Nov. 22, 2021 "'Poor is more': Pot shop chain says low-income areas good for sales": Today I found this article by Jeff Lagerquist on Yahoo news:
For Ontario cannabis stores, the well-worn real estate mantra of "location, location, location" can mean setting up shop in lower-income neighbourhoods, close to where booze is sold, according to some major pot retail operators in the province.
"I have a bit of a saying. It's probably not a very popular saying. But sometimes, poor is more," Steven Fry, president and co-founder of Sessions Cannabis, told an audience at the Lift&Co. Expo last week. "You see in certain demographics, especially in lower socio-demographic areas, cannabis sales are generally higher."
His comments come amid rising competition in Canada's most populous province, where the number of pot shops has exploded throughout the COVID-19 pandemic. Many have opened in retail spaces vacated by businesses unable to weather the economic downturn.
According to real estate brokerage Colliers International, the number of pot shops in the Greater Toronto Area (GTA) grew from 13 in January 2020 to 336 in March 2021, a 2,485 per cent increase. The Ontario Cannabis Store (OCS), the government-owned monopoly wholesaler to retail pot shops, said in August that the province has surpassed 1,000 locations.
Fry, whose company operates 44 locations in Ontario, according to its website, highlights another potentially uncomfortable reality of selling cannabis - an uptick in sales on days when government benefits hit his customers' bank accounts.
"I look at baby bonus day, cheque day, pension day. [They're] the biggest days, by a lot," he said, noting the sales increase can be up to 30 per cent, compared to average daily sales.
For Chris Jones, founder of CANNABIS XPRESS, a chain of small-format pot stores based in Ontario, choosing the right location involves mapping out nearby Liquor Control Board of Ontario (LCBO) and Beer Store locations.
"Usually those types of people that have high alcohol and tobacco consumption are also cannabis users," he told Lift&Co. Expo attendees during a panel discussion.
Fry agrees.
"We look for things that would be complementary, whether it be restaurants or grocery stores. We love liquor stores and beer stores, specifically in Ontario," he said. "Any store we've had that's in or near an LCBO plaza outperforms other stores."
Nova Cannabis (NOVC) chief operating officer Marcie Kiziak says neighbouring stores don't always spell stronger sales, due to restrictions on who can set foot inside pot shops.
"You can't bring children into a cannabis store like you can into a liquor store. So if you want to pick up your cannabis, you can't if you have children," she told the Lift&Co. audience.
Nova has more than 70 locations across Ontario, Alberta, and Saskatchewan under its Value Buds and Nova Cannabis banners.
Kiziak also notes that her company's core customers were not who she initially expected.
"Originally, we thought there was going to be this kind of . . . call them the white wine crowd. That's the best descriptor I've got," she said.
"That's not who our customer is turning out to be. Our customer is turning out to be the big bag consumer," she added, referring to the large format, lower-margin products aimed at disrupting the illegal market.
George Smitherman, president and CEO of the Canadian Cannabis Council, told Yahoo Finance Canada that he has seen no evidence to back up a correlation between strong cannabis sales and consumers in low-income neighbourhoods, or alcohol.
"I don't like the sound of it, to be honest with you," he said in an interview. "Maybe it speaks to the fact that successful retail needs to be everywhere, because our customers are everywhere."
Pot shop pain expected in 2022
Canadian spending on recreational cannabis amounted to $354.6 million in September, according to Statistics Canada. Ontario accounted for nearly 40 per cent of that monthly figure.
The province initially saw a slow roll-out of brick-and-mortar stores, much to the frustration of licensed producers, who blamed the situation for lacklustre financial results. Now, analysts are sounding the alarm over the high number of stores, predicting some will not survive through 2022.
"We are worried that 2022 could be a year of retail closures in Ontario," BMO Capital Markets analyst Tamy Chen wrote in a note to clients earlier this month.
Distribution of pot shops has been uneven across the province, with major municipalities like Mississauga, Vaughan, and Richmond Hill opting out of allowing stores to open.
