April 9, 2019

Fire & Flower Corp (CVE:FAF) CEO on Ottawa Cannabis Store’s $50,000 First Day Sales

Midas Letter
Midas Letter
Fire & Flower Corp (CVE:FAF) CEO on Ottawa Cannabis Store’s $50,000 First Day Sales

Fire & Flower Holdings Corp (CVE:FAF) (OTCMKTS:FFLWF) CEO Trevor Fencott is thrilled by the success of the company’s Fire & Flower York Street Cannabis store opening on April 1 in Ottawa. Fencott reveals the Fire & Flower branded shop, located in Ottawa’s Byward Market, made $50,000 in systems sales on its first day. Fencott estimates that just half of the province’s 25 retail shops opened at the start of April. The company’s Fire & Flower branded Kingston location had a soft-opening on April 1 and will be open to the public within a week of Ontario’s private retail store launch. Fencott also provides an update on the company’s retail operations in Western Canada. He notes that private retailers are allowed to have e-commerce platforms and offer delivery in Saskatchewan and he believes such ancillary models could be successfully applied to other provinces.


Narrator: Fire and Flower is a cannabis retail franchise with provincial licenses to operate seven cannabis retail stores in Alberta, two cannabis retail stores in Saskatchewan, as well as the wholesale cannabis supply business.

The company is currently pursuing additional licenses to operate stores in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario.

Fire and Flower stores recently surpassed $10 million in sales since legalization. The company had five locations open on October 17th, and has since doubled its retail footprint.

Fire and Flower began trading on the TSX Venture today under the ticker symbol FAF.

[stock_chart symbol=”FAF:TSV” align=”left” range=”1M”]

James West:   Animation. Trevor Fencott is here with me now. He’s the CEO of Fire and Flower. Trevor, welcome.

Trevor Fencott:    Thanks for having me.

James West:   Yeah. So Trevor, you guys just opened a store yesterday in Ottawa, and it was a big success by all accounts?

Trevor Fencott:    Yes, it was a great success. I mean, we knew from opening stores in Alberta on October 17th that there was going to be lines; I don’t think we expected this level of support from Ottawa. We did $50,000 in system sales on Day One; that’s amazing.

James West:   Wow, that is amazing. Did you sell out of anything?

Trevor Fencott:    We did not! I think – well, actually, we came close with a couple of products, but the good thing about the 25-store limit is that there is enough supply. So I mean, obviously it’s not great for consumers because there’s not enough stores out there yet, but the store was fully stocked, and we did a lot of inventory.

James West:   Okay. Of the 25 licenses that were granted under the lottery system in Ontario, how many stores opened yesterday?

Trevor Fencott:    I don’t know. I heard it was fewer than half.

James West:   Right. So does that mean all these other guys have to pay a big fine now?

Trevor Fencott:    It could be, it could be. I mean, we did a soft launch in our Kingston store, so it was open, but we were still doing some final tweaks and training of staff. But we had inventory in store, so we’ll see. There’s probably a few stores that are like that, that are trying to get the last bits of their system up in place, that could have opened, but I think you have to err on the side of caution. This is a regulated industry; you need to err on the side of caution.

James West:   Right. So what are the hours of your store in Ottawa, just out of curiosity? What, when do you open, when do you close?

Trevor Fencott:    It’s 10 till 10.

James West:   Ten till ten? Seven days a week?

Trevor Fencott:    I believe it’s seven days a week; the hours are reduced on Sunday.

James West:   Interesting. So you’re, call it, halfway – open half as much as the black market.

Trevor Fencott:    That’s right, and we don’t deliver.

James West:   Right, and you don’t deliver. Now, do you think that the absence of delivery and the absence of a 24-hour clock, which is currently, like, if you go to Weedmaps.com, there’s like a dozen illegal operators in every jurisdiction operating, delivering weed within an hour in some cases, for a fraction of the cost. Obviously they don’t have to pay the taxes, they don’t have a storefront to operate, they don’t have the burden of compliance of being a public company…how important is it to you that these entities are shut down through enforcement actions by the government?

Trevor Fencott:    I mean, I think that’s certainly part of it. I mean, we have to get support from the government in that regard. But I think the bigger support, and this is true of any industry, is, you have to give customers what they want. You can’t, you know, the reason we’re out of prohibition is simply that people are cannabis consumers; that’s the fact, right?

James West:   Right.

