Pot retailers look to Yukon as way into industry

Yukon's cannabis retail market is heating up — and some businesses say they want to use the territory as a launching pad to expand elsewhere in Canada.

"The Yukon seemed to have its act together more so than any other province," said Richard Fuller, chief operating officer of The Herbary, Whitehorse's newest pot shop. It opened this week in what used to be the government's Cannabis Yukon store, in the Marwell area.

"[Yukon]'s been a lot more accessible in the sense that the sort of the machinations behind it haven't been so bogged down in confusion and red tape."

Fuller and his business partner already ran the local Money Mart outlet in Whitehorse, when they decided to get into the pot business. Their first retail application was turned down by Yukon's Cannabis Licensing Board last year, because the proposed store was too close to a school.

They weren't deterred though, and applied again for the new location. The licence was granted in January.

Fuller describes it as a first step into cannabis retail. They've got their sights set on Ontario, which is removing the cap on the number of pot shops in that province and will start issuing more cannabis store authorizations this spring.

"We're in the process now of putting an application in, in Ontario," Fuller said, over the phone from the U.K.

From Muskoka to Yukon

Another soon-to-open Whitehorse pot shop is actually headquartered in Ontario. But Cannilux Inc. doesn't yet have a retail licence in its home province — its "model store" in Gravenhurst can't yet sell weed.

"We've just been using it as a community hub, and basically a t-shirt giveaway point," said Cannilux CEO Josh Both.

Yukon is where Cannilux wants to get a foothold in retail cannabis.

"The licensing process in Yukon has been much easier to navigate," Both said. "But what really drew us to the area was the tourist capacity."

Both says his company's ambition is to open hundreds of stores across Canada and the U.S. within the next few years. It's focused on smaller communities, where tourism flourishes. 

"That stems from a military mindset," Both said. He's a former reservist and his business partner is an Afghan war vet.

"We like to think outside the box when it comes to population."

It probably doesn't hurt that Yukoners led Canadians in buying the most legal pot per capita from retail stores in the first year of legalization.

Cannilux — granted a Yukon retail licence last month — already has a location in Whitehorse's Marwell area. The store is slated to open on Apr. 20.

Both said Cannilux has also been looking at vacant land in Yukon to one day grow hemp for CBD, or cannabidiol, a derivative of the cannabis plant often used medicinally. 

6 stores and counting

With The Herbary and Cannilux, Whitehorse will have four operating cannabis stores, and the territory as a whole will have six (there are stores in Carmacks and Dawson City).

Two other licences have been granted in Whitehorse, although one was granted last year and there are no signs that a store will open soon. The other licence was granted in January to ArcticPharm — whose management team is largely B.C.-based — for a store at Second Avenue and Hawkins Street.

Two more retail licences — in Dawson City and Watson Lake — are still before the Cannabis Licensing Board.

If those are granted, Yukon could see up to 10 legal pot stores in operation. That would be about one store for every 4,000 people. 

Compare that to Alberta, where some analysts say the cannabis retail market is saturated. Matthew Pallotta, an equity research analyst with Echelon Wealth Partners says there are now more than 400 pot shops in Alberta — roughly, one for every 10,000 Albertans.

"I think Alberta is already reached a point where there's more than enough licences issued to adequately serve the province — to the point where per-store economics has sort of been suffering in recent quarters," Pallotta said.

"There's too many competitors."

In Yukon, there's no cap on the number of retail licences available — though some operators have worried about "market saturation."

Two local retailers, already in operation, objected to some newer applications before the Cannabis Licensing Board last year, citing "market saturation" — but board members decided it's not their concern.

"The commercial aspects are not amongst our relevant conditions, and we are a creature of statute ... and right now there's nothing in the statute [Yukon's Cannabis Control and Regulation Act] that would talk about such issues as competitiveness and so on," said Dave Sloan, chair of the Cannabis Licensing Board.

"If a person figures that they can make a go of it in a small community, it's not for us to say, 'well you can't have it.'"

Sloan's not sure how many more retail applications might come before the board. He said that in Whitehorse, city bylaws will likely restrict competition more than anything else.

Right now, pot retailers can only set up shop in the downtown and Marwell areas, and there are mandatory buffer zones around things such as schools, and addiction treatment facilities.

"So I think that will probably, if anything, will curtail maybe where some of the places can go," Sloan said.

He said another thing that has not yet come up, but may, is the idea of cannabis pop-up shops — for example, at a summer music festival.

"We haven't had an application yet, nor have we considered how we would treat it ...  I think that's the kind of thing we'd need to have better defined."