Legal cannabis stores had early impact on Hamilton's black market

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Hello Cannabis, a medical marijuana information and education centre, had been operating for about a year at 51 Cootes Dr. in Dundas when Ontario held its first recreational retail pot store lottery.

Operators of the centre didn’t win one of those first 25 retail licenses, but partnered as consultants with Hamilton license winner Santino Coppolino to open and operate a retail store under the Hello Cannabis name just steps away at 57 Cootes Dr.

Less than a year later, the consultants moved on and the name changed to Cabbage Brothers. The store is still owned by Coppolino. 

Michael Armstrong, an associate professor at Brock University’s Goodman School of Business called the province’s decision to limit the first group of retail licenses to 25 reasonable, due to product shortages early in 2019, but said the lottery process was misguided.

“A lot of people put their name in the hat to see if they’d win the magic ticket,” Armstrong said. “The lottery was a mess.”

He said the government may have wanted to give independent business people a chance to get permits alongside larger corporations, but he said it resulted in some with no experience, business plan or financing getting a retail license. Licenses couldn’t be sold for a year, so many found partners to operate the business — sometimes large corporations.

Cabbage Brothers manager Oliver Coppolino, son of the licence holder, said he understands criticism of the lottery system — but appreciated the effort to get small business into the Ontario cannabis industry.

“To include small business, it was worth doing,” Coppolino said.

He said Ontario was behind, with no retail stores almost six months after cannabis was legalized in Canada.


Coppolino said they were able to partner with a local company, with an established presence, and maintain the store as a small business.

“That was a big part of it,” Coppolino said. “They were local people. We felt better about that. We wanted to be a family business.”

The Coppolinos, along with Hello Cannabis CEO Stephen Verbeek and his team, opened the 57 Cootes Dr. Dundas store on April 26, 2019. It was about a week after Canna Cabana opened its doors on Barton Street East, and the newborn industry was facing a product shortage.

Original store manager Frank Germana said the Dundas store came close to facing a shortage, but managed by maxing out their first order, and subsequent weekly orders after that.

“We had reserves to draw from,” he said.

By the time the store’s reserves were dropping, the supply improved.

Coppolino, who was working at the store from the start, took over as manager when the partnership with Hello Cannabis ended, and said the later opening meant less of the “door-crashing” business of curiosity seekers that others may have had earlier in the month.

Germana agreed business was strong from the start.

“We saw a good business right out of the gate, and it steadily increased after that,” Germana said. “We saw real business from day one. I think the stigma is more perceived than real.”

He said they saw supporters of the black market become customers when their product source dried up, even though they may have been philosophically opposed to government-regulated pot.

He said legal stores did a respectable job of fighting the black market, taking away about 30 per cent of its business before the end of the first year.

Coppolino said the early days saw customers coming from outside the Hamilton area because Hello Cannabis, and later Cabbage Brothers, was the closest store. There was little legal competition.

“From the beginning, our biggest competition is the black market,” Coppolino said.

He said Cabbage Brothers staff are “product consultants” who can help customers find the option suited to them. They know the products, and what they contain.

“There’s a degree of peace of mind we offer, over the illicit market,” Coppolino said.

He said product quality improved over the first 12 months, and prices gradually got better.

“There’s certainly a lot of demand,” Coppolino said. “I don’t see other (legal) stores as competition.”

Armstrong echoed many of Coppolino’s observations. As the first anniversary of operation approached, there was a growing focus on how to strengthen legal retail and break the black market.

“Now price and quality are the complaint, “Armstrong said. “It didn’t matter a year ago because there was a shortage of product and stores.”

He said legal retail has taken about a third of the black market’s business — but there’s a lot more left to grab.

“If you can get a product that’s just as good, and close to the black market price, you can quickly get another third of the market,” Armstrong said.

James MacKillop, Peter Boris Chair of Addictions Research at McMaster University, said a key success of legalization will be if the legal market can effectively displace the illegal market. He said research already shows inroads have been made.

“Our earlier studies showed that people quite strongly prefer legal products — knowing the quality and purity, knowing the THC (and) CBD level, not having to break the law — as long as the price differential is not too much,” MacKillop said. “Once legal products cost dramatically more than illegal ones, preferences shift.”

As Hamilton’s first two legal retail cannabis stores opened and continued operating over the spring and summer of 2019, Hamilton Police experienced greater success in shutting down illegal dispensaries.

Local authorities had stronger powers to seize illegal stores and keep them from reopening, so it wasn’t just the two legal stores taking black market business away.

But Hamilton Police were clear, the legal stores were not creating problems.

“Youth who used it still are, but it hasn’t spread,” Chief Eric Girt told the Hamilton Police Services Board on June 13, 2019. “We’re not seeing that increase.”

Bringing in legal cannabis retail did not create a new wave of crime.

“There has not been a spike in violence. We have not lost control of our city,” Deputy Chief Frank Bergen told the police board on July 18, 2019.

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