How Cannabis Brands Drive Retail Sell-Through in Ontario (Without Breaking Inducement Rules)

Quick answer: In Ontario, cannabis brands cannot pay retailers for shelf space, displays, promotion or exclusivity. AGCO rules ban those as inducements. Brands drive sell-through instead by creating demand that reaches the store: compliant consumer marketing, staff education, products that fit the shelf, and tools that send shoppers who click an ad straight to a nearby store with stock. Sell-through earns reorders, and reorders earn shelf space.

What is sell-through, and why does it matter?

Sell-through is how quickly a product sells off retail shelves after the store buys it. In Ontario, stores buy from the Ontario Cannabis Store (OCS) and reorder what moves. A product with strong sell-through earns repeat orders, more facings and new stores. A product that sits gets marked down, then dropped. For a brand, sell-through is the number that decides everything else.

What are the cannabis inducement rules in Ontario?

The AGCO's Registrar's Standards for Cannabis Retail Stores prohibit licensed retailers from asking for or accepting material inducements from licensed producers, their representatives or accessory suppliers. Since June 30, 2022, the rules also ban most agreements between retailers and producers for any item, benefit or service.

Examples the AGCO lists as prohibited include:

• A retailer receiving payments from a producer for advertising the producer's products
• Co-branded advertising where costs are shared between retailer and producer
• Agreements that require a set amount of product, display space or promotion
• Exclusivity, or restricting what else a store may carry
• Physical assets such as fridges, TVs or computers given to the store
• Cannabis supplied for sensory display
• Paying retail staff to attend producer training

Items of nominal value, small samples and education without payment are allowed. Source: AGCO guidance on inducements.

The AGCO enforces these rules. It issued a $200,000 monetary penalty to the operator of the Cannabis Xpress chain over agreements that gave preferential treatment to producers in exchange for fees.

What can cannabis brands do to drive sell-through?

1. Build consumer demand within federal rules. The Cannabis Act allows factual and brand-preference promotion where young people cannot access it. Use your website, email lists and age-gated channels.
2. Educate budtenders. Training staff on your products is allowed, as long as staff are not paid to attend. Budtenders recommend what they understand.
3. Make your product easy to sell. Clear formats, accurate descriptions and good photos help stores list your product well online and in store.
4. Fit the shelf. Price, format and potency should fill a gap the store has, not compete with ten near-identical products.
5. Send shoppers to the shelf. Most brand marketing ends at awareness. The brands that win connect an ad click to a local store that has the product today.
6. Measure retail sales, not impressions. Retail buyers respond to proof. Show them which stores your marketing filled.

How Poof connects brand marketing to retail sales

Poof was built around Ontario's rules. Brands pay Poof to market their products. Retailers pay the brand nothing and receive nothing from the brand. They simply receive orders.

Here is how it works:

1. A brand adds one Poof script to its website or campaign page.
2. A shopper clicks Add to Cart.
3. Poof finds the closest licensed retailer with that product in stock and writes the order into that store's POS.
4. The retailer charges its own price on its own merchant account, fulfills the order and keeps the customer.

Because Poof routes on proximity and live stock, never on price or on any deal with the store, there is no placement, display or exclusivity agreement between the brand and the retailer. The brand gets measurable sell-through. The retailer gets new customers and keeps its full margin. Poof takes no margin from the retailer.

As with any program, brands and retailers should review their own arrangements with legal counsel. See how Brand HQ works.

Frequently asked questions

Can cannabis brands pay retailers in Ontario?

No. AGCO rules prohibit retailers from asking for or accepting material inducements from licensed producers, including payments for advertising, shelf space, displays, promotion or exclusivity.

What counts as an inducement in Ontario cannabis retail?

Any item, payment, benefit or service from a licensed producer that could influence what a retailer stocks or promotes. Examples include paid advertising, co-branded ads, display agreements, physical assets and cannabis for sensory display. Nominal-value items and unpaid education are allowed.

Can cannabis brands train budtenders in Ontario?

Yes. Brands can educate retail staff about their products, but retailers and their staff may not receive payment for attending that training.

How do cannabis brands get more shelf space in Ontario?

By proving sell-through. Stores reorder and expand products that sell, so brands that drive real shoppers into stores, and can show the sales that resulted, earn more space.

Is Poof an inducement?

Poof is designed to keep brand money away from retailers. Brands pay Poof for marketing, retailers receive routed orders based only on proximity and stock, and no placement or promotion agreement exists between the brand and the store. Brands and retailers should still confirm their own arrangements with legal counsel.