A manager of one Red Deer cannabis store says customers are thrilled edibles are now available.
“We’ve already sold quite a few of them. People seem to be pretty excited,” said Colin Fisher, YSS Red Deer store manager.
“There have been people coming in for the last week or two weeks asking about (edibles).”
YSS, along with some other Red Deer stores, received its first shipment of edibles on Wednesday.
With the cold weather, the cannabis-infused treats didn’t arrive at the dispensary on 49th Street until about 5 p.m., which was a few hours later than expected.
“Lots of people came yesterday, but they understood with the -40 weather that the truck wasn’t running and that’s why they didn’t come in earlier,” said Fisher on Thursday.
The edibles the store has available are just “the tip of the iceberg” for future cannabis products, said Fisher.
“We just have some chocolates and gummies right now. They’ve still got a whole list of infused beverages, like spritzers and sparkling water, with CBD and THC that I know a lot of people are looking forward to,” he said, adding beverages could come to the store as soon as this month.
Isaac Watson, vice-president of product development and retail experience at Fire & Flower Cannabis Co., said edibles have been a popular choice at the company’s two stores in Red Deer.
“Almost every customer walking through the door is taking some time and looking over those products,” said Watson.
“It looks like quite a few customers are picking up edibles in their various forms.”
Watson said he expects edible sales to increase coming into the weekend.
“We don’t know this for sure, but given that it has a more lasting effect, it’ll more likely be consumed on Fridays and Saturdays,” he said.
“For us, this has been a long time coming. We’ve been really excited (to introduce edibles). Alberta was a little bit delayed with their release compared to some of the other provinces.
“But for us, it’s great to finally get it into markets like Red Deer, where the community has been so supportive of us.”
Fisher said a whole demographic of customers has been waiting for edibles.
“A lot of people were waiting for edibles because they weren’t comfortable with the smoke, or just didn’t like the idea of it,” he said.
Anyone trying edibles for the first time should “start low (and) go slow,” Fisher said.
“The packages we sell are capped at 10 milligrams, which is probably a fairly hefty dose for someone who’s new to it. But for a fairly seasoned user, 10 milligrams is not a whole lot,” he said.
“One pack has one unit that’s got 10 milligrams in it, or it will have four two-and-a-half-milligram units or two five-milligram units, so it’s kind of broken up that way.”
Fisher says first-timers should start with two and a half or five milligrams and see how it sits with them.
“Then, you can always go up from there. You know for next time you can start with maybe a 10-milligram dose,” he said.
After 2019’s Market Shakeout, Analysts Says the Right U.S. and Canadian Cannabis Stocks Will Rise in 2020
These Pot Stocks Received BUY Recommendations and Bullish Price Targets Up to 185% Above Market
2019 was an ill-fated year for many North American cannabis stocks and their shareholders. High-fliers such as Canadian licensed producers (LPs) Aurora Cannabis (TSX: ACB) (NYSE: ACB) (FRA: 21P) and Canopy Growth (TSX: WEED) (NYSE: CGC) (FRA: 11L1) were assaulted by headwinds including a botched rollout of retail cannabis operations in Ontario. Numerous American multi-state operators (MSOs) such as Cresco Labs (CSE CL) (OTCQX: CRLBF) (FRA: 6CQ) and the recently acquired Origin House were beset by the difficulty of dealing with a patchwork of laws including the U.S DOJ holding up mergers with antitrust reviews.
Missouri-based brokerage and investment bank Stifel along with its newly acquired Canadian affiliate GMP Capital is calling a loud ‘Buy’ on a range of cannabis stocks that its analysts think can stand apart and deliver major gains by taking advantage of their financial position and competitive edge in 2020. This helps Stifel and GMP separate itself from the pack of brokerage houses and U.S. banks that, as we’ve mentioned in the past, have been late in understanding the dynamics of the burgeoning cannabis industry.
