Fire & Flower Archives - Green Market Report

Adam JacksonOctober 18, 2022
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4min12830

Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF) has fashioned a financing deal with Alimentation Couche-Tard Inc. — owner of Circle K convenience stores — in which ACT would supply the company with a $11 million principal amount loan.

The two have also revised a stock purchasing agreement, in which ACT will snap up $5 million worth of common shares of Fire & Flower. ACT is currently the holder of 17,796,284 Series C Warrants.

“These financings with our strategic partner, Alimentation Couche-Tard, provide Fire & Flower with access to capital on favorable terms and demonstrate continued strategic alignment between the two companies as we continue to execute our technology-enabled retail strategy,” said Stéphane Trudel, Chief Executive Officer of Fire & Flower.

“The company will prudently use this capital to continue to grow the business and build upon the recent success we have seen through improvements in our retail, wholesale and logistics, and digital business segments.”

ACT will loan $11 million to the company with an interest rate of 11.0%. The loan matures on December 31, 2023, and ACT will have first-priority security on all of the assets of the company and its subsidiaries, including all intellectual property subject only to permitted liens. Fire & Flower noted in its last earnings report that it had current liabilities of C$31 million and total liabilities of C$79 million.

Fire & Flower may prepay all or any portion of the loan without a bonus or penalty. Funding under the loan agreement is subject to approval from the Toronto Stock Exchange, with funding of the loan expected to occur shortly thereafter.

For the stock purchase, ACT will subscribe for 3,034,017 shares at a price of $1.64798 per share for proceeds of approximately $5 million. Fire & Flower is entitled to terminate the deal and enter into an agreement with respect to an unsolicited superior proposal, in which case the loan shall become immediately due and payable.

“In addition to our co-located store program with Fire & Flower, Alimentation Couche-Tard has committed to advance these financings to enable Fire & Flower to execute upon its growth-oriented strategy,” said Alex Miller, Executive Vice-President, Operations, North America, and Global Commercial Optimization of Alimentation Couche-Tard.

Miller added, “Fire & Flower continues to be our strategic partner in the growing cannabis retail market, and we look forward to continuing to work with Fire & Flower on other initiatives.”


StaffSeptember 13, 2022
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6min2760

The Daily Hit is a recap of cannabis business news for Sept. 13, 2022.

ON THE SITE

Intra-Industry Ballot Measure Fight Brewing In Several L.A. County Cities

A political fight is building to a possible November crescendo in at least three beach towns in Los Angeles County, in which state-licensed marijuana companies are both supporting and opposing multiple ballot questions that are, on their face, pro-cannabis.

At issue are local ballot measures in Hermosa BeachManhattan Beach and Redondo Beach that would  force the cities to issue new cannabis business permits. But not everyone is happy with how the measures achieve that. Read more here.

PharmaCann Buys The Clinic For Undisclosed Amount

PharmaCann, one of the nation’s largest privately held, vertically integrated cannabis companies, is buying all four locations of The Clinic, a group of boutique Colorado marijuana dispensaries. The amount paid was not disclosed.

The planned acquisition will likely see all The Clinic locations rebranded to the popular LivWell brand.  Upon completion of the acquisition, LivWell, the state’s leading cannabis brand, will enjoy the largest presence in Colorado with 26 dispensaries in the Centennial State. Read more here.

Leading Testing Lab Could Soon Detect Same-Day Cannabis Use

Quest Diagnostics (NYSE: DGX) struck a deal with Hound Labs to become the sole provider of test results for a breathalyzer that can identify cannabis use within a few hours of testing. The partnership will give employers the ability to figure out whether an employee ingested or inhaled cannabis products immediately before or during the workday. Read more here. 

Fire & Flower Revenues Tick Down, Tech Services Improves

Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWD) posted mixed results as it faced industry-wide headwinds during the second quarter ended July 30. The company found some buoyancy during the period with its tech services, such as its delivery and member program.

Same-store sales were down year-over-year but increased sequentially on strength from the Spark Perks Member Pricing program. Read more here.

Green Market Report’s Cannabis Tech Awards Profile: CannaBiz Media, Best Platform Design

Sales and marketing are critical aspects of growing a business, but Cannabiz Media’s License Database goes further than any other customer relationship management platform to meet these goals for cannabis businesses. This is why Green Market Report honored Cannabis Media at the first ever  Green Market Report Tech Awards in San Francisco. Read more about Cannabiz Media’s innovative platform here.

