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HIGHLIGHTS
  1. VIVO and 48North each invest $1.25-million into retailer Friendly Stranger
  2. Friendly Stranger aims to open licensed cannabis stores across Canada
  3. 48North looks for additional retail investment opportunities

Small licensed producers are investing in cannabis retailers – even before the stores obtain licences to sell their product – as legal pot growers look for ways to engage with consumers amid strict marketing regulations that leave them few brand recognition options.

VIVO Cannabis Inc. and 48North Cannabis Corp., both small licensed producers (LPs), have each invested $1.25-million in Friendly Stranger Holdings Corp., a retailer of cannabis accessories in Ontario that has been operating for 25 years and aims to add legal marijuana to its offerings after receiving a licence.

With an additional $2.5-million investment by Green Acre Capital for a total of $5-million, cannabis accessory operator Friendly Stranger plans an “aggressive growth strategy” to open additional stores and launch premium adult-use cannabis store locations across Canada.

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The move follows retail investments made by some of Canada’s biggest licensed producers (LPs), such as Aurora Cannabis Inc., which invested in Canna Cabana-owner High Tide Inc. as well as Choom. Canopy Growth Corp., one of Canada’s biggest LPs, operates Tweed stores through partnerships.

But this is not just a small financial investment for 48North and VIVO, which entered preferred partnership agreements that include helping Friendly Stranger obtain cannabis retail licences, conducting in-store events, and leverage co-branding opportunities.

“We believe that retail is an important opportunity for our company. We are limited to market and brand with the regulations as they are in Canada,” said Alison Gordon, chief executive of 48North, adding that this gives 48North exposure and “consumer experiences” at the retail level.

“Retail gives you different opportunities to have consumer experiences. We do believe in the strength of retail as a business.”

Ms. Gordon declined to state the level of ownership that the investment provides.

Canada’s strict marketing restrictions, which are designed to keep cannabis out of the hands of minors, prohibit LPs from advertising their product and using traditional techniques to develop brand awareness. This makes it difficult for LPs to establish customer loyalty and brand recognition.

Despite the agreements between LPs and retailers, provincial regulations do not permit a producer to sell directly to a retailer in Ontario and most other provinces, where legal cannabis sales must go through the government-run and only wholesaler, from whom retailers must then buy their products. Though 48North will not be permitted to sell directly to Friendly Stranger, the intent is for the store to carry the LP’s products, Ms. Gordon said.

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“We’re interested in looking at other retail opportunities that are out there. We hope to do a similar type deal with other retail groups that maybe touch on another consumer audience,” she said, declining to provide details.

VIVO made its strategic investment in June, after looking for cannabis retail partnerships.

“We have actively sought strategic partnerships with retailers to establish strong relationships with existing and future leaders in the cannabis industry,” said stated Barry Fishman, chief executive for VIVO.

So far, there are 25 retail stores licensed to sell cannabis in Ontario and the next round of licences will be granted following a lottery in August, meaning that the next 42 stores to receive licences to sell pot remains unknown.

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