Second Cup extending its brand into gas and grocery

The coffee chain furthers its strategic pivot with new drive-thrus at Petro Canada, a return to CPG and ambitions for its own branded cannabis products.
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The latest updates on Aegis Brands’ plans for Second Cup are focused on extending the brand into new high-growth opportunities, including by bringing its cafes to drivers on the go.

Through a pilot program with Suncor, three Second Cup drive-thrus will be opened at Petro Canada locations in Ontario this year, before looking at opportunities to “deepen these relationships” in 2021.

The expansion is in line with a strategic plan Aegis has been on to reverse its less-than-stellar performance in recent years, which has included focusing growth in its store network on “non-traditional” locations, such as hospitals, airports and train stations. The company plans to open 14 of these locations in the next 18 months, as well as continue efforts to convert corporate-owned cafes into franchise locations, or other businesses altogether, such as retail cannabis. However, the company says it is also in the midst of a review of its 244 cafes, and plans to close a yet-to-be-determined number of underperforming locations in the coming months.

Further extending its brand, Second Cup has also announced plans to once again make its coffee available for sale into retail. Details of the extension into CPG have not been released, but the company says it will have a robust retail distribution network, supplementing its own ecommerce platform that launched in April.

Second Cup first began selling in retail in the 90s, although by 2015 it began to exit grocery store shelves after previous CPG partner Kraft established a new partnership with McDonald’s.

CPG remains a growth opportunity for coffee brands, which competitors like Tim Hortons, Starbucks and McDonald’s have already tapped, but Aegis CEO Steven Pelton pointed out that demand has skyrocketed during the pandemic, with more people working from home.

Following the opening of its first Hemisphere cannabis retail store last month, the company says it is in the early stages of securing a partner to co-produce a branded line of cannabis products. Included in its cannabis ambitions is the ability to produce both THC and CBD beverages with Second Cup flavours and branding, though the company’s ability to do so would be subject to cannabis marketing regulations. Peloton said, in particular, the deregulation of non-psychoactive CBD would allow it to sell these beverages in its cafes, the first national coffee chain to do so.

These announcements were made as part of Aegis Brands’ Q2 results, released today. For the quarter ending June 27, the company’s first to be fully inclusive of the COVID-19 pandemic, same-store sales declined by 52.6% year-over-year, contributing to a net loss of $1.93 million. However, the company pointed out that sales have begun to trend positively since stores have reopened. While there was a 62% year-over-year decline in same-store sales in April, the decline was only 43% in July. As of the end of July, 176 of the company’s 244 cafes had re-opened, and royalty and advertising fund payments from franchisees – which had been suspended in March – resumed near the end of the quarter.

Since it has only been open for roughly one month, Hemisphere’s results were not included in this quarter’s financial reporting, but the company says sales are trending ahead of predictions.