HIGHLIGHTS
- Tilray to expand its retail ownership outside of Alberta where permitted
- LP and retail cannabis partnerships seen as increasingly important
- Acquisition of FOUR20 to add to Tilray’s minority investments in retail
Tilray Inc.’s agreement to buy Alberta cannabis retailer FOUR20 Premium Markets, just months ahead of the legalization of value-added products such as edibles and concentrates, will leverage the producer’s expansion into other provincial markets and boost its brand building strategy, the company said.
“Tilray and High Park will leverage FOUR20’s retail expertise and brand and market knowledge to expand into other Canadian provincial markets where Licensed Producer (LP) retail ownership will be permitted in the future,” said Andrew Pucher, chief corporate development officer for Tilray.
“Strategic retail partnerships that enable us to build direct relationships with end consumers will become increasingly important as the Canadian market continues to evolve, particularly with the introduction of additional legal product form factors this fall.”
Through its subsidiary High Park Holdings Ltd., British Columbia-based Tilray entered a definitive agreement to buy FOUR20 for up to $110-million in shares, pending regulatory approval and performance milestones by the retailer.
Calgary-based FOUR20 has six recreational cannabis stores open in Alberta with an additional 16 locations secured throughout the province.
Alberta privatized adult-use cannabis retail in 2018 when recreational pot was federally legalized and has by far the biggest number of legal stores open. About 280 retail licences have been granted and 470 applications are pending,
While retail cannabis is also privatized in Ontario – Canada’s biggest consumer market – the provincial government does not permit LPs to own more than 9.9 per cent of any outlets, causing growers to look elsewhere for major downstream investments.
“We believe this acquisition validates the importance of retail as a part of the cannabis value chain,” Eight Capital said in a report.
Several publicly traded cannabis retailers reported strong revenue and gross margins in their most recent financial quarterly statements.
“The acquisition of FOUR20 furthers our distribution and brand building strategy for the Canadian adult-use market and is complementary to existing minority investments Tilray has already made with other cannabis retailers,” Mr. Pucher said.
Canadian LPs are struggling to build brand recognition in the recreational cannabis industry due to strict federal marketing regulations that restrict traditional labelling and advertising.
FOUR20 stores will continue to offer cannabis products made by other companies, though the available Tilray brands will broaden as more products are legalized in late-2019, Mr. Pucher said.