As more pot shops pop up, Thunder Bay retailers confident consumer demand can keep up
The recreational cannabis market in Thunder Bay has become much more competitive over past year
As more recreational cannabis stores pop up across Thunder Bay, Ont., existing retailers say they feel confident the demand is there to support the growth.
The sector has grown by leaps and bounds over the past year. Little more than a year after the first store opened in Thunder Bay, the Alcohol and Gaming Commission of Ontario lists 12 stores as currently authorized to open in the city, with another 8 hopefuls currently engaged in the licensing process.
Despite being among the very first stores to open in Thunder Bay, DJ Connors, the business development manager at Kia Ora Kannabis, says he's not losing sleep over the budding competition.
"You know, like anything you see another store open up ... it makes us nervous for a few seconds. But then we just figure out, well, we just have to continue working on our experience with our customers and having knowledgeable staff. And and, you know, we think that it's not going to really hurt business that much."
Connors says demand at Kia Ora has only grown over the past year – enough so that the company recently expanded, opening a second location in the city, and adding to the increasing number of storefronts.
It's a similar story for Tokyo Smoke. The first store to open its doors in Thunder Bay also just launched a second location.
"With the great success that we saw in Thunder Bay we wanted to continue to serve the community," said Melissa Gallagher, the director of corporate and franchise stores for Canopy Growth, Tokyo Smoke's parent company.
Gallagher said she attributes that demand to a number of factors, including an expanding range of cannabis products that appeal to the "canna-curious," and customers that are still getting used to the idea of buying the drug legally and in various forms.
Legal stores are also aiming to take a bigger bite out of black market sales, she said, something that Connors also believes is a key factor.
"What we've noticed is more stores have opened, but they're still getting a customer base somehow. So that's why ... we assume that it's chipping away at the black market" Connors said.
"We've had customers tell us, 'I don't go to my dealer anymore, you guys are cheaper,' or 'I don't go to my dealer anymore, you guys have a better variety of product.'"
What's the saturation point?
Legal stores in Ontario have become better able to compete with the black market in the second year of legalization, as an adjustment period has taken place and some lower cost products have come on the market, said Michael Armstrong, an associate professor in the Goodman School of Business at Brock University.
Ontario's sluggish start when it came to the legalization rollout, has also meant that across the province, market expansion has only recently begun to ramp up across the province.
While the rate at which the sector has grown varies from city to city, Armstrong said Thunder Bay's number of authorized stores, compared to its population, makes sense in light of what's happening on a provincial scale.
"It's not out of line," he said, adding people in the industry tend to rely on a rule of thumb based on what happened in the State of Colorado, where the ratio ended up being about one store per 10,000 people. However, whether the rule will hold true in Canada, remains to be seen.
Predicting a saturation point for a new industry in an untested market is a difficult task, he said, leaving industry players to make an educated guess.
Armstrong said he expects the industry to continue to grow across the province in the coming months, followed by a possible correction in the market.
"So we will probably overshoot the number of stores in the short term and then settle back to a smaller number," he stated.
While she's confident that a significant consumer base remains untapped, as Ontario's licensing process continues to ramp up, Gallagher said industry players will be watching to see how the retail landscape changes.
"So it'll be interesting. I think we'll all have our eyes on how this shifts over the next few months and year."