eResearch | The cannabis market is becoming a very competitive landscape, and companies are constantly trying to increase market share by getting products onto as many shelves as possible.
In Canada, with each province controlling the retail distribution, there is a patchwork of public & private physical stores and online portals. In Ontario, the provincial government initially proposed a provincial monopoly in cannabis sales that would have seen the government run 150 retail stores. But with a change in government, the plan changed to a private store and public online model, run by experienced cannabis and retail professionals, however, it is currently struggling to set up stores and meet demand.
In the U.S. there are countless companies and brands across multiple states, making it difficult to get a good retail location or to get products onto the saturated shelves of retail stores.
Cannabis companies in both countries are now developing strategies to get their products into consumers hands, and many have turned to partnering up with experienced retail companies that have the physical infrastructure already placed in optimal locations.
In Canada, on July 24, 2019, Fire and Flower Holdings Corp (TSXV: FAF; OTC: FFLWF), an Edmonton-based independent cannabis retailer, announced a C$26 million investment from Alimentation Couch-Tard Inc. (TSX: ATD; OTC: ANCUF; DB: CJA).
The convertible debt investment can be converted into 24.3 million shares at a price of $1.07 per share, representing a 9.9% equity ownership in Fire & Flower.
In addition, Couche-Tard will concurrently receive 3 series’ of share purchase warrants, which, if exercised in full, would provide more than C$380 million in growth capital to Fire & Flower and result in Couche-Tard owning 50.1% of Fire & Flower.
Fire & Flower is a cannabis retailer and does not cultivate cannabis. Fire & Flower operates 20 cannabis retail stores in Alberta and Saskatchewan as well as a digital sales platform, and is a licencor of the Fire & Flower brand to 2 retail locations in Ontario.
Alimentation Couch-Tard is one of the world’s largest retailers with approximately 10,000 storefronts across North America and another 5,000 from Scandinavia to New Zealand. Alimentation Couch-Tard operates its stores under various store brands including Couche-Tard, Circle K, INGO, Corner Store, Holiday, and Kangaroo Express.
In the U.S., on July 29, 2019, U.S. cannabis producer Charlotte’s Web Holdings, Inc. (TSX: CWEB; OTC: CWBHP) announced that it will be selling its topical CBD-infused products across 1,350 stores in 22 states through Kroger Co. (NYSE: KR; LSE: 0JS2; DB: KOG), the largest grocery retailer in the U.S. In addition to having products in Kroger grocery stores, the deal extends the distribution to Kroger’s subsidiaries in multiple states, including Dillons, Fry’s, Fred Meyer, King Soopers, Mariano’s, Pick ‘n Save, QFC, and Smith’s.
Cannabis companies in both the U.S. and Canada are still in such early stages in market development and finding the best strategy in getting products into consumers hands the quickest and at scale is what is important now. It will be interesting to see if partnering up with leading retail chain companies will beat out small mom and pop style cannabis retail businesses.
Fire & Flower’s stock price increased by 20% to C$1.37 per share after announcing the investment, and Charlotte’s Web’s stock price increased by 14% to C$22.15 per share after announcing the distribution deal.
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Fire and Flower Holdings Corp (TSXV: FAF; OTC: FFLWF)
- Headquartered in Edmonton, Canada, Fire and Flower is a cannabis retailer focused on capturing a significant market in Canada through their Hifyre digital platform that connects consumers with cannabis products.
- Fire currently runs an online e-commerce platform and operates 20 cannabis retail stores in Alberta and Saskatchewan, and is a licensor of the Fire & Flower brand to 2 retail locations in Ontario.
- Fire and Flower currently trades at C$1.30 per share with a market capitalization of C$152.5 million.
Charlotte’s Web Holdings, Inc. (TSX: CWEB; OTC: CWBHP)
- Headquartered in Colorado United States, Charlotte’s Web is a cannabis producer and distributor of hemp-derived CBD wellness products made from proprietary help genetics that are 100% American farm grown.
- Charlotte’s Web has over 600 acres of irrigated farmland and a 40,000 sq. foot facility for manufacturing and research & development.
- Charlotte’s Web currently trades at US$17.35 with a market capitalization of US$747.5 million.
Alimentation Couch-Tard Inc. (TSX: ATD; OTC: ANCUF; DB: CJA)
- Headquartered in Quebec, Canada, Couch-Tard is a multinational convenience store operator with approximately 15,000 stores in Canada, the U.S., Europe, Mexico, Japan, China, and Indonesia.
- Couch-Tard operates under several brand names including: Couche-Tard, Circle K, INGO, Corner Store, Holiday, and Kangaroo Express.
- Couch-Tard currently trades at C$82.45 per share with a market capitalization of C$ 46.5 billion.
Kroger Co. (NYSE: KR; LSE: 0JS2; DB: KOG)
- Headquartered in Ohio, Unites States, Kroger is an American retail chain that is the largest supermarket in the U.S. by revenue.
- Kroger operates 2,760 supermarkets and multi-department stores through its Kroger store and subsidiaries including: Dillons, Fry’s, Fred Meyer, King Soopers, Mariano’s, Pick ‘n Save, QFC, and Smith’s.
- Kroger currently trades at US$21.36 per share with a market capitalization of US$17 billion.
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