Cannabis Retailers: The Dawn of a New Industry

Date : 02/04/2019 @ 5:25PM
Source : GlobeNewswire Inc.
Stock : Aphria Inc (APHA)
Quote : 13.72  0.07 (0.51%) @ 7:58PM

Cannabis Retailers: The Dawn of a New Industry

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Mugglehead believes that Canadian cannabis retailers will be the next big focus for the industry.

The current marijuana retail industry is practically non-existent today. Not only that, the shopping experience from retailer to retailer, even amongst the same company brands, are incredibly inconsistent.

That’s because Cannabis branding in Canada, like tobacco, is extremely regulated. More importantly, it’s extremely restrictive.

How can any marijuana retailer leverage brand and shopping experience – the way Starbucks has with coffee – when there are so many restrictions on branding and packaging?

Though the cannabis industry is arguably still in a stage of infancy, the coming months will likely be foundational in the creation of Canada’s legacy cannabis brands, as Canada’s marijuana retail sector begins to experience intensifying levels of competition.

Today, Mugglehead looks at a handful of Canadian LPs positioned to capitalize on this influential stage of the marijuana industry.

Westleaf: Conquering Canadian Cannabis Retail

In just a manner of weeks, Westleaf (TSXV: WL), a vertically integrated cannabis company that is focused on delivering innovative retail experiences and engaging cannabis brands, has emerged as one of the top contenders in Canadian cannabis retailing.

It could be because the company’s management seems to respect an age-old piece of entrepreneurial wisdom: conquer your home market before going overseas.

And conquer they may.

Westleaf’s recently closed acquisition of Canndara Canada Inc. increases Westleaf’s planned retail store count from 20-30 to roughly 50 fully operational retail locations by the end of 2020, subject to provincial and municipal licensing and regulations. This positions Westleaf as one of the largest premium cannabis retailers in all of Western Canada.

Westleaf’s innovative retailing strategy could solidify Westleaf amongst some of Canada’s biggest, most well-established marijuana companies.

Jason Childs, an associate professor of economics at the University of Regina, said partnerships and takeovers can lead to a concentration in the market which could then become an oligopoly.

“You’re not just seeing one big owner, we’re seeing Westleaf, we’re seeing Canopy through Tweed, we’re going to see Aphria and Aurora, as well,” he said.

As markets mature, it’s only natural that oligopolies form.

Needless to say, the companies that make up these oligopolies historically enjoy tremendous returns, since these firms control the lion’s share of the market.

By taking a closer look at the brands behind Canada’s leading cannabis producers, we can get a better understanding of which firms will rise to the top of Canada’s seemingly inevitable marijuana oligopoly.

Westleaf, A Cannabis Retail Leader in the Making

In addition to Westleaf’s medical brand, Westleaf is now heavily focused on launching Prairie Records – its retail strategy.

Prairie Records leverages the instinctual tie between cannabis and music to create an unprecedented cannabis purchase experience – a new take on cannabis retail that could draw the attention of a lot of the major LP’s and help with branding across the board.

But instead of albums with songs, each record in the store represents a strain of cannabis that describes precisely the brand and cannabis you’re buying: the strength of the product, the experience, the flavours – even a curated playlist to enhance your experience.

The “records” provide an accessible, tactile medium that puts consumers in control of their purchase.

While Prairie Records seems to target Western culture as a whole, Loon, Westleaf’s health and wellness cannabis brand, appears to target Canadian culture specifically.

Westleaf Targets Western Canada

Using vivid imagery of farm land, lakes, and the common loon (Ontario’s provincial bird, for those unawares), the Loon brand capitalizes upon the serene beauty of rural Alberta and Saskatchewan.

While Westleaf looks to create its own unique branded products, some of Canada’s biggest marijuana producers are using their economic clout to acquire, or otherwise leverage, the brand equity of already established brands.

Tilray

Much like Westleaf, Tilray Inc. (NASDAQ: TLRY) is actively hacking modern culture.

This intention is no clearer than in Tilray’s recent revenue-sharing agreement with Authentic Brands Group (ABG), an owner of a portfolio of global lifestyle brands that includes names like Marilyn Monroe, Michael Jackson, Nautica, and Juicy Couture.

Via CTV News:

[Tilray] announced Tuesday the long-term revenue sharing agreement with Authentic Brands Group, to whom Tilray will initially pay US$100 million in cash and stock, or up to $250 million depending on certain milestones.

Tilray will receive up to 49 per cent of the net revenue from these products bearing names from ABG’s portfolio of more than 50 brands, with a guaranteed minimum payment of up to US$10 million annually for 10 years.

“We believe that consumers will be much more likely to try a cannabis or CBD product if it’s branded with a brand that they already know and trust,” said Tilray’s chief executive Brendan Kennedy.

Under the deal, Tilray would be the preferred supplier of active cannabinoid ingredients, such as CBD and THC, for ABG’s cannabis products.

In addition to its new partnership with ABG, Tilray is introducing its own portfolio of cannabis brands under its subsidiary, High Park Brands. Some of High Park Brands concepts include Irisa, a distinctly feminine, astrologically influenced product line and Yukon Rove, a brand that embraces outback grit and down-to-earth determination.

Aphria

Aphria Inc. (NYSE: APHA) (TSX: APHA) maintains a stake in the cannabis retail sector through its previous investment of $10 million into independent cannabis retailer Fire & Flower.

Aside from this, Aphria currently has five cannabis brands under its belt. Examples include, Solei, a thoughtful, care-free summery brand, Broken Coast, a masculine seaworthy brand, and Good Supply, a rough-around-the-edges, unapologetically vulgar brand.

Currently, Aphria is fighting an unsolicited hostile bid by Green Growth Brands Inc., a U.S.-based cannabis company with a strong focus on retail brands.

The Green Organic Dutchman

Once touted as the world’s largest marijuana IPO, The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF) is a Canadian organic marijuana producer launching its first product line in Spring 2019.

Although The Green Organic Dutchman does not have a significant retail presence as of yet, it holds a unique position as one of the world’s few large-scale, premium organic cannabis brands.

Recently, TGOD increased its forecast of domestic production capacity. As a result of their learnings, the engineering design improvements enable optimized facility throughput which, together with organic specific modifications, provide a forecasted domestic productive capacity increase from 156,000 kg to 202,500 kgs.

Westleaf’s Unrivaled Opportunity to Lead Canadian Cannabis Retail

While Tilray, Aphria, and the Green Organic Dutchman are already some of the biggest marijuana companies, branding remains a key component and all are focused on developing compelling retail brands.

That’s why Mugglehead believes cannabis retailers are the next big boon for the cannabis industry. That’s because in the absence of an online retail channel, consumers require a space to discover new products.

A place that they enjoy coming back to, again and again.

By using innovative retail strategies to foster a more personal connection with their customers, cannabis retail brands like Westleaf’s Prairie Records have the opportunity to attract cannabis consumers from all walks of life—and keep them coming back.

The dawn of the cannabis retailers is here.

The original post can be found here: https://mugglehead.com/the-opportunity-that-canadas-biggest-cannabis-producers-are-missing/

Directors of Mugglehead own shares of Westleaf (WL) and The Green Organic Dutchman (TGOD) at the time of this writing.

About Mugglehead

Mugglehead.com is a digital publisher dedicated to cannabis news, investments, culture, and science, owned by Mugglehead Media Corp. We publish original content, including video, interviews and articles. Because many of the companies and trends we cover are related to investments and stocks within the cannabis industry, please review our disclaimer and forward-looking statements below.

Original content created by Mugglehead Media Corp. © 2019 is protected by copyright laws.

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