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HIGHLIGHTS
  1. High Tide opens accessories-only Canna Cabana store, awaits licence
  2. NewLeaf holds more than 20 per cent of Alberta cannabis retail licences
  3. Alberta retailers maintain large growth plans despite licence freeze

Established cannabis store operators in Alberta could be harbingers of the budding Ontario retail scene this year as they roll with some unexpected punches – a worse-than-anticipated national supply shortage and provincial licence freeze – by opening accessories-only stores while holding firm on ambitious expansion plans.

Sixty-five recreational cannabis stores have opened in Alberta since adult-use marijuana was legalized in October, but only 25 bricks-and-mortar stores are slated to open in Ontario starting in April through a lottery process set to take place today. The small number of initial licences in Ontario combined with the chance outcome are the latest curveballs being tossed at a young industry that was planning on opening hundreds of outlets in the country’s biggest market in 2019.

Calgary-based High Tide Inc. opened four Canna Cabana pot stores before Alberta Gaming, Liquor, and Cannabis (AGLC) temporarily stopped issuing retail licences in November due to the national product shortage. So the company has opened its fifth shop while awaiting its licence to sell cannabis, and is selling accessories while establishing relationships with new customers.

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“In the municipalities that are flexible and amenable to this approach, the plan is to open Canna Cabana locations to sell accessories only. When the cannabis supply situation is improved, we’ll be ready and people will know where stores are,” said Nick Kuzyk, chief strategy officer for High Tide, adding this comes with a scaled-back operating model.

“We’re anticipating that in a matter of months, not years, we’ll be able to roll out the rest of our stores in Alberta.”

High Tide has development permits for 28 other locations that are at various levels of completion in the province, he said.

Fire and Flower, which has seven licensed stores open in Alberta and two in Saskatchewan, also plans to open stores to sell accessories while awaiting retail cannabis licences from the AGLC.

“The way we are approaching this in Alberta is we have stores that are built out and licensed but are selling accessories, and for us we also sell hemp fabric apparel and we will do that in Ontario as well,” said Trevor Fencott, chief executive of Fire and Flower, while speaking at a conference hosted by AltaCorp Capital in Toronto this week.

National Access Cannabis (NAC), which owns 14 NewLeaf cannabis stores in Alberta and six Meta Cannabis Supply Co. stores in Manitoba, said on Thursday its cumulative sales by early January reached $10.18-million, and that non-cannabis revenue accounted for about 6 per cent of sales.

NewLeaf does not plan to open accessories-only stores, unlike High Tide and Fire and Flower, which combined have fewer licensed stores than NAC’s 20 in Alberta and Manitoba.

“We will be patient until the moratorium lifts. It allows us to focus more than was planned on the Manitoba market,” said Matt Ryan, vice-president of marketing for NAC.

“None of us are serving the demand that is out there right now and we’d like to get to the point where the industry balances out and normalizes. Our plans will still be to max out in all of the regions.”

NewLeaf, which Mr. Ryan said “played by the rules” and was “very lucky to get 14 (Alberta stores) through before the licence freeze,” holds more than 20 per cent of the 65 licences granted by the AGLC so far. This is above the 15 per cent cap allowed by the AGLC.

“Once the cannabis supply shortage has been resolved and additional licences are issued, AGLC will ensure this situation is resolved and brought into compliance,” AGLC spokesperson Chara Goodings said.

“The current situation with NewLeaf is just a matter of unfortunate timing but we are receiving more product on a regular basis and are hopeful that we can open the licensing process in the near future.”

Ms. Goodings said the AGLC received 12 responses to its expression of interest from licensed producers in late-2018, in its effort to increase supplies.

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An Alberta Cannabis Collective survey of 23 retailers – 56 per cent of whom strongly disagree with the AGLC’s decision to temporarily freeze new licences – estimates that if the freeze extends to one year, business owners will lose a total of $13-million in commercial lease payments, while 1,800 jobs could be impacted.

The fate of smaller businesses still awaiting licences, however, is uncertain.

“I think there will be a lot of (store) sites available, when people realize this business wasn’t the gold mine that people thought it was,” said James Burns, chief executive of Alcanna Inc., which owns five Nova Cannabis stores in Alberta.

“We could take people off leases if they have a good site. Right now the frenzy for buying sites has totally dissipated.”

Alcanna, like other major cannabis retailers, maintains its plan to open the maximum amount of stores possible in Alberta and Ontario, Mr. Burns said.

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