Pottery store chain says low-income areas are good for sales

With increased competition in Ontario, pottery store operators are recognizing potentially uncomfortable sales trends. (Steve Russell / Toronto Star via Getty Images)

For Ontario cannabis stores, the well-known real estate mantra of “location, location, location” may mean establishing a store in low-income neighborhoods, close to the where alcohol is sold, according to some major cannabis retailers in the province.

“I have a little saying. It’s probably not a very popular saying. But sometimes poor is more,” Steven Fry, president and co-founder of Sessions Cannabis, told a Lift & Co audience. Expo last week. “You see in some demographics, especially in lower socio-demographic areas, cannabis sales are generally higher.”

His comments come amid increasing competition in Canada’s most populous province, where the number of jar stores has exploded throughout the COVID-19 pandemic. Many have opened in retail spaces vacated by companies unable to weather the economic downturn.

According to real estate brokerage firm Colliers International, the number of jar stores in the Greater Toronto Area (GTA) increased from 13 in January 2020 to 336 in March 2021, an increase of 2,485%. The Ontario Cannabis Store (OCS), the government-owned monopoly wholesaler for retail pot stores, said in August that the province had passed 1,000 locations.

Fry, whose company operates 44 locations in Ontario, according to its website, highlights another potentially uncomfortable reality of selling cannabis – increased sales on days when government benefits hit its customers’ bank accounts.

“I’m looking at baby bonus day, check day, retirement day. [They’re] the most important days by far, ”he said, noting that the increase in sales can be as much as 30% over average daily sales.

For Chris Jones, founder of CANNABIS XPRESS, an Ontario-based small-format jar store chain, choosing the right location involves mapping the Liquor Control Board of Ontario (LCBO) locations and nearby beer stores. .

“Usually the types of people who consume a lot of alcohol and tobacco are also cannabis users,” he told Lift & Co. Expo participants at a round table.

Fry agrees.

“We’re looking for things that would be complementary, whether it’s restaurants or grocery stores. We love liquor stores and beer stores, especially in Ontario,” he said. “Any store we’ve had in or near an LCBO plaza outshines other stores. “

Nova Cannabis (NOVC), Chief Operating Officer Marcie Kiziak said grocery stores were not always synonymous with stronger sales due to restrictions on who could set foot there.

“You can’t bring kids to a cannabis store like you can to a liquor store. So if you want your cannabis back, you can’t if you have kids,” she said. at Lift & Co. public.

Nova has over 70 branches in Ontario, Alberta and Saskatchewan under its Value Buds and Nova Cannabis banners.

Kiziak also notes that her company’s main customers were not the ones she initially expected.

“Originally we thought there would be this kind of… let’s call them the white wine crowd. It’s the best descriptor I have,” she said.

“That’s not what our client turns out to be. Our client turns out to be the big bag consumer,” she added, referring to large-format, low-margin products aimed at disrupting the illegal market. .

George Smitherman, President and CEO of the Canadian Cannabis Council, said Yahoo Finance Canada that he saw no evidence to support a correlation between high cannabis sales and low-income consumers, or alcohol.

“I don’t like the sound, to be honest with you,” he said in an interview. “Maybe this is a testament to the fact that successful retail has to be everywhere, because our customers are everywhere.”

Pain at the pot store expected in 2022

Canadian spending on recreational cannabis reached $ 354.6 million in September, according to Statistics Canada. Ontario accounted for almost 40 percent of that monthly figure.

The province initially saw a slow rollout of brick and mortar stores, much to the frustration of licensed producers, who blamed the situation for poor financial results. Now analysts are sounding the alarm on the high number of stores, predicting that some will not survive until 2022.

“We fear 2022 may be a year of retail closings in Ontario,” BMO Capital Markets analyst Tamy Chen wrote in a note to clients earlier this month.

The distribution of pot stores has been uneven across the province, with major municipalities like Mississauga, Vaughan and Richmond Hill deciding not to allow stores to open.

“Unless more municipalities opt for cannabis stores, it could cause industry sales to decline (year over year),” Chen added.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on twitter @jefflagerquist.

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