First, let’s take a look at which companies Stifel thinks will do well in the U.S. marketplace—the golden prize of the North American continent and indeed the world, despite Canada’s lead on national legalization. Importantly, these shares of American MSOs are all traded in Canada since the federal status of marijuana makes trading its shares illegal on major U.S. exchanges such as the NYSE and NASDAQ.
Below are a few of the Stifel analyst’s U.S. MSO price targets:
*Prices are in CDN Dollars. Source: Bloomberg Terminal
Two MSOs, in particular, received the most attention from Stifel: Green Thumb Industries (CSE: GTII) (OTCQX: GTBIF) (FRA: R9U2) and Curaleaf Holdings (CSE: CURA) (OTCQX: CURLF).
Stifel expects Green Thumb to rise from today’s closing price of $13.25 and reach a Price Target of $32 per share. The analyst also anticipates an upswing on shares of Curaleaf which closed at $9.51 today and projects that CURA will reach a Target Price of $24. Both GTII and CURA stock received BUY ratings from Stifel and as of today offer investors, an implied upside of 141.51% and 152.37%, respectively. Stifel isn’t the only analyst that’s bullish on these two MSOs. Ten analysts are calling GTII and CURA a BUY, but Stifel’s targets are the most bullish.
GTI reported stellar Q3 earnings in late November 2019, with revenue increasing by nearly 300%. The company is booking revenue in roughly a dozen U.S. states and is continuing its march to new jurisdictions with a growing vertically integrated portfolio of strong brands and cultivation properties. Stifel GMP analyst Rob Fagan said he was particularly attracted to Curaleaf’s financial position, fueling its ability to enter new markets and strengthen its position in established ones quickly through acquisition. “We view the company’s fortified balance sheet as a clear competitive advantage to fuel future value creation,” Fagan emphasized. Curaleaf shares have been on the rise since the company announced its new non-dilutive financing deal on December 20, 2019. Curaleaf closed on its upsized $300 million loan facility yesterday allowing shareholders to rest easy knowing the company won’t have to dilute anytime soon.
In Canada, Fire & Flower Holdings (TSX: FAF) (OTCPK: FFLWF) is a favourite of Stifel’s, which has it pegged to rise 116.35% from today’s closing price of $1.04 to reach his Price Target of $2.25 per share. Stifel analysts think that unlike Aurora, which was just downgraded to ‘Sell’ by Piper Sandler, Toronto-based Fire & Flower can move nimbly in Ontario, which recently announced plans to fix its poor retail cannabis system. Rob Fagan and Justin Keywood of Stifel GMP expect to see Fire & Flower’s Ontario retail store count grow from 30 to over 100 by 2021. This growth in Ontario’s retail space is expected to help the company reach profitability.
Let's hope Fire and Flower is applying for a lot of these new licenses. - FUNMAN
How to Apply for a Retail Operator Licence
Things to Know Before You Begin
Effective January 6, 2020, the AGCO is accepting Retail Operator Licence applications from any interested applicant and will issue a licence to eligible operators immediately upon satisfactory completion of an in depth eligibility assessment.
The AGCO will process applications as they are received. However, the first application received will not necessarily be the first issued as a number of factors determine the length of time to process, including application deficiencies, the number of interested parties to be reviewed, the applicant’s responsiveness in providing required information, the extent of the due diligence investigation required and so on.
The AGCO is committed to processing applications as quickly as possible with the objective of making a legal supply of cannabis more broadly available across Ontario. As regulator, the AGCO’s priorities continue to be ensuring that only eligible applicants are licensed and that licensed operators act with honesty, integrity, and in the public interest, following all laws, regulations and standards.
As a reminder, those who wish to operate a cannabis retail store in Ontario must follow a two-step application process with the AGCO:
* First, they must qualify for a Retail Operator Licence, which confirms they meet the eligibility criteria set out in the Cannabis Licence Act and its regulations.
* Second, once licensed, an operator’s proposed physical store(s) must qualify for a Retail Store Authorization, which confirms the store meets the location, layout, security and other requirements set out in the regulations and standards.
