Large companies shaking up cannabis business in Sask. 'not surprising': officials

Shake-ups of who is selling cannabis in Saskatchewan shouldn't come as a surprise, according to Jason Childs. 

Childs, an associate professor of economics at the University of Regina, said it was predicted prior to legalization.

Cannabis company Westleaf announced Tuesday that it had struck a deal to buy two Saskatoon cannabis shops once the stores are up and running, pending government approval. A second company, Alberta-based High Tide, made a similar announcement on Wednesday.

Westleaf already owns one store in Warman and has plans to open up shops in British Columbia, Alberta and possibly Ontario — all under the chain name Prairie Records.

Partnering with big operators a trend

It likely won't be the last time that a national or international company has stepped into the provincial pot scene. 

One pot store based in North Battleford sold its retail permit last October, right after legal pot stores first opened.

In December, a Regina shop owned by a local family opened its doors in partnership with Tweed, a large cannabis corporation. Tweed operates multiple shops across Canada and is a subsidiary of international company Canopy Growth Corporation.

"The expertise that goes into running a retail operation like this is going to have some value, so there's going to be benefit to the local stores handing over to the day-to-day operations," Childs said. 

He said partnerships and takeovers can lead to a concentration in the market which could then become an oligopoly.

"You're not just seeing one big owner, we're seeing Westleaf, we're seeing Canopy through Tweed, we're going to see Aphria and Aurora, as well," he said. 

Childs said there are some concerns that come with a concentrated industry — one of them being regulation.

"You have these major retailers coming in and they basically control the legal market," he said, adding problems can arise if things aren't going the way major retailers want.

"They start making appeals to SLGA or the provincial government or whomever to change the rules under which they operate to benefit them."

Childs said this has been seen in multiple industries, including banking, airlines and brewing. He said industries often flow in a cycle, "and a lot of that cycle depends on what's going on with the regulations."

He said the beer industry is trending the opposite way of its cannabis counterpart. Although the beer industry began with independent operations that amalgamated to form two giants, Labatt and Molson, "now we're seeing this massive explosion of craft and micro-brewing," he said.

High Tide wants in

On Wednesday, another company said it's buying Saskatchewan stores.

Alberta-based High Tide Inc. cannabis company announced it signed letters of intent to buy two cannabis retail shops in Saskatchewan. In a release the company said it expects the sale to close at the end of February. 

High Tide currently runs Canna Cabana and Kushbar stores in Alberta. 

Minister says buyouts aren't surprising

Gene Makowsky, Minister Responsible for SLGA, agreed that movement in the cannabis industry isn't surprising.

"That happens in any retail environment. Somebody doesn't want to own a hardware store anymore, and they sell it out to whoever may be interested in buying," Makowsky said.

He said the government didn't know how much movement would happen among permit holders prior to legalization.

"it's up to each individual who has set up as shop and received a permit if they want to get out of it."

He noted all hopeful retailers must go through the "good character" check before they get the green light.