Well, some folks are in an upbeat mood with news the Ontario State Monopoly is going to double store authorizations in the province, beginning yesterday.

I’m not.

Despite increasing authorizations, the reality is that 18 months have been wasted. A year and a half in our lives, where folks who had dreams of working in retail – or owning a store – are prohibited from participating in a legal economy because a state monopoly controls access to it.

That’s not effective ‘regulation’: it’s economic suppression for the benefit of a state actor. It’s a Monopoly inserting themselves in where no private market would ever tolerate a monopoly in private good provisioning (impacting both producers and retailers). And it doesn’t matter if ‘now they’ve got it right’ – that’s a bullshit line from professional apologists.

They shouldn’t be there at all. And their existence will continue to distort private markets and purchases and sales within it, create winners and losers, and exist as dead-weight burden on society.

Ok. That feels better, but it don’t help though.

The reality is that of all the state monopolies in 90 years of booze, only Alberta broke the chains and dismantled half of their monopoly. And it took a very popular premiere, with all kinds of goodwill, elected on a broader mandate to tackle government spending and areas of responsibility to get it done (a detailed look at it is here). Even then, it wasn’t smooth, as the State Monopoly had to figure out how act like a business. They lost hundreds of millions, fucked up retailer orders for a half dozen years, and by most accounts….took about a decade to finally stabilize the supply chain. They’re still a dictatorial Sphinx that drop edicts from on high and demands cash up front a week in advance¹. A more recent look at it back in 2013 only hints at the challenges the province is currently facing: oligopoly formation.

Due to the regulated nature of booze and single sourcing from the only State Monopoly, retailers couldn’t get better deals unless they were buying bulk. And the Mom & Pops slowly got bled out, either selling into or out all together. I’ve heard recently that 85% of all booze sales in Alberta is through 2 chains, which, was said would never happen. That popular premiere, responding to critics who said liquor will just ‘become a private monopoly’ said: “We will never let any single retailer get over 30% of the market”.

I think there are a couple of things that are important takeaways from this, and how it applies to ACGO.

• Monopolies don’t move fast
• Those having superior relationships with the Monopoly (and products that move) will have structural advantages.
• Monopolies will push back against initiatives not in their interests
• They speak from their pulpit, everyone else are simply a member of their flock.

So, regarding Ontario, a massive backlog is now a massive backlog….divided by 2. At a fixed rate of issuance that’s arbitrary value, probably based upon what was most convenient for the Monopoly to do when considering Friday afternoon ‘Twister & Potluck’ shindig the Social Club has planned throughout the fall to enhance team-building. After they considered that really hard for a month.

Aside from this usual though, I want to mention regulatory affairs – which is something I have had a fair bit of experience with. Not doing it (oh my God no), but having been in energy for so long, I often came up across regulatory issues around natural gas transportation and power generation. And as the business unit I got to know, regulatory can be arcane, outcomes can bring massive windfalls, and the role is strategic by definition.

Because the legal cannabis sector came together essentially in a ‘big bang’ – many companies haven’t had regulatory on their priority list. That will change over time as the sector realizes it needs a voice – both federally, and across the 10 little fiefdoms – to have concerns able to be stated and considered, and serve the litany of ‘stakeholder relations’ jobs the monopolies have created nationally.

The State Monopolies aren’t going anywhere. Ever. And dealing with politicians and regulatory is a known condition from a host of other industries. And there are people out there who know these folks, don’t have the innate repulsion of arbitrary roles and inefficiency that I hold, are eloquent, and are respected individuals that can articulate and posit important feedback and guidance into the regulatory process.

Yep, it’s pretty airy. And the function can be worth millions to a company if executed well.

Look for some sort of formalization in the bigger outfits with cash. They’ll be hunting for the right Rolodex, and people with current numbers in it. There’s lots of them out there, but to find one that’s effective is hard. There’s folks out there with a lifetime of experience that has little understanding about results, or their accountabilities and responsibilities around them.

Figuring out how to lubricate process that’s ex-company is a sure sign of maturation.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative.

¹ – That ‘cash up front for your order next week’ thing works great if orders are filled. I have a friend who owns a bar/liquor store who had orders both shorted and overstuffed for years. Errors would occur every week. Of a $15k order, they would get no vodka, but 3 cases of unordered rum. Next week, no palate of wine, but 2 cases of Galliano. There was always a rolling credit/debit on his account, sometimes truing up to more than 50% of the order price. This is the kind of thing that happens when there is no choices available. The Monopoly knows it. They know you know it. And you know it too.