Highs and lows As the province pushes for more pot retailers, weaker brands are likely to be weeded out By: Martin Cash Posted: 7:00 PM CDT Tuesday, Jun. 16, 2020

Hey there, time traveller!
This article was published 15/06/2020 (1557 days ago), so information in it may no longer be current.

As the province opens up the cannabis retail application process for more players, the industry is shaking itself off from the latest round of disruptions.

COVID-19 forced some stores to close temporarily and the rest to hustle and install fixtures and protocols to allow them to safely operate to prevent the spread of the virus. Cannabis companies continue to deal with on-going investor disappointments and the latest round of licence applications in Manitoba means another bout of uncertainties.

But cannabis retailers can’t complain too loudly. It is considered essential services in Manitoba which was not the case in other provinces. But still some stores did close, at least temporarily.

In other provinces, stores were forced to shut their doors completely to stop the spread of COVID-19 and there have been reports from across the country of licensed producers laying off hundreds of workers as they struggled to stay afloat.

Another round of licence applications does give cause for optimism in the industry, after experiencing strong sales through the shut down.

But in Manitoba the retailing landscape still looks like a startup.

In Alberta, officials said 36 new private retailers opened between March 16 and June 11, bringing the provincial total to 469.

Winnipeg-based Delta 9 Cannabis, opened a store in Calgary with another in Grande Prairie scheduled to open next week.

In Ontario, where restrictions were eased to allow another wave of entrepreneurs to open cannabis stores, the province’s alcohol and gaming commission said customers were welcomed to 13 new stores in March and April and 29 more received retail store authorization, which allows them to start buying product but requires them to pass further inspections before opening.

There are only 29 stores open in Manitoba, with many of them many clustered in the same neighborhoods. All six cannabis stores in Brandon are within about a kilometre of each other and a Garden Variety store on Ellice Avenue is the most northerly location in Winnipeg.

There are three cannabis stores in Osborne Village, including Canopy Growth Corp.-owned Tokyo Smoke and Tweed stores around the corner from each other.

Lacey Norton, vice-president retail at Canopy Growth dispelled the rumour that the Tweed store on Osborne Street, which only just reopened a couple of weeks ago, would be closing.

She said, “Both stores are doing great. We continue to see momentum and sales are increasing week over week.”

To date, Manitoba Liquor and Lotteries has received about 94 applications for cannabis stores.

But Norton was noncommittal about whether or not Canopy would be rushing to apply for additional locations in Manitoba.

That is not the case for Delta 9, the home-grown licenced producer which just recorded its first-ever profit for the first quarter of this year.

John Arbuthnot, the CEO of Delta 9 Cannabis, said the company is so keen to expand it has already built a third location in Winnipeg, at Kenaston Boulevard and Lindenwood Drive, while it awaits licensing.

Arbuthnot said the company is shooting to have 12 stores in the province in the next 24 months. It currently has four.

But there are still growing pains. Meta Cannabis Supply Co., which has several partnerships with First Nations, had to close one such location in Portage la Prairie.

And even though Delta 9 is keen to open more — and has allocated about $3.5 million this year to build out more locations — the province has a stipulation that one operator will be limited to owning no more than 15 per cent of stand-alone stores in Manitoba.

The new round of applications includes what is referred to as controlled-access licence for retailers who may already operate a grocery store, convenience store or hotel beer/liquor store in a small town that might not be able to sustain a standalone bricks and mortar store.

To that end Delta 9 announced on Tuesday that it has formed a partnership with the Manitoba Hotel Association to be their exclusive cannabis partner.

The arrangement means the company has access to the MHA membership to canvass and develop interest in establishing cannabis retail outlets and selling Delta 9 cannabis products on site in Manitoba hotels.

At the same time, Delta 9 is starting to entertain inquiries about the potential to establish franchise agreements.

“We will be taking three separate approaches to the market now that it’s opening up — our own corporate stores in very high profile, partnering in controlled access licences and we are starting intake for applications for franchises,” Arbuthnot said.

He said it is too early on in the process to be able to forecast how many more locations it will be able to become involved in. As well there is the issue of a limit on 15 per cent ownership from any one entity.

Susan Harrison, a spokesperson with Manitoba Liquor & Lotteries, said the 15 per cent calculation will always reflect the most current number of licensed stores.

“Given the number of applications in the queue already, it is quite likely that the number of stores that would represent a share of 15 per cent of the market will rise quickly this year alone.”

The fact is, according to Arbuthnot, Delta 9 already represents more than 50 per of capital investment, employment and revenue in the cannabis industry in the province.

Premier Brian Pallister has said he wants to have a cannabis retail location within a half hour drive of all Manitobans, Arbuthnot wants it to be understood that Delta 9 is ready to accommodate.

martin.cash@freepress.mb.ca