IN OTHER NEWS

Green Acre Capital Distribution Corp. Increases Stake In US Distribution Joint Venture With Humble & Fume

Green Acre Capital Distribution Corp. invested $6 million into HC Solutions Holdings, its joint venture with cannabis distributor Humble & Fume (CSE: HMBL) (OTCQX: HUMBF), increasing its ownership interest to 45%. Green Acre funded its investment through an option agreement with Johnson Brothers, a wine, spirits and beer distributor in the United States. Read more here.


StaffJune 14, 2022
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Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWD) announced its financial results for the fiscal 2022 first quarter ending April 30, 2022. Fire & Flower reported revenue fell 7% to $40.9 million for the quarter from $44.1 million in the previous year. Fire & Flower attributed the drop to increasing competition from new licenses issued and pricing pressures in the cannabis retail market. The company trimmed its net losses to $9.9 million versus last year’s net loss of $61.6 million.

“Fire & Flower has delivered impressive growth in the early stages of our business and now we are moving forward to focus on the next phase of our evolution. As we evolve, our goal is to deliver positive Adjusted EBITDA and free cash flow. These goals will be achieved through a focus on operational excellence in all our business segments, continual growth in our Hifyre cannabis consumer technology platform, and expansion of our Pineapple Express Delivery service, now integrated in our Wholesale and Logistics segment. Deep retail expertise and our close partnership with Alimentation Couche-Tard, combined with our industry-leading cannabis consumer technology platform and competitive pricing strategy, are key drivers of value for the Company,” said Stéphane Trudel, Chief Executive Officer of Fire & Flower. Trudel was recently named Chief Executive Officer on June 1, 2022. Prior to joining Fire & Flower, Trudel held the position of Senior Vice President of Operations for Alimentation Couche-Tard Inc. and was a member of its Executive Leadership Team. 

Breaking down the businesses,  retail revenue decreased 12% to $29.6 million from $33.6 million in the prior year comparative period. Wholesale and Logistics revenue of $8.5 million was an increase of $0.8 million or 11% compared to the same quarter of the prior year. Digital revenue of $2.9 million grew slightly from last year’s $2.8 million in the same quarter.

The company has made improvements to its balance sheet. Free cash flow for the quarter was negative $8.7 million, an improvement from a negative $11.6 million in the previous fiscal quarter ending January 29, 2022, as a result of lower SG&A expenses and a reduction in capital expenditures. The cash and cash equivalents balance of $28.4 million as of April 30, 2022, increased by $8.6 million from the fiscal year ended January 29, 2022.

“Competitive pressures, license expansion outpacing market growth, and a growing value-oriented customer base have created challenging market conditions for the industry as a whole.  With these market conditions, we look to optimize our retail network and have already seen favorable indications on our expanded Spark Perks Member Pricing program. As the market continues to grow, novel offerings such as the Firebird Rapid Delivery service, which brings cannabis products to consumers’ doors within hours, will become important service differentiators for our customers. We remain focused on improving near-term financial performance and remain steadfastly focused on our ultimate goal of financial sustainability through driving towards positive free cash flow.”

 


Debra BorchardtApril 26, 2022
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5min2160

Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWD) announced its financial results for the fiscal year and the fourth quarter ended January 29, 2022. In the fourth quarter, Fire & Flower reported that revenue dropped slightly by 1% from the previous year to $42.7 million. Fire & Flower said that retail revenue for the fourth quarter, decreased 5% to $31.7 million from $33.2 million in the prior year’s comparative period. Revenue decreased by $2.0 million or 6% sequentially from the third fiscal quarter of 2021.

The company said that the quarter-over-quarter revenue decrease was primarily due to increasing competition from new licenses issued and pricing pressures in the retail market. The net loss for the quarter was $19.4 million versus last year’s $11.4 million for the same time period. 

Full Year Results

For the full fiscal year, revenue rose 37% to $175.5 million versus the 2020s $128.1 million. The company said that retail revenue for the 2021 fiscal year increased 29% to $130.8 million from $101.5 million in the fiscal year 2020. Wholesale distribution revenue for the 2021 fiscal year increased 49% to $30.3 million compared to $20.3 million in 2020 fiscal. year. The net loss for the year fell slightly to $63 million from the previous year’s net loss of $78 million. 

“Fiscal 2021 has been a year of significant advancement and growth for Fire & Flower and we have delivered meaningful year-over-year revenue growth. The Hifyre Digital Platform has exhibited impressive 129% annual and 7% quarterly sequential growth and is the core value proposition of our business. This year, we have refined our vision to, ‘Deliver Cannabis to the World’ positioning our business as a consumer e-commerce platform, supported by a distributed retail network enhanced by our Circle K store co-location program. This position is enabled through the acquisition of Pineapple Express Delivery, one of the largest cannabis delivery platforms in the world,” shared Trevor Fencott, Chief Executive Officer of Fire & Flower.