Trevor Fencott:    So I think it’s probably as important, if not more important, for the government to focus on giving people the products that they want to consume, and that’s coming in October; we’re going to have edibles and other forms of cannabis, so we’ll be more closely aligned to what you can buy from your guy that comes 24 hours a day. But the other piece is, you have to let people, give them access points to cannabis that are more reasonable. So as we look at Ontario, I think the initial government projection of 1,000 stores, I think you need to go to 2,000, 3,000 stores. It’s what the market bears should be your goal, because that’s actually how you compete with it.

And allowing things, in my personal view. In Saskatchewan, we’re able to do online e-commerce and delivery modalities, click and collect, a whole bunch of private industry initiatives. I think that we’re seeing huge success there, and I think that as we go forward, I think other provinces should maybe look at this as perhaps an ancillary model. Not getting rid of, perhaps, the provincial online if you don’t want, but let private companies do the delivery in a safe, effective, socially responsible way.

James West:   Sure. What is your top-selling product?

Trevor Fencott:    I don’t know the top – THC is obviously a huge seller, still.

James West:   Relative to CBD?

Trevor Fencott:    Relative to CBD, yeah.

James West:   Because that’s interesting, it’s the other way around in the United States in the regulated market.

Trevor Fencott:    Yeah, and we see that in Alberta, CBD is a big seller as well, but it’s a supply-constrained environment there. I think that certainly one of the things that we saw sell very, very quickly, I don’t know if we sold out, but it was pretty close, was the peppermint drops, HEXO’s sublingual sort of spray. But I think that that, again, speaks to a product that is more similar to a black-market product. It doesn’t, you know, it freshens your breath. CBD, by the way, and THC.

So as we get those kinds of products, and other companies are coming up with innovative products, you’re going to see, I think, us taking market share away. But for the moment, it’s a lot of people that were not involved in the black market that are coming to our stores.

James West:   Sure. There’s something like 170 licenses now across Canada, and how do you determine which companies you will feature in your store and which ones you won’t?

Trevor Fencott:    That’s a great question. So for us, it’s a balanced scorecard. We want to be very forthright with our vendor partners and say look, you know, it’s a – we’re curating, our role is to curate this for the consumer. They don’t have time to know all the different brands and all the different QA procedures and stuff, so it’s our job to curate this, like Whole Foods does for health foods. So we go out and a balanced scorecard for us is, are you supplying us, right? I mean, that’s not a given. People who are not living up to their supply commitments can’t be top of the cart for us, because again, we’re making a promise to our customers.

There are certainly QA issues that we’re seeing, you know. There are, there have been recalls in different provinces for different matters and stuff, and so that’s going to matter, because that’s what our customer is buying from us. It’s amazing people come back to the store and say, Well, Fire and Flower, what’s wrong with your cannabis? And we have – this is not our cannabis, this is a licensed producer’s cannabis and maybe we have to think about them as a vendor partner.

It’s also about selection and availability. So not all provinces have the same sort of products, and we’re actually at a particular advantage because we actually do wholesale in Saskatchewan. So Open Fields, our subsidiary there, we buy directly from the licensed producer and we actually also sell to the independent retailers. There’s 31 independent retailers in that market. So we have pretty close relationships with them and in that sense, if we’re getting access to good product – because you know, Saskatchewan is not, they’re not Ontario in terms of their buying power – so if we can get good deals there, then that’s going to be reflected system-wide for us.

James West:   You bet. Interesting. So then, in Saskatchewan, in each place where you operate, is the popularity of products skewed more towards THC universally?

Trevor Fencott:    It is at the moment, but I think that it’s not an apples-to-apples comparison yet. I mean, we’re in a very supply-constrained environment. But we do see, for example, and I’m waiting to see our data from Ontario on what is actually, in a kind of a supply unconstrained environment, although it’s artificial, what are people choosing.

So we know in Alberta that high-THC does sell, and Saskatchewan that’s the same thing, but it’s also because, you know, we’re really limited in terms of the skus that we can get from licensed producers at the moment.

James West:   Wow, fantastic. And when will your Kingston store be open full-time?

Trevor Fencott:    Kingston is going to be doors open to the public on Friday.

James West:   On Friday?

Trevor Fencott:    Yep, I’ll be there, and we invite people to come down. It’s going to be amazing.

James West:   Yeah, well, we’ll have to come and check it out ourselves, so we’ll look forward to that!

Trevor Fencott:    Absolutely.

James West:   All right, Trevor, well let’s leave it there for now. We’ll have you back soon and hear how the retail market is going in Ontario. Thanks for joining me today.

Trevor Fencott:    Thanks for having me.

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