Shoppers Drug Mart: the Starbucks of weed?

What does Shoppers' move to distribute medical marijuana mean for the future of the industry as a whole?

Shoppers Drug Mart made headlines across the country by announcing their decision to apply to Health Canada as a medical marijuana distributor. It is important to note that they are not seeking to produce marijuana, like most Licensed Producers (LPs), but are aiming to become an outlet for medical marijuana patients who want to fill their prescriptions.

This is a very interesting proposal for a number of reasons: 1) they are the first major non-cannabis enterprise to throw their hat into the ring, 2) LPs are currently required to use a direct-to-client mail order system, and 3) Shoppers is a subsidiary of Loblaws.

Shoppers is a heavyweight

Medical marijuana is clearly coming into mainstream acceptance when one of the largest pharmacy chains in the country is advocating becoming a dispensing agent. The reason this important is not because it might further dinner table discussions regarding the legitimacy of marijuana as medicine or whether it should be legalized completely – those are conversations that have been, and will be, resolved through legislation. It is important because it could potentially reignite some discussion regarding the distribution model patients and future recreational consumers can hope to expect.

Not only that, but their timing is rather serendipitous. Shoppers announcement came just days ahead of a recent Deloitte survey revealing that 24.7% of respondents would prefer to see marijuana sold in pharmacies – this was the leading choice for respondents of the listed channels of distribution (private retail, government-owned retail, provincially-owned liquor boards, privately-owned liquor boards, or supermarkets being the other options). Shoppers’ announcement could influence public opinion further in favor of pharmacies.

It is one thing to have relatively small dispensaries that operate in the grey advocating for private retail outlets, it’s another thing altogether to have one of Canada’s most identifiable brands jump on the bandwagon. It may even be possible that Shoppers Drug Mart could garner enough public support to prevent the state-owned retail model some provincial politicians seem keen to put in place.

An example of this government run distribution is the Liquor Control Board of Ontario, otherwise known as the LCBO. It is the state-owned enterprise in charge of alcohol distribution to the residents of Ontario – it is also the largest purchaser of alcoholic beverages in the entire world (they even have it written on their website). The LCBO earned a $1.8 billion dividend for the province of Ontario in 2014. Take a moment to imagine a similar system for marijuana. That would be a big chunk of tax revenue for the government to walk away from.

Pharmacies would appear to be a happy middle ground between private versus state-owned retail for medical marijuana, at least in the eyes of the Canadian Pharmacy Association, which is quite the turnaround from their previous position less than three years prior. They have not yet commented whether or not they believe this would also hold true for a recreational market. But given the increased revenue expected from a recreational market, it is likely they would additionally lobby themselves as a suitable and safe recreational distribution point.

Shoppers doesn’t want to ship marijuana

When the Marihuana for Medical Purposes Regulations (MMPR) was initially introduced in April 2014 it stated very clearly that medical marijuana would only be distributed to clients by mail. This is also true for the Accessing Cannabis for Medical Purposes Regulations (ACMPR) that replaced the MMPR this summer (at least they replaced Marihuana, spelled with an ‘h’, to Cannabis…) – LPs do not have the option to establish a retail storefront. So this begs the question: “How does Shoppers Drug Mart plan on selling marijuana?”  Do they plan on being the exception to this rule, or are they hoping to spur on industry-wide changes?  Or stranger still, are they planning on shipping marijuana by mail like all the other LPs?

It’s difficult to imagine that the people behind Shoppers’ decision to submit an application to Health Canada envision a system in which they become a mail order source of marijuana. Patients come into the pharmacy, discuss their prescription with a pharmacist, place an order….  and then go home to wait for the mail?  That’s what the current regulations would require.

Pharmacist lobby groups have been quoted stating that pharmacies are an ideal outlet for a number of reasons: pharmacists understand drug dispensing, they can look for any contraindications, and they already have systems in place for safeguarding controlled drugs. To many people it only makes sense that they be the choke point for another controlled substance.

The obvious counterargument many would make is that dispensaries currently fulfill this role. What’s to prevent them or any of the LPs from hiring a pharmacist and meeting the necessary security standards for a medical marijuana storefront?  Why should Shoppers Drug Mart and other large pharmacy chains (Rexall, etc.) get a pass, allowing them to sell on location?

The fact of the matter is that they wouldn’t. An amendment to the current regulations would be required and there would be many companies following Shoppers’ lead. But Shoppers would have the clear head start. And with that comes all kinds of market advantage and the potential goodwill fostered from being, at least seemingly, an early supporter.

And then, of course, there is the always-impending recreational market…  There are over 1,307 Shoppers/Pharmaprix stores across Canada.  That would be more than a few potential marijuana outlets. Is Shoppers’ application an attempt to get in on the ground floor of what is, by all accounts, going to be a very lucrative market?  This question is rhetorical: money is going to be made.

The recent Deloitte survey estimated that there is a potential $22.6 billion to be made. This would be shared amongst the federal and provincial governments, the LPs, the retailers, and any number of the peripheral service providers and manufacturers that spring up around the recreational marijuana industry. Who gets the lion’s share is yet to be determined, but mail-order delivery won’t be forever, and it could be that the first group to legally clear that hurdle will make quite a bundle in doing so.

The Loblaws connection

Money speaks volumes. And Shoppers Drug Mart is owned by Loblaws, the largest food retailer in Canada. Being part of the largest food retailer in Canada means having access to their supply chain, capital, and general business machinery.

For those who were not previously aware, Loblaws Companies Ltd. bought Shoppers in 2013. This is the same company that owns over 1000 grocery stores: Superstore, No Frills, and T&T, amongst others. And it is the reason you see an increasing number of groceries stocked in the same place you would normally have gone to pick up mail or a prescription. It can still be surprising to see produce being sold in Shoppers Drug Mart.

But there is more than just the company and its name. Loblaws is in turn owned by George Weston Ltd. – founded by George Weston in the late 19th century and still owned by the Weston family today. Patriarch to the Weston family, the second wealthiest family in Canada, is Galen Weston. His son, Galen Weston Jr., is the head of Loblaws Companies Ltd.  You’ve likely seen him in President’s Choice commercials.

When Galen Weston Jr. assumed control of Loblaws in 2006 the company had recently posted its first loss in two decades. Under his direction, they transformed their supply chain management, righted their ship, and not only reversed this loss but have subsequently experienced phenomenal growth.

In other words, they are not in the habit of making bad business decisions.

If you asked me a year ago what the odds were on pharmacies selling weed in the near future I would have given a pretty quick ‘not likely’. Medical licensing authorities are reticent on the issue, medical marijuana dispensaries exist throughout the country – in Vancouver they are being licensed and regulated by the municipality, in Toronto they’re popping up all over – plus the provincial governments want to open up government-owned retail. Those are some significant obstacles.

But in Canada, it’s pretty hard to bet against Loblaws and the Westons. Is it even possible to determine or measure the level of political persuasion they might wield?  On top of which they have shown incredible foresight in the past, they have seemingly limitless financial support to draw upon, and they control some of the most recognizable Canadian brands.  They wanted beer in their stores?  They got beer in their stores. And now they want marijuana as well.

- Matthew Trudeau

- Featured image via Wikipedia user GTD Auquataine

Matthew Trudeau works as a quality assurance consultant for CanCanna Inc., a Licensed Producer applicant based out of Richmond, BC. His previous work includes employment in health and fitness as well as molecular biology research. He is generally interested in drug and health policy, the developing cannabis industry, and writing on what captures his attention.

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