Applying for a Retail Operator Licence
To submit your online Retail Operator Licence application via the iAGCO portal, you will need to create an iAGCO account. For more information on how to create an iAGCO account, visit the iAGCO Customer Feedback FAQs page.
You will also need to know your:
* Applicant Type (Sole Proprietor, Limited Partnership, Partnership, Corporation, Trust)
You will also be required to answer a number of entity and individual disclosure questions and read and sign a Declaration. Once you have created your iAGCO account, you can view the questions and save your application in draft form until you are ready to submit it.
In addition, you will need to provide supporting information by uploading required documents.
If you are applying for a Retail Operator Licence, prior to the Licence being issued (i.e. your licence cannot be issued without the required documentation):
Applicants must provide their Tax Compliance Verification (TCV) confirmation code. For more information, please refer to the Tax Compliance Verification (TCV) Program
2) Personal History
A Personal History (using the form provided on iAGCO) for all employment and/or unemployment (including education, parental leave, etc.) will be required from:
* Applicants who are Sole Proprietors
* Individuals who are required to provide disclosure information
3) Third Party Agreement
Applicants must provide all applicable third party agreements. For more information, please refer to the Supplementary Questionnaire for a list of agreements and details.
To submit an application for a Retail Operator Licence, you must make the non-refundable $6,000 Retail Operator Licence fee payment.
The retailers that are adding stores are increasing revenues with every new store opening, for as many weeks in a given quarter that they are open.
Extractors are producing products a quarter ahead of the LP's that are selling them.
FUNNY how "eyes" see the same thing so very differently? I am more aligned with this writer's point of view because I don't believe PPS's ever just keep going straight up without a bubble to be burst.
But I think the extractors and retailers have a better chance to prevail through the boom and bust cycle that I believe is inevitable in 2020.
Cannabis 2.0 products just started shipping, and it's widely reported that the shelves were running bare within hours or days depending upon the location.
The company fundamentals will take a little time to catch up to the euphoric PPS rises.
Therefore I see a sector PPS retracement because cannabis investors are more savvy this year. They are putting fundamentals before hype.
So I would rather not see the cannabis euphoria cause another problem one year later for investors, as it did in the spring of 2019 when it burst.
Cannabis Stocks Rebound Big: This Won't Last Chris Lau - Monday, January 20, 2020
Last week, cannabis stocks surged, with Cronos (NASDA:CRON) up 26%, Canopy (NYSE:CGC) up 21%, and Aurora (NYSE:ACB) back to the $2 range and up 29%. The sector found buyers as market sentiment turned euphoric.
Although this rally will not last, it gives investors plenty of trading opportunities.
Fundamentally, Cronos and Canopy have the best chance of survival. At $3 billion and $9 billion in market cap as at last week, respectively, these two have outside companies that injected cash on their balance sheet.
Both firms squandered that money while allowing them to invest in the future. As a bigger firm, the launch of edibles (cannabis 2.0) and more store openings in Ontario are near-term catalysts.
Bullish investors need to ignore the price/sales ratio of all cannabis stocks. $100 million in sales against an $8 billion market capitalization seems silly.
And demand-supply dynamics are unfavorable: Canada still has too much supply and falling prices. The illegal weed market continues to benefit from higher prices on the legal channels. If anything, the legalization market is driving demand in the illegal market higher. Medical Cannabis
Aphria (NYSE:APHA) and Aurora are carving a niche in medical cannabis. This is an expensive venture because of higher marketing costs and slow sales of medical cannabis. Plus, R&D costs for justifying the medical use of the product will hurt cash flow.
Takeaway
Beware of the latest cannabis stock rally. Sell into the jump and buy into the dips.
REGINA, Sask., Canada – Fire & Flower Holdings Corp. (“FFHC”) (TSX: FAF) and its wholly-owned subsidiary Fire & Flower Inc. (collectively with FFHC, “Fire & Flower” or the “Company”), today announced that it has begun selling new “cannabis 2.0” product formats in its retail stores in the province of Saskatchewan.