“In the fourth quarter of fiscal 2021, while we have continued to see growth in our Hifyre digital business segment, we saw a decline in our retail revenue due to increased competitive pressures within the Canadian cannabis retail landscape. We announced a further competitive price and product strategy aimed at continuing to build an expanded consumer base. As we look out to fiscal 2022, we anticipate continued growth in our digital business and driving further revenue opportunities in the U.S. We look forward to greater continued alignment with our partners at Alimentation Couche-Tard through the retail store co-location program which will be important in delivering a clear, convenience-oriented value proposition to our customers in brick-and-mortar retail and e-commerce.”

Looking Ahead

Fire & Flower remains focused on the long picture. The company completed one of the last remaining steps in its NASDAQ listing by obtaining DTC Eligibility for the common shares on April 13, 2022. It has expanded logistics and delivery services through a cross-docking Distribution Agreement with Manitoba Liquor & Lotteries on April 14, 2022.

With regards to the sales issues, the company announced a highly competitive product and pricing strategy to drive an expanded customer base on April 21, 2022.


StaffDecember 14, 2021
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Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWD) announced its financial results for the fiscal third-quarter ending October 30, 2021, with revenue rising 37% to $45.4 million versus $33.1 million for the third quarter of 2020. The net loss reported was $1.9 million. One cautionary note was that Fire & Flower reported that same-store sales decreased 27% for fifty-four (54) stores in operation during the quarter due to increased competition as the surge in newly licensed retail cannabis stores continues across Canada. The company noted that in Ontario, 228 new stores were opened in the period. Fire & Flower also reported a decrease in same-store sales last quarter.

Trevor Fencott, Chief Executive Officer of Fire & Flower commented, “Our progress in the third quarter was not only demonstrated by our continued strong financial performance, but by the many growth opportunities that we successfully advanced in order to solidify our high-margin, asset-light cannabis retail business model. We completed the acquisitions of PotGuide and Wikileaf, the industry’s leading online cannabis platforms, setting the stage for the role out of our expanded e-commerce digtal platform strategy. In addition, we expanded our Circle K co-location program to create additional strategically-located, asset-light stores to complement our existing retail network. Finally, last week, we announced our acquisition of Pineapple Express Delivery, the cannabis industry’s leading logistics provider for the delivery of legal cannabis.”

It was the sixth consecutive quarter of positive Adjusted EBITDA of $2.1 million compared to positive Adjusted EBITDA of $2.0 million for the third quarter of 2020. Fire & Flower currently has 102 stores. The company said its total principal amount of debt outstanding on October 30, 2021, was $2.4 million and it had cash and cash equivalents balances of $16.5 million. The company also recently announced a $30 million Secured Debt Facility with strategic partner Alimentation Couche-Tard.

“With these accomplishments, we are rapidly transforming into a cannabis consumer technology platform which allows us to deliver a seamless customer experience from online customer acquisition through to fulfillment via same-day delivery to customers at our 100+ stores across North America,” concluded Fencott.


StaffDecember 9, 2021
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Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF)  is buying Pineapple Express Delivery Inc., Canada’s largest delivery and logistics company serving the cannabis sector in a deal valued at $5.3 million. The transaction is expected to close in the first quarter of 2022.  Pineapple Express said that its revenue for the trailing 12-month period ending October 31, 2021 was approximately $10 million.

“The Acquisition of Pineapple Express will complete our proprietary technology stack and allow us to deliver a seamless customer experience from online customer acquisition and discovery at our top-of-funnel sites such as PotGuide.com and Wikileaf.com, through a personalized online or in-store shopping experience powered by Hifyre and our Spark Perks program and now culminating in best-in-class fulfillment service right to our customers’ doors through Pineapple Express. To our knowledge, this complete cannabis consumer technology platform is the first of its kind in the legal cannabis industry and will power our asset-light retail strategy, not just in Canada but across North America. We see this as an example of the advantages of building, testing and hardening technology and systems in the federally legal Canadian market before deploying them to the U.S. and other emerging markets,” said Trevor Fencott, Chief Executive Officer of Fire & Flower.

Once the deal is complete, Fire & Flower said it will have all the necessary pieces in its business to deliver a full consumer technology platform experience, supported by a network of more than 100 retail stores and full same-day delivery to cannabis consumers.

Fencott continued, “Cannabis customers shopping in the illegal market are accustomed to purchasing products online which are delivered directly to their door, often in the same day. The Acquisition of Pineapple Express will provide a clear value proposition to cannabis customers who are shopping in the legal market and offer a better solution and experience for those still purchasing from the illegal market. With our cannabis consumer technology platform in place and our strategic partnership with Alimentation Couche-Tard that includes existing in future licensed co-located stores, we are well positioned to successfully execute on our asset-light strategy in new markets we enter, further driving shareholder value.”

