Canopy Growth says LCBO pot stores a good step toward eliminating black market

TORONTO - The Ontario government's plan to sell and distribute recreational pot strictly through a network of government-operated stores is being welcomed by one of largest licensed marijuana producers.

Canopy Growth (TSX:WEED) president Mark Zekulin says the plan announced by the province today to have the Liquor Control Board of Ontario operate up to 150 stand-alone marijuana stores by 2020 and sell online is a good step towards eliminating the black market for pot.

But the government's plan to start with only 40 stores in July 2018, when recreational pot is set to be legalized federally, drew criticism for not providing enough access and spurring marijuana users toward illicit sellers.

Jacob Capital Management analyst Khurram Malik says limiting the amount of Ontario residents that have easy access to legal pot will make it harder for the government to shut down the black market and cap the potential for legitimate providers.

Malik says, however, in the near term it makes sense to limit access as it's easier for the province to regulate a smaller number of LCBO operators at the outset as opposed to hundreds of independent dispensaries.

Zekulin says it will take some time for the government's distribution model to scale up, but it and other producers which already sell online can help serve those who don't have an outlet nearby.

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