The Company is among the first retailers in Canada to be selling these new product formats. This has been achieved through a private wholesale model in the province of Saskatchewan, where the Company’s wholly-owned distribution business, Open Fields Distribution purchases from and negotiates prices directly with Licensed Producers.
New product formats in Fire & Flower’s assortment will be composed of edibles including gummies, mints and chocolates; and concentrate vaporizers in both all-in-one and cartridge formats. Fire & Flower’s initial assortment of cannabis 2.0 products in the province is anticipated to include offerings from the following Licensed Producers and brands prior to the end of 2019: Aphria, Aurora, Dosist, Cronos, The Green Organic Dutchman, High Park, Organigram, Redecan, and Sundial.
“With Fire & Flower being one of the first retailers in Canada to stock new cannabis formats, this exemplifies the clear benefits of the private distribution model including price, access and diversity of product within the province of Saskatchewan,” shared Trevor Fencott, Fire & Flower’s Chief Executive Officer. “We have demonstrated leadership through establishing Open Fields Distribution which supplies both the Fire & Flower retail network and external accounts within the province of Saskatchewan. There is significant demand for these new product formats in the market and we look forward to bringing these products to our loyal customers.”
“Our team has worked diligently over the last year and we are thrilled to be launching our Solei, RIFF and Good Supply vaporizers in 510 and all-in-ones at Fire & Flower stores across the province of Saskatchewan,” said Bernie Yeung, Vice President, Sales & Channel Strategy with Aphria Inc. “We are confident in our market readiness across the country and look forward to working closely with our retail partners to ensure we have the right brands and product offerings for consumers as we strive to combat the illicit market.”
Fire & Flower will continue to monitor consumer preferences of new product formats using the Hifyre digital retail and analytics platform to judiciously manage its product assortment and inventory on-hand.
As new products, including beverages and topcials, become available, Fire & Flower expects to include these products in the Company’s assortment, thereby increasing consumer choice of new product formats.
The Company does not yet have a confirmed date for the release of new cannabis product formats in provinces where government-owned provincial distributors control the supply chain.
Our customers are invited to use Fire & Flower’s e-commerce website or the Spark PerksTM FastlaneTM service to order online and pickup in store as we anticipate high demand for initial products.
About Fire & Flower
Fire & Flower is a leading purpose-built, independent adult-use cannabis retailer poised to capture significant Canadian market share. The Company guides consumers through the complex world of cannabis through education-focused, best-in-class retailing while the Hifyre digital platform connects consumers with cannabis products. The Company’s leadership team combines extensive experience in the cannabis industry with strong capabilities in retail operations.
Fire & Flower Holdings Corp. owns all issued and outstanding shares in Fire & Flower Inc., a licensed cannabis retailer that owns or has interest in cannabis retail store licences in the provinces of Alberta, Saskatchewan, Manitoba and Ontario and the Yukon territory.
Through its strategic investment with Alimentation Couche-Tard Inc. (ATD.A, ATD.B), the Company has set its sights on the global expansion as new cannabis markets emerge.
Canadian cannabis retail chains see themselves as the kingmakers of brands, and the growth engine driving the sector as more store locations broaden access to legal pot. Analysts expect a strong performance from pot shop chains in 2020, as producers seek to wedge pricier products into limited store space. However, the capital crunch of 2019 may haunt those without deep pockets.
Fire & Flower (FAF.TO), Meta Growth (META.V) (formerly National Access Cannabis), and High Tide (HITI.CN) collectively oversee more than 100 stores, and they all plan to grow their retail footprints in 2020. Chief executives from the three companies participated in a panel hosted by AltaCorp Capital last week, where they discussed how they see cannabis retail evolving in 2020.
The rollout of physical stores in Canada has been anything but smooth thus far, with Ontario opening about two dozen since recreational legalization. That’s compared to the more than 300 serving Alberta’s far smaller population. Last year, AltaCorp analysts estimated Canada would need 3,640 locations to match the store density of Colorado’s mature recreational cannabis market.