Pineapple Express was founded by seasoned delivery pioneer, Randy Rolph and has grown to become one of the largest players in the cannabis delivery space – completing more than 40,000 deliveries per month to recreational and medical cannabis customers across Canada. The addition of best-in-class logistics and delivery management expertise will enable Fire & Flower and Hifyre to provide delivery software and fulfillment technology to its existing network and in the U.S. and European markets.

“Pineapple Express is thrilled to be joining Fire & Flower and Hifyre and we look forward to working with the team to continue to scale our delivery capabilities across Canada and the U.S.,” said Randy Rolph, Founder and Chief Executive Officer of Pineapple Express. “In looking at what was going to allow our company to grow in a way that fulfills our ultimate vision, it was clear that Fire & Flower, with its strategic partnership with Alimentation Couche-Tard, and its focus on building a global, future-focused, cannabis consumer technology platform was the right partner for us in our next evolution.”


Debra BorchardtOctober 5, 2021
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Alimentation Couche-Tard (ACT) (OTC: ANCUF), the parent company of Circle K stores is continuing to cement its relationship with cannabis company Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF). The two companies are expanding on a pilot program to open new Fire & Flower cannabis retail stores next to existing Circle K in markets across Canada.

The original Circle K co-located store pilot program started in July 2020 with the first two stores, located in Calgary and Grand Prairie, Alberta. The company said that the expansion of the pilot program between the strategic partners will see new co-located retail stores open over the next several months in the Canadian provinces of AlbertaSaskatchewan, and Manitoba. The two companies said they expect to continue this strategy with sights set on Ontario and even the U.S.

“Alimentation Couche-Tard has been an invaluable partner to Fire & Flower as we built out Canada’s largest retail network of legal cannabis products and services over the past two years. Our success in Canada, and now as we enter into the U.S., is directly attributable to the powerful consumer data and analytics technology that we have successfully employed in each of our stores through our Hifyre™ technology platform,” said Trevor Fencott, Chief Executive Officer of Fire & Flower. “As we continue to build on our leadership position, we are leveraging our powerful consumer data, strategically working with our key partners to capture this data and, together, enhance our collective cannabis operations, allowing Fire & Flower to advance our ‘asset-light’ business model to further support our financial growth.”

The companies are also capitalizing on the technology that each has developed in order to plan the co-location sites. Fire & Flower said that it used ACT’s existing lease footprint and its own analytics platform called Hifyre to build a small-scale store that delivers strong economies of scale for both companies.

Fencott added, “As we continue to advance our relationship with Couche-Tard, we are driving a new level of service to our extensive operational footprint in Canada and beyond. We are able to leverage the power of Hifyre to allow these small co-located stores to run efficiently. The advanced analytics we provide allows stores to operate and manage inventory at maximum efficiency.”

Debra BorchardtSeptember 30, 2021
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10min2020

High Tide Inc. (TSXV: HITI) (Nasdaq: HITI) just hit a milestone when the Canadian cannabis retailer announced that it has opened over 100 stores. High Tide said that its total number of branded retail locations across Canada numbered 101, and the company has 30 stores in Ontario. In addition to those stats, High Tide also noted that it has launched eight organically-built stores in the month of September alone. While this is a laudable event, could Ontario be reaching dispensary saturation and is that a bad thing for cannabis companies?

Competition is the lifeblood of capitalism. It is survival of the fittest. Retailers that don’t hit the mark will lose customers, while those that can deliver the right products at the right prices in an environment shoppers like will be winners. In the cannabis industry, like other more traditional industries, there are only so many consumers for the product. The industry is limited in its ability to advertise and there is some discomfort at trying to woo new cannabis consumers. The stores are left to wait for the new consumers often called the “canna curious” to explore on their own. This has resulted in a plateauing of sales in some areas. Cannabis consumers can only consume so much within a week or month.

Too Much Competition

The Canadian market is beginning to see the effects of market saturation in some areas. Both Fire & Flower (OTC: FFLWF) and High Tide recently mentioned in their earnings announcements that sales were affected by this. Fire & Flower said that its same-store sales decreased 14% for forty-eight (48) stores in operation during the second quarter of 2021 due to a surge in newly licensed retail cannabis stores in Ontario. According to the company, in just three months the number of licenses went from 665 at May 1, 2021 to 981 at July 31, 2021. The company’s sales also dropped despite the reopening of stores to foot traffic due to the pandemic. Fire & Flower also pointed out that competitors had engaged in deep discount pricing. 