"Unless more municipalities opt in for cannabis stores, this could lead to a (year-over-year) decline in industry sales," Chen added.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
'Poor is more': Pot shop chain says low-income areas good for sales (yahoo.com)
Feb. 19, 2021 "Goodbye downtown, hello suburbs: What the new Second Cup owner has in store": Today I found this article by Alicja Siekierska on Yahoo news:
The new owner of the Second Cup Coffee has set its sights on an expansion in suburban Canada, the latest turnaround plan aimed at bringing the struggling coffee chain to its former glory.
Last week, Aegis Brands announced it had reached a deal to sell its Second Cup Coffee Co. chain to Foodtastic, a Quebec-based restaurant franchising company. Aegis Brands did not disclose the sale price of the deal, but said it includes a $14 million cash payment and a post-closing earn-out.
While the immediate focus for the new owners of the chain will be making it through the pandemic, Foodtastic chief executive Peter Mammas said that the company has set its sights on expanding the brand in a few years time. The goal is to have 300 locations by 2025, up from the existing store count of 190.
“We’re going to be looking to open smaller locations, with drive-thrus, in suburban markets,” Mammas said in an interview.
“Right now, a lot of these Second Cup locations in malls, downtowns and transit locations – all three parts of the business that have been extremely hurt by the COVID-19 pandemic. We want to diversify the exposure of Second Cup and move it more into the suburbs.”
Foodtastic has long been eyeing a potential coffee acquisition, Mammas said, as the category was not one in its portfolio of restaurants.
Foodtastic is a relatively young player in the Canadian restaurant space. The company, which was launched in 2016, operates 16 restaurant franchises accounting for approximately $250 million in annual revenue.
Second Cup will be the biggest chain in its portfolio, alongside smaller Quebec brands like La Belle & La Boeuf, Big Rig Kitchen & Bar, and Rotisseries Benny. Foodtastic is owned by Mammas and his brother, and has received funding from Oaktree Capital Management, a global alternative investment management firm backed by Brookfield Asset Management. While the company is privately held and does not disclose its financials, he said the Foodtastic has a budget of approximately $85 million for further acquisitions.
“We have a plan, but it’s not going to be done overnight,” he said. “It will be done over 18 months, but that’s how we’ll proceed.”
Mammas said the first priority for Second Cup will be to evaluate the company’s existing staff. Foodtastic’s leasing team will then look at the company’s existing store agreements and analyze operations at all Second Cup locations. After that will come marketing and strategies around modernizing and improving the offerings, as well as renovating outdated stores.
“Our messaging is going to be: we have better coffee, we have a great atmosphere, we have better service, and we’re Canadian,” he said. “We’re going to play on on all those four points. It’s not something that’s going to be done overnight, but I think that’s what we’re going to strive for.”
Coffee is the No. 1 menu item in Canada, according to NDP Group, but it’s a highly competitive market dominated by three players – Tim Hortons, McDonald’s and Starbucks. Those three brands have dominated about 75 per cent of the coffee market in Canada over the last five years, with smaller players battling it out for the remaining 25 per cent.
“There’s lots there. It’s a 2 billion plus serving market every year, so there’s a lot of coffee being served to go around,” Vince Sgabellone, a foodservice industry analyst with NDP Group, said in an interview.
“Certainly there’s a lot for Second Cup to take back.”
Since 2016, Foodtastic acquired 10 of its 16 brands, creating the remaining six from scratch. Of the 10 brands that the company purchased, Mammas said six had sales that were between negative five and 15 per cent. He points to one brand – pizzeria chain Monza – which had sales down in the double digits when Foodtastic took over. He says sales are up 40 per cent since the acquisition.
“We feel confident in our team," he said. "And we're going to leverage our team for Second Cup, just like we did with the other brands. They were suffering, same-store sales were bad, franchisee relationships were bad, and we turned them around.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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