It’s said that the west is wild and for now that remains the case, at least when it comes to a continually burgeoning cannabis retail market in Alberta – the uncontested dominant player of retail cannabis in Canada.
With a population of 4.3 million, Alberta accounts for roughly 11.5 percent of the Canadian population, and with over 480 cannabis providers listed on the Alberta Gaming, Liquor and Cannabis (AGLC) website, that’s a whole lot of access.
Contrast that to Ontario with a population of 14.5 million which accounts for 38.5 percent of Canadian population, and 87 retail stores according to the OCS Year in Review, or Quebec with a population of 8.5 million which accounts for 22.5 percent of the population, but only 42 stores, according to the SQDC.
Here we take an overview of the cannabis retail scene in Alberta to get a sense of what’s selling and not selling, how “Legalization 2.0” affected business, the potential of reaching market saturation, and how COVID-19 has affected things.
ALBERTA RETAIL OVERVIEW: LEGALIZATION TO TODAY
Alberta’s cannabis retail market is one fire, making it the hottest destination in Canada for cannabis retail from legalization to today, and this has kept retailers on their toes. From Legalization, to Legalization 2.0, to COVID-19, it’s been a continual rollercoaster for retailers.
…many of the approaches that the province of Alberta took during legalization and continues to adapt to, have been really good.ISAAC WATSON, FIRE AND FLOWER
Isaac Watson, VP of Product Development at Fire and Flower(operating 37 stores), commented that the evolution of the retail sphere has been handled very well, by government, retailers, and customers alike, whether it be from the number of interested parties entering the space to the “the sheer number of customers that are choosing to shop in the legal market.”
“I think it has been demonstrated across the province, and I think in almost all markets…it’s really working and many of the approaches that the province of Alberta took during legalization and continues to adapt to, have been really good,” he said.
Ryan Roch, Executive Director of Lake City Cannabis (located in Chestermere),explained that at first operators like himself had to rely solely on the basic fundamentals of business and cannabis, specifically making sure he offered great customer service, whereas now, different product choices are allowing him to differentiate his business from the competition.
How do you staff for that, and how do you manage a labour model when you’ve only got product two days a week but people expect you to have it? Supply challenges have been… challenging.MARCIE KIZIAK, NOVA CANNABIS
“Now it’s product choices. What kind of products are you bringing in?” he asked, hypothetically. “Do you have a good range? Are you paying attention to the trends? Are you watching what people are needing? Are you fluctuating week to week?”
To achieve this, Roch meticulously watches not only what is offered to retailers, but also what his competitors offer via their online menus. With the vast majority of retailers providing online menus of their products to the public, retailers are able to see what’s offered by one another, which allows them to assess what is selling broadly, and as such, what customers want to buy.
Marcie Kiziak, President of NOVA Cannabis (operating 30 stores),commented that one of the issues at the outset of legalization was that it was accompanied by supply issues on an ongoing weekly basis, which brought not only the difficulty of keeping products in stock regularly, but also other logistical challenges.
“That was definitely problematic,” she said. “How do you staff for that, and how do you manage a labour model when you’ve only got product two days a week but people expect you to have it? Supply challenges have been… challenging.”
…as the industry continues to grow there’s going to be more opportunities to really differentiate yourselves as retailers, primarily through product assortment and curation.NATHAN NOBEL, SPIRITLEAF
Kiziak noted that even to this day there still isn’t “a lot of consistency” on a weekly basis when it comes to product availability, which causes the company to “never know for sure if we’re going to have [a specific product] week after week. That creates some challenges for us.”
Nathan Noble, National Manager of Retail and Training at Spiritleaf (operating 40 stores),said that operating in Alberta since legalization has been phenomenal because it was a great region to “really get our feet wet in”. This has provided the company the opportunity to take what they’ve learned in Alberta and apply it to other provinces.
Being close to a large group of diverse retailers provided Spiritleaf the opportunity to “connect with some of our peers in the industry and celebrate those retailers that are doing amazing things,” he said, and that supporting other retailers looking for a little bit of comradery “in this new industry” was a positive that they sought.
Being part of a “greater community” is an opportunity, says Noble, who added that there’s “quite a big pie out there” and that as the industry continues to grow “there’s going to be more opportunities to really differentiate yourselves as retailers”, primarily through product assortment and curation.
CURRENT STATE OF RETAIL: WHAT’S MOVING, WHAT’S NOT?
Everyone noted that dried flower was the number one seller, and with the relatively recent introduction of large format sales (7, 15, and 30 grams respectively), dried flower sales have even further increased.
“Dried flower… takes the number one spot. It always has [and] still reigns supreme,” said Watson about Fire and Flower’s sales, before adding there’s also a jockeying between pre-rolls and reusable vapes with multiple cartridges.
Similarly Roch commented about Lake City Cannabis that while vape sales do well, the biggest movers are bulk sales, including “half ounces, full ounces, that are value-based… People are super comfortable with getting into something like that… you can tell things are shifting a little bit with people’s pocket books.”
The introduction of Legalization 2.0 brought with it new categories and products which are still relatively in a stage of infancy, and while customers are interested in the new products, supply issues and low potency edibles still leave much to be desired.
