The number of pot stores in Alberta is unsustainably high

Craig Kolochuk has been candid in his assessment of Alberta’s cannabis scene: There are too many stores, competition is fierce, price wars have broken out and dozens of locations are in danger of closing.

“Unfortunately, now there is blood in the streets,” he said.

Kolochuk is the CEO and founder of 13th Floor Cannabis, a small independent cannabis retailer with two locations in Calgary and one in nearby Airdrie.

It is expected that about a third of current retail outlets will be closed within the next year or two.

“We just cut the pie too much and the market doesn’t exist,” he said.

“It will be … who can persevere and who has a strong balance sheet and some supportive shareholders.”

According to the latest information from Alberta Liquor, Gaming and Cannabis (AGLC), there are 761 licensed cannabis providers in the province, with 194 of them in Calgary.

“I think 30-40 percent of the sites will be closed within the next 12 to 24 months,” Kolochuk said.

Retail market ‘oversaturated’

that Analytics From the Canadian retail cannabis market, conducted by data firm Cannabis Benchmarks earlier this year, it was concluded that Alberta has too many retail outlets based on comparable data from Colorado and Oregon, two US states that legalized cannabis in 2012 and 2016 respectively.

Het Shah, who collected the data, says Colorado has one entertainment retailer for every 9,600 residents, while Oregon has one for every 6,150 people.

Alberta has approximately one retail outlet for every 5,911 people. In comparison, the national figure is tied to one store for every 12,184, according to Shah’s research. He says there is room for expansion across the country, not just in Alberta.

“On average, we found Alberta to have approximately 27 percent more stores than is needed to serve the population,” he said.

Shah says a single store should ideally serve 7,500 people, suggesting there is room to add more than 5,000 stores across the country — outside of Alberta.

AGLC, the government agency that regulates retail cannabis licensing, continues to approve new license applications. The number of retail stores has increased by 85 over the past year, with an average of seven new stores opening each month.

Shah predicts that the number of stores in Alberta will actually decrease over the next two years “as competition intensifies and the economics of stores becomes less favorable,” he said.

“There are a lot of stores that are suffering.”

While the number of new licenses is increasing, some stores are also closing.

“We’re also starting to see a lot of contraction in the market,” Marcy Kiziak, CEO of Edmonton-based Nova Cannabis, said during a conference call with analysts and investors last month.

“There is an oversaturation of licenses across the province,” she said.

The company, which operates 82 retail outlets in Alberta, Ontario and Saskatchewan, reported record sales in its latest quarterly update as it opened 29 new stores last year and renamed outlets to Value Buds.

Alberta’s ‘highly competitive’ market

Standardization is still a topic in the cannabis retail market. Larger companies have taken out smaller, independent stores while also opening new locations.

High Tide Inc. says: , which operates 29 stores in Calgary and 75 in Alberta under the Canna Cabana store banner, expansion is a key part of its strategy. Unlike BC, there are no restrictions on the number of licenses a single Alberta company can have.

“Alberta is a very competitive market for cannabis retail right now,” said Omar Khan, senior vice president for corporate and public affairs.

“I wouldn’t dispute the idea that there might be too many licenses in the county right now,” he said from the company’s headquarters in northeastern Calgary.

Craig Kolochuk is the founder and CEO of 13th Floor Cannabis in Calgary. He says over-saturation of cannabis stores will lead to some outlets closing. (Brian Labe/CBC News)

Without revealing the exact locations, Khan said the company is looking to open new stores, or possibly acquire existing ones, in areas that High Tide considers underserved.

“There are pockets in the county that can handle additional cannabis stores, and in terms of our organic growth strategy and acquisition strategy in the county, that’s what we’re really looking forward to,” he said.

Khan hopes the AGLC can ease existing restrictions on retailers which could help them compete against the illicit cannabis market, which he estimates makes up 40 percent of cannabis sales.

Price wars

With the number of retail outlets in Calgary approaching 200, Kolochuk says competition for customers is fierce.

“It looks like a race to the bottom, it’s a price war, margins have been squeezed,” he said.

The storefronts of Canna Cabana advertise the lowest price guarantee. Other retailers also offer loyalty programs and other rewards.

Nick Lamonaka, who bought a few joints at a Canna Cabana store in northwest Calgary, says he has noticed how prices have fallen and retail outlets have proliferated.

“It’s popping up like gas stations,” he said. “You see one here, you see one there.”

“They were doing like promotions, they did the scratch card lottery thing, and I didn’t get one because they gave them away so quickly.”

An employee on the 13th floor of cannabis in northwest Calgary is showing off some new products. The store owner says there are too many retail outlets in Calgary and expects many to close within the next two years. (Brian Labe/CBC News)

a Report From Deloitte Canada and cannabis research firms Hifyre and BDSA found that the average price of cannabis fell to $7.50 per gram last year from $11.78 per gram in 2019 after legalization.

Kolochuk says it can be hard to compete with larger retail chains and the purchasing power they have with licensed producers, but he says his company is focused on offering quality products along with consumer education.

The same Deloitte report indicated that consumers are willing to pay more for a superior product.

It’s a strategy that Kolochuk hopes will help him through the ups and downs of the retail scene – and that probably includes opening a few stores or buying existing ones.

“I think we can turn this to our advantage and potentially take out other freelancers who are struggling, and maybe rebrand those stores. And you know, we’re really pushing our brand,” he said.


Brian Labe is a foundation correspondent with CBC Calgary. If you have a good idea or advice for a story, you can reach out to him at bryan.labby@cbc.ca or on Twitter at @CBCBryan.