to 200 permits to open stores in the province, with at least 50 of those stores up and running.
“Even if all these stores up and running, we are nowhere close to having enough retail locations for the population of this province,” Fraser said.
Applicants are encouraged by the AGCO to get their stores up and running by October, but unlike the last round, no penalty will be imposed if winners exceed that October deadline.
By Vanmala Subramaniam
Source Finantial Post