Canadian Cannabis Retailers Could Become Serious Cash Cows In The Near Future

Last week, we published the first part of a two-part series that covers the Canadian cannabis retail market and received a lot of requests for more information on the topic. In today’s follow up article, we have highlighted 5 companies that are capitalizing on this vertical of the Canadian cannabis industry.

While there are some behemoths like Canopy Growth Corporation (WEED.TO) (CGC) that are levered to the Canadian cannabis retail market, there are a lot of smaller operators (from a market capitalization standpoint) that are recording strong growth. A few years ago, Canopy Growth entered the Canadian cannabis retail via the acquisition of an early-stage operator, and we will monitor how the retail market supports the growth of the entire business in 2021 and beyond.

Fire & Flower Corporation (FAF.TO) (FLFWF) is one of the smaller scale operators that are levered to the Canadian cannabis retail market. Earlier this month, the company reported quarterly earnings that showed strong growth and we will continue to monitor how the business performs.

Aurora Cannabis Inc. (ACB.TO) (ACB) followed Canopy Growth’s strategy for the Canadian cannabis retail vertical and made several investments in smaller scale operators. Although Aurora Cannabis’ strategy has not yet proved to be successful, the company opened several branded retail outlets and we will monitor how this vertical of the business supports growth in 2021 and beyond.

Late last week, High Tide Inc. (HITI.CN) (HITIF) issued an update that covered some its most significant milestones of 2020 as well as its going forward growth strategy. The Canadian cannabis retailer’s year was highlighted by the acquisition of Meta Growth which provided the business with additional market share in Ontario’s cannabis retail market. We are impressed with how High Tide was able to capitalize on a challenging market environment and will monitor how the story advances in 2021 and beyond.

Prior to the COVID outbreak, we visited Canada almost every month. While we were in Vancouver, we visited WildFlower Brands’ (SUN.CN) (WLDFF) dispensaries and were impressed with the operation. During 2020, the company has been relatively quiet, and the market has punished the stock as a result. Hopefully, we will be able to visit the operation once travel to Canada is approved and will monitor the trend into the close of the year.

When we look at the revenue numbers that are being reported by Health Canada and the market capitalizations of the companies that are capitalizing in the vertical, we believe there is a disconnect with the market. In 2021, we will monitor how revenue numbers continue to trend and this is a vertical that we believe is flying under the radar.

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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