Cannabis retailers find their way into Ontario market

High Tide, Spirit Leaf and Choom have established agreements with the government's lottery winners.
Spirit Leaf Inc--Spirit Leaf Inc- Unveils Concept Design for Rec

A concept design for a cannabis retail location released by Spirit Leaf last year.

When the Ontario government announced the 25 lottery winners who would be permitted to pursue the first cannabis retail licenses in the provinces, producers and retailers alike seemed to be left out in the cold, with all the opportunities being awarded to private citizens.

However, the government planned to charge stiff fines to any applicants who would be unable to open their stores by its deadline. This presented the opportunity for cannabis retail companies, who had already been pursuing franchise and license agreements in markets permitting private sale, to reach out to these winners, and gauge their interest in partnering up to provide them with the knowledge and resources to get their stores open in time.

As the last two weeks have shown, several companies were taking that opportunity quite seriously.

On Feb. 4, Calgary-based High Tide announced that it had entered into a letter of intent with one of the 25 lottery winners, acquiring a minority interest in the unnamed winner and the option to acquire a greater interest in the future, as it would assist with the establishment and operation of a cannabis retail store in Ontario. The following week, it announced that it had been selected to assist with the establishment and operation of a retail cannabis store by a second winner of the lottery.

Established in 2009 as a manufacturer and wholesaler of cannabis accessories, High Tide has been moving into the consumer-facing retail market with its Canna Cabana accessories banner. It has also pegged recreational cannabis as a growth opportunity, entering into letters of intent to acquire two stores in Saskatchewan. The company counts licensed producer Aurora among its investors, while FSD Pharma is one of its founding shareholders.

High Tide has yet to announce if either of its deals in Ontario include anything in the way of naming rights or franchise and licensing agreements. However, deals announced since then have been much clearer.

Spirit Leaf, which has five locations in Alberta and Saskatchewan, announced that it had entered into an agreement with one of the winners, located in Kingston, Ont., that allows for the opening of a Spirit Leaf store  through a brand licence and consulting arrangement. Spirit Leaf with collaborate with the lottery winner to build out the store location, license its brand and operating standards and provide product training. In addition, licensed producer Up Cannabis announced that the location would include one of its branded “experiential hubs,” giving it prominence in the store. The “hub” will focus on its ties to music – something especially relevant as Kingston is the home of The Tragically Hip, one of the early investors in Up Cannabis parent company Newstrike.

Spirit Leaf has 20 additional franchise agreements in Ontario, anticipating plans by the government to issue additional cannabis retail licenses before the end of the year.

Choom, a company based in Vancouver that has expressed its goal to be the largest cannabis retailer in Canada, has also announced a letter of intent with one of the lottery winners to help establish its location, though it did not say if the location would operate under its banner.

Finally, Fire & Flower announced Tuesday that it had reached agreement with two lottery winners, which will result in the company collecting licensing and consulting fees as well as an option to purchase each of the winners’ interests in the retail locations after the expiry of the lottery process, though that purchase would be subject to approval by the Alcohol and Gaming Commission of Ontario. The company expects the stores to be operational by April 1, adding it to a retail network that includes seven cannabis retail stores in Alberta and two in Saskatchewan.