On The company’s earnings call, CEO Trevor Fencott said, “We saw this in Alberta where there was a mass licensing. I think the record at the time was 20 licensed a week. And it expanded. It’s got a lot of kind of mom and pops in the queue that, unfortunately, even though there isn’t really a lot of room for single players anymore in the market, they have to kind of launch to market because they’ve signed a lease. And so, they’re coming, come – no matter what, they’re going to launch. And then, you’ve got the overcrowding and then a pairing back as businesses, unfortunately, can’t compete. So, all these things resolve themselves. I doubt they resolve themselves in a quarter, but they eventually do.”

High Tide noted in its recent earnings call that the number of stores open in Ontario rose to over 1,000 roughly 10 times the number open about a year ago. CEO Raj Grover said, “This increased competition has resulted in it taking longer for new stores to ramp up to the point where they are contributing to consolidated EBITDA. The number of retail licenses in Alberta also increased 60% versus a year ago. And during this time, a few value players have arisen which have driven the retail gross margin for cannabis lower.”

Saturation

As the cannabis industry matures, it begins to face the same issues as traditional retail. Some markets in Canada are now dealing with saturation issues. Grover said in the earnings conference call when asked about saturation, “When you compare the populations between Alberta and Ontario, you’ve got 4.3 million people in Alberta versus 15.5 in Ontario, and Alberta already has 700 stores approximately 700 versus Ontario still has about 1,000 but triple the amount of people. So we still feel that there’s good growth ahead in Ontario. I do agree with you that there are certain markets in Ontario, especially in Toronto, where there’s an extreme saturation of stores.” His plan is to go into retail plazas with strong anchor tenants to keep his traffic strong. High Tide has also created a customer loyalty program called the Cabana Club to combat discounters.

Deep Discounts

In addition to those moves, High Tide is creating its own deep discount brand called Cannabis Chop Club. Grover said on the conference call, “We are seeing very aggressive pricing from select value players. They’re not profitable today and intend to clean up the market before raising prices to a level where they can be profitable. Unfortunately, this will be at the demise of many independents and small chains. We will be positioning our own value brand in more value-sensitive markets and neighborhoods under the Cannabis Chop Club name. This will be done on a micro-market basis depending on the competitive dynamics in each area. We have identified markets where launching our own value brand makes sense. So we can keep our retail concepts differentiated and increase our market share in price-sensitive markets.”

The stores will have a smaller footprint, lower building costs and a different assortment of products and accessories. The locations will be targeting value sensitive areas.

Grover added, “To be clear, we will not be the one starting a price war but we just won’t sit on our hands and lose market share. We will fight fire with fire when necessary. Given our unique positioning in accessories, our lean operations and national scale of growing loyalty plan and our strong capital markets profile and balance sheet strength, we are well-positioned to continue to lead the market regardless of competitive dynamics. And our new Cannabis Chop Club concept will be another tool we have to keep driving value for shareholders.”

Diminishing Returns

Stifel analysts believe the overexpansion of dispensaries will result in diminishing returns for the market. Andrew Carter wrote in a recent report titled September 2021 Cannabis Update, “We outline an uneven environment in which some areas are past the point of saturation, while others have no access: 21% of Canadians live in areas with one store or more per 10,000 residents, while 25% of Canadians live in areas without a licensed dispensary (defined as five miles from the population center). Expanding legal access is likely to be difficult, with 30% of the addressable market in areas where the Provinces own and operate all retail stores, while municipal restrictions prohibit stores in some areas (most notably Mississauga, Ontario, with over 700,000 residents). For the retail operators, the Canadian market is extremely competitive in some areas, with the average Ontario retailer facing 20 stores within a two mile radius. Absent unlocking underserved areas, continued retail growth will not likely be a tailwind for category growth, given the diminishing returns.”

To be fair, sales are still rising for many. Stifel said that Headset suggested robust growth from the Canadian market as lockdown restrictions are easing.  Stifel cautioned that there are elevated retail inventory levels, continued pricing compression, and increasing category fragmentation in what “we regard as a structurally difficult market for private operators.” Carter wrote, “We count over 200 producers, and the market share outside the top-10 producer has grown to 37% in the latest three months, up 12 ppt from the end of 2020. Through July, we highlight the sequential market share performance across our coverage for the trailing three months: Aurora Cannabis down 145 bps, Canopy Growth down 320 bps, Cronos Group up 34 bps, HEXO down 170 bps, and Tilray down 170 bps.”

Ultimately, Stifel said it has an overall negative bias towards Canadian producers.


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