Murky regulations causing promotional quandary among retailers

A second retail cannabis chain in Alberta has slashed prices on select products amid the national supply shortage, while other stores shy away from offering discounts as regulations remain murky nearly four months after legalization.

MARCY NICHOLSON FEBRUARY 06, 2019

A second retail cannabis chain in Alberta has slashed prices on select products amid the national supply shortage, while other stores shy away from offering discounts as regulations remain murky nearly four months after legalization.

Canna Cabana store in Calgary, which is owned by publicly traded High Tide Inc., has placed seven items on sale at discounts as big as 54 per cent. The sale is only advertised inside the store, due to strict marketing rules, but Nova Cannabis, which had the first known pot sale in Alberta, displays “Black Market Blowout!” on select strains in the centre of its home page.

To see the page, viewers must first state their birthdate to show they are of legal age, which is a minimum of 18 years.

“What is challenging is the promotional space. We’re trying to be compliant with AGLC (Alberta Gaming, Liquor and Cannabis) and Health Canada regulations, which is why we’re only displaying it in our store,” said Jason Kostiw, spokesman for High Tide.

This is a common interpretation among retailers of AGLC’s regulations. But when asked if it is within regulations to advertise a promotion on a store website, AGLC spokesperson Chara Goodings said in an e-mail: “As long as the site has age-verification so that people 18 years and older can enter.”

Product discounts by a small number of retailers in Alberta have come as a surprise, not just because of the overall supply shortage that caused AGLC to place a moratorium on new cannabis retail licences in November, but because some retailers were not aware this was permitted.

“While the AGLC Board has the ability to establish a minimum price for cannabis sold in a retail store, it has not seen the need to do [this] to date, so retailers may set their own prices,” Ms. Goodings said.

Store owners who are opting to cut prices are doing so for different reasons. While Nova said it placed discounts on unpopular items such as low-THC flower in order to move its inventory, Canna Cabana said it is gauging customer interest and price ranges.

“The trick is to find the value that a consumer is willing to put on that product and see if that fits within our business model,” Mr. Kostiw said.

“We will take the feedback and results from this and hopefully use it to help us bring in the right brands and products to keep our customers happy.”

Recreational cannabis is Canada’s youngest industry and retailers are just beginning to understand what customers want and what they are willing to pay. On top of this, retailers are only able to purchase a fraction of what they would like to offer due to the low quantities being offered by AGLC, the sole provincial wholesaler.

“I wouldn’t say there’s a supply shortage overall. I think there’s a shortage in the products that people are looking for,” Mr. Kostiw said.

“Cannabis is being treated like a single commodity across the board. There’s a shortage of those higher selling items.”

Several retailers said the most popular products are dried flower and pre-rolls that are high in THC, as well as CBD capsules.

Fire and Flower, which is currently Alberta’s second-biggest cannabis retailer by number of store, does not have products on sale, but plans to “bundle” some products for Valentine’s Day, said Nathan Mison, vice-president, government and stakeholder relations.

“We are not in a position where we feel the necessity to begin to discount products in the cannabis space where supply is such a premium,” Mr. Mison said.

“Concurrently, we will continue to work with the regulator to understand the rules and restrictions in regards to discounting, sales and perceived inducement, as they may be considered in the future if appropriate.”

But there is another aspect that exaggerates supply disruptions at some chain stores. Unlike the liquor business, which is also privatized in Alberta, cannabis retailers cannot transfer products from one store to another. This means if there is an abundance of one product in one store, it cannot be moved to another store that lacks the product.

“We have had some inquiries and are reviewing this,” Ms. Goodings said, when asked if there are any efforts to change the regulation that prohibits the movement of cannabis products between stores.

While Health Canada established regulations under the Cannabis Act, it is up to the individual provinces to set rules around how recreational pot is sold. Promotional rules established by Health Canada are strict and similar to those of tobacco, in an effort to keep legal marijuana out of minors’ hands.