At Fire and Flower Holding Corp.’s annual general and special meeting of shareholders on Tuesday, the cannabis retail chain laid out its plans to open more stores before the end of fiscal 2019, spoke about the challenge posed by “monopoly” wholesalers, and revealed the economic benefits of its loyalty program. Below are key takeaways from chief executive Trevor Fencott’s presentation.
Store numbers to more than double by end-2020
Edmonton-based Fire and Flower is one of Canada’s biggest licensed cannabis retail store chains with 33 outlets and aims to raise this to 45 stores by the end of its fiscal 2019 year with a total of 85 planned by the end of fiscal 2020. The bulk of its stores are in Alberta where “the black market remains our main competitor,” Mr. Fencott said.
Included in this plan is the expectation for Ontario, Canada’s biggest consumer market, to “soon” start granting more cannabis retail licences.
“We are very optimistic about Ontario. We have decided we do need to invest in the province before opening up. We have leases in the province,” Mr. Fencott said, specifying the company has secured around 12 to 15 leases in Ontario.
“We have the capital to deploy to get that first cohort out there,” he said.
In August, global retailer Alimentation Couche-Tard Inc. invested in Fire and Flower, which plans to manage its “advantageous cash position" and Couche-Tard relationship in 2020 in a market place experiencing “investor fatigue.”
“We’re exploring other opportunities. Couche-Tard has a large presence in the U.S. and Mexico. Those are markets that are of particular interest to us,” Mr. Fencott said, adding that Fire and Flower is in the “exploratory phase” as recreational cannabis is not yet federally legal in those countries.
The perks of a new loyalty program
Fire and Flower launched Spark Perks, a loyalty program that has more than 45,000 enrolled members, in September through its subsidiary Hifyre Inc., a digital retail and analytics platform. While the program gives members fast-lane checkout, special deals and access to member-only events, it also shows these individuals spend more than non-members. Members have spent 32 per cent more per transaction than non-members, and the number of transactions done by registered customers has also increased, Mr. Fencott said.
“This is absolutely key and is something our competitors are honing in on,” he said.
“The technology is really driving our business. It is definitely our intention to find other ways to monetize this software.”
Wholesaler “monopolies” and 2.0 product visibility in Saskatchewan
“Saskatchewan quite simply is the test market for Canada and Canada is the test market of the world, full stop,” Mr. Fencott said about the province that privatized cannabis wholesale and where the company has a wholesale business.
Most other provinces each have one government-operated wholesaler, whereas Fire and Flower has the ability to negotiate prices directly with licensed producers (LPs) in Saskatchewan.
“These provincial purchasing monopolies … what you’re seeing is a lack of consistent purchasing … that is thwarting the sales process at the retail level,” he said.
“I think there will be an impact from that, particularly in provinces like Alberta where the province has overbought on products maybe it shouldn’t have.”
While retailers in most provinces await details on what newly legalized concentrated pot products will be offered by LPs as soon as mid-December, and what percentage the gross margins will be, Fire and Flower has some visibility through its wholesaler in Saskatchewan.
“Our direct conversations with the LPs are pretty clear and they’re pretty confident that we will have product in that market by December 17 [in Saskatchewan]. We don’t have visibility on Alberta and Ontario,” Mr. Fencott said.
“We’re going to work as hard as we can to get those products there as soon as December 17th as possible.”