I would say the one we hear most often would be higher potency edibles, obviously being limited at 10 milligrams, that can be a little low for high tolerance consumers,NATHAN NOBEL, SPIRITLEAF
At NOVA Cannabis products which have performed very well in the edible category includes gummies and soft chews, according to Grant Sanderson, Vice President Operations, who added that the flipside to these new products is that the supply chain is often inconsistent.
Additionally, Noble said of Spiritleaf that while the introduction of new product categories have brought more sales opportunities, what’s missing are “value focused” brands and products which “allow for a bit of trial” at a “better point of access.”
“I would say the one we hear most often would be higher potency edibles, obviously being limited at 10 milligrams, that can be a little low for high tolerance consumers,” he said, adding that remains one of the “common pain points” in a lot of stores.
SATURATION AND PROFITABILITY: IS THE GETTING GOOD?
When it comes to whether the market is saturated, the answer varies depending on who you ask.
We’re a million miles away from saturation, I think we’ve just begun.RYAN ROCH, LAKE CITY CANNABIS
Lake City Cannabis’ Roch expressed that the market is nowhere near saturated, and added that while large corporate dispensaries have multiple stores, there are still underserved communities in the province.
“We’re a million miles away from saturation,” he said, adding, “I think we’ve just begun.”
Conversely, while the major markets in the province have close to the right number of locations according to Watson of Fire and Flower, certain saturation points exist in cities where “you’re able to look down the street and see three different retailers…I think there’s going to be a struggle for each of those retailers.”
“When I see certain of those strips, I really do think that some of those retailers must be struggling to a certain extent,” he said.
Similarly, Kiziak of NOVA Cannabis and Noble of Spiritleaf both agree that the market has reached a level of saturation depending on the specific community you look at. Kiziak pointed to Lethbridge as a specific example – a largely university town where people go home for part of the year, which has 21 stores currently.
All interviewees acknowledged that while their respective businesses are profitable, increased competition due to new retailers and the existing legacy market, supply constraints, a lack of ability to have unique products, and a customer base still in need of education all serve as impediments to greater profitability.
Every decision we make, every price change to the product… is this a value that is going to transition to our customers?RYAN ROCH, LAKE CITY CANNABIS
Every store sourcing their products from the same place limits the ability to have unique products, which is an issue, according to Watson of Fire and Flower. “…we’re all selling the same product [and] pricing becomes pretty competitive.”
NOVA Cannabis let’s their store managers run their businesses with an “‘it’s your business’ accountability approach to everything”, says Sanderson, who explained that they “hyper communicate” with store teams in regards to the viability of their businesses.
Kiziak added that NOVA Cannabis conducts operating statement reviews with each store on a monthly basis to ensure store managers recognize “every cost and every expense” while allowing stores flexibility and autonomy around product offering due to geographical purchasing habits while ensuring they hold retailers “accountable to the results.”
“…if they want to buy something that just doesn’t move and we have to discount it, we do actually hold them accountable for that,” she said.
Roch made clear that Lake City Cannabis is both “making money” and “doing well” and that the primary reason for that is he’s been focused on “value” since day one.
“Value for the customers. Are they getting value in everything we do? Every decision we make, every price change to the product… is this a value that is going to transition to our customers?” he hypothesized. “If we’re answering no to that, then we’re not doing it…it doesn’t make any sense.”
THE COVID19 CURVEBALL
The emergence of COVID19 was an unexpected obstacle retailers across the country had to deal with – along with consumers – at a rapid pace. All those interviewed expressed that the situation brought with it unexpected occurrences, including panic buying.
A lot of people need that retail therapy regardless of what it is they’re buying.ISAAC WATSON, FIRE AND FLOWER
Fire and Flower experienced higher than usual purchasing, specifically large format options, and Watson suggested that customers specifically appreciated that they were able to leave their houses to visit an essential business.
“People totally appreciate that experience,” he said about visiting a store during the pandemic. “…customers have appreciated a place to kind of go out to and make a purchase. A lot of people need that retail therapy regardless of what it is they’re buying. We’ve acted in our stores as a place for people to come and have a little bit of human contact over the last couple of months.”
The reality is that sales [for all retailers] jumped when the pandemic hit, there was a lot of panic buying.MARCIE KIZIAK, NOVA CANNABIS
Similarly, Lake City Cannabis, NOVA Cannabis, and Spiritleaf all saw increased purchases, with Roch commenting that Lake City Cannabis actually saw a decrease in premium sales during the early stages of the pandemic.
“[During COVID19] the high end premium stuff is just not as popular, it’s just not as interesting,” he said. “People’s pocket books are shifting a bit away from them… but we are still moving them.”
Kiziak of NOVA Cannabis noted that at the beginning of the pandemic there were a lot of stores across the province struggling and which were close to potentially closing their doors. She expected many retailers were potentially able to survive longer due to the pandemic itself driving increased sales.
“The reality is that sales [for all retailers] jumped when the pandemic hit, there was a lot of panic buying,” she said, adding that struggling businesses who saw an increase due to [panic] buying could have helped their ability to continue operating. “Otherwise,I can’t see a case in which a lot of these stores make it, you know, another quarter or another two quarters.”
Beyond the pandemic, Alberta will surely continue to remain the wild west, but there is a strong possibility that with the increased licensing of retail stores in Ontario, that central Canada will catch up.
Jon Liedtke is a reporter, a marketing and cannabis specialist, and an entrepreneur who founded Higher Limits, Canada’s largest cannabis lounge, in Windsor Ontario