“I’m really glad 2019 is over,” High Tide CEO Raj Grover told attendees at Toronto’s Shangri-La Hotel. “We learned a lot of valuable lessons.”
Meta Growth CEO Mark Goliger joked that he learned to assume that “government is not going to get it right,” referring to Ontario’s much-derided lottery-based store authorization system that was recently abandoned for an open allocation model.
For Fire & Flower CEO Trevor Fencott, it was the mood change among lenders that stood out, as the high-flying stocks that saw retail investors pile into pot in 2018 returned to earth in 2019.
“There was a lot of access to growth capital, and all of a sudden it completely dried up,” he said. “I think the biggest lesson that we can take from 2019 is to focus a lot more on profitability.”
With a tough year behind them, Fire & Flower, Meta Growth and High Tide expect 2020 will be a banner year as more stores open for business, consumers get a taste of pricier next generation products, and licenced producers compete for limited shelf space.
Earlier this month, AltaCorp Capital analyst David Kideckel named Fire & Flower his top pick in the cannabis retail sector, noting a better profitability outlook for retailers compared to licenced producers. Analysts at Stifel also named Fire & Flower their top cannabis pick in a lengthy 2020 outlook research note.
The analysts highlight the company’s strategic ties to Alimentation Couche-Tard (ATD-B.TO). The global retail operator announced a deal for 9.9 per cent of Fire & Flower’s equity for $26 million in July, with the potential to up its stake to 50.1 per cent of the company for $380 million. The partnership is aimed at helping Fire & Flower develop its digital retail platform and expand its store network.
“We expected a move to a more privatized model in Ontario, and see Fire & Flower as being a large beneficiary with already 13 strategic lease locations in high traffic areas (mainly in Toronto) ready to go,” Stifel analyst Justin Keywood wrote in a recent note to clients. “We see a compelling investment case with the growth profile ahead and strategic support from Couche-Tard.”
Kideckel praised the company for opening 46 stores ahead of its own timeline. He expects more stores and increased spending from cannabis 2.0 products like edibles and vapes to increase sales to $160 million in 2020, from $58 million in 2019.
The company expects to expand its store network to 135 locations in 2021.
Meta Growth plans to open 90 locations by the end of 2020. The Toronto-based company currently has 34 stores and 36 licences secured. CEO Mark Goliger sees power in the hands of retailers as licenced producers push new and unfamiliar products wrapped in government-mandated bland packages.
“We can king-make brands through distribution and budtender advice,” he said. “Ultimately, success and failure is going to be driven by the retailer. We have a finite amount of shelves. I would ask you to think, how many [chocolates] do you think we are going to carry? This is going to be a massive bottleneck.”
High Tide’s Grover is equally optimistic about the position of retailers in the cannabis value chain. However, he’s willing to slow the pace of new store openings in favour of a tidier balance sheet.
“Our complete focus in 2020 is to become cash-flow positive, even if it means we curtail a little bit of growth and go after selective locations,” he said. “It’s not only about ‘here’s what we’ve got on the map’. It’s about sustainable growth.”
His comments come days after the company secured a $10 million credit facility from Windsor Private Capital, a Toronto-based merchant bank, to open more stores in Ontario and Alberta.
Andrew Udell of the cannabis research firm TheCannalysts expects many retailers will have to go “cap in hand and raise money in a pretty tough market” in order to fuel growth.
He estimates new stores cost around $2 million to open, depending on location and other variables, with $1 million required for initial inventory alone.
“If you take a look at the cash balance of these companies, and their current run rates, they cannot incrementally open more than several stores,” he told Yahoo Finance Canada. “I just don't see them having enough capital runway to fulfil their promises.”
Fire & Flower, Udell said, is in the best position. Although, he notes Couche-Tard acquired its stake in the company “cheaply on the backs of shareholders.”
“Ultimately, Couche-Tard has given them the platform to have as much capital and runway they need to deploy exactly how many stores they need,” he said. “Despite the amount of loss of control, at least they have access to capital to be able to realize a breakeven stance and bring in knowledge and infrastructure from a well-established retailer.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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