More legal pot stores needed to shake up black market, says report to council

Regina needs more than double the number of cannabis dispensaries in order to disrupt the illegal market, says a new report to city council.

The report examines the impact of retail cannabis on the black market and the economy and also how well zoning regulations are working.

It cites Statistics Canada data that says people are increasingly buying legal pot, with 68 per cent of consumers buying from a legal source compared to 47 per cent in 2019 just after legalization.

However, it notes a price difference remains between the cost of legal cannabis (an average of $10.30 per gram at the end of 2019) versus illegal cannabis (an average of $5.73 per gram in 2019).

“Displacing the black market further, according to industry experts, will depend on the extent to which the legal market can offer a better cost, location and supply,” the report says.

According to the report, a “mature market” would have one store for 10,000 people. “This means Regina, with its population of 239,497, would need to host roughly 24 stores to ensure a healthy business environment to disrupt the black market.”

Currently, Regina is home to 11 licensed cannabis retailers, with 11 applicants who have secured development permits and are waiting for approval from the Saskatchewan Liquor and Gaming Authority. The city is reviewing another four applications for development permits.

The city treats cannabis differently from liquor and other retail, which can operate in 13 land use zones. Cannabis stores are allowed in six.

Regina’s cannabis rules require stores to keep a separation of 182.88 metres from other pot shops, or sensitive land uses which include schools, parks, daycares and other places where young people frequent.

The separation distance is reciprocal, meaning schools, parks, daycares, enclosed rinks, libraries and community centres cannot set up within that distance of a cannabis store already in place.

All of these rules present a barrier to those trying to enter the market, the report says.

“This has left potential store owners frustrated with the limited options as expressed by customers to the City through permit reviews or preliminary reviews of sites, as well as service requests,” it reads.

Later this year, the report says amendments to the zoning bylaw will be presented to council after public consultation.

Cannabis sales in Saskatchewan are growing. They totalled about $38 million in 2018-19, doubling to about $70 million in 2019-20.

The numbers for 2020-21 were not available when the report was written but it says the government reported sales of $91.8 million from April to December.

Total tax revenues are not available, the report says, because the province does not track the PST by sector.

“For the excise tax, the government received $1.8 million in 2018-19, $7.6 million in 2019-20, and the estimate for 2020-21 is $13.5 million,” the report said.