Why Superette is cautiously optimistic about cannabis retail

The weed co's delayed expansion to Toronto highlights the sector's ongoing struggles.

Superette

With the opening of its second store in Toronto’s Summerhill neighbourhood late last month, cannabis retailer Superette is one step closer to having the expansive store network it envisioned back in 2017.

As with most pot shops in Ontario, the young company has encountered hurdle after hurdle since legalization – from the province’s restrictive regulatory regime to its abolished lottery licensing system, and now, the COVID-19 pandemic.

With the opening of its second location in July, and three more in the works for this year or next, Superette appears to be finally hitting its stride. But as a whole, co-founder and chief brand officer Drummond Munro is cautiously optimistic about the state of the cannabis retail industry in Ontario, part of the reason the brand is hoping to stand out with a unique in-store experience and a wide assortment of non-cannabis lifestyle products.

Munro and his co-founder and CEO Mimi Lam hail from Tokyo Smoke’s pre-Canopy era. Lam served as director of corporate development and Munro as head of retail development for the company back when it was a coffee shop and marijuana accessory chain in Toronto. Tokyo Smoke’s parent Hiku Brands was acquired by Canopy Growth in 2018.

“I was in all those meetings with all of the design architects, industrial designers that ended up building that brand,” Munro says. This meant that Lam and he “not only understood how to navigate the cannabis industry, but we also knew that this industry can change within 24 hours, so we couldn’t go too far along, and shoot ourselves in the foot.”

With the founding of Superette in 2017, Munro says the duo wanted to “create a lot of the same things that Tokyo Smoke had going for them – an aesthetically pleasing store, great customer experience – but in a really unique way that no one had experienced yet in the industry and making it a little more accessible and approachable.”

Superette Founders

Superette offers a wide range of cannabis accessories and non-cannabis lifestyle products, from a vintage ashtray to Superette t-shirts and sweatsuits. Roughly 50% of its assortment is Superette-branded accessories and non-cannabis products that Munro says “transcend cannabis consumption and reflect the rituals around it.”

“How do you differentiate in an industry where you all have access to the same products? We all buy from the Ontario government, we all have access to the same SKUs,” Munro notes. “How do you stand out from your competitors while selling the exact same stuff? For us, one of the ways to do that was to curate a product assortment above and beyond cannabis.”

Jumping JackThe company has now introduced its first branded cannabis product, a vape cartridge named Jumping Jack, created in partnership with Fume Labs and Blinc Group. Jumping Jack has been approved by The Alberta Gaming, Liquor & Cannabis Commission and will be available for retail sale in Alberta this month and in other provinces starting this fall.

But due to the lengthy approval process for new products in Ontario, Jumping Jack is not yet available in Superette stores – an unfortunate reality that prevents the company from leveraging the control and brand awareness that would come with selling through its own channels. (The company is currently in talks with the Ontario Cannabis Store to bring the product to Ontario.)

In addition to offering a wide assortment, Munro and Lam have strived to create a unique in-store experience. Superette’s retail concept (named the 2019 Top Retail Store by Cannabis Retailer) feels part toy store, part diner, complete with booths and stools, subway tiling and deli cases from which product can be viewed.

“There are all these things that people have seen before, which inadvertently makes them say, ‘I know how to interact with that,’ says Munro.

In spite of its early successes, the brand is not where it anticipated it would be two years into legalization. The delays that have plagued Ontario’s cannabis retail industry persist and have, in some cases, worsened due to the pandemic.

While based in Toronto, Superette was forced to open its first store in Ottawa by partnering with one of the 25 winners of the province’s previous retail lottery system. That store recorded $7 million in sales in the five months following its April 2019 opening (though Munro declined to comment on revenue during its first full year in operation).

The Ontario government eventually scrapped the lottery system to help open up the market, but only after announcing in August 2019 that a second lottery would award an additional 42 licences through the Alcohol and Gaming Commission of Ontario.

“[There was the] secondary roll-out of the lottery – we didn’t win again – and then there was a moratorium on licensing, and then COVID hit,” Munro says. “We obviously had ambitions to have a couple of stores open by now. But given all the delays, we were thankful to be able to [open] our first store in Toronto.”

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Since the lottery system has been replaced with an open market process, all new Superette stores, including its new Toronto flagship, are corporate owned.

Munro estimates the pandemic delayed the opening of the Toronto store by five to seven weeks, with the biggest delays coming from city permitting, manufacturing and sourcing.

“Factories stopped producing, people weren’t working in the office, so there have been general delays all across the board,” he says. “We actually couldn’t get a team to go in there and do demolition; the city wasn’t accepting building permits or signage permits.”

And now that the Ontario retail market has opened up, Munro fears a flood of independent applications from prospective retailers could once again hamper the process.

The government is currently granting new retail licenses on a rolling basis, and according to Canadian Press, the province has received 1,066 retail operator licence (ROL) applications and 892 retail store authorizations (RSA); both are needed in order to open a cannabis store. A ROL grants a licensee the chance to apply for an RSA for each new location it wishes to open.

“Unfortunately, there is no visibility into exactly where you sit in the queue and opening dates are their best estimate and not an exact confirmation,” says Munro. Although Superette has passed the initial RSA inspections for its additional stores, the opening dates for those stores range from this fall to early 2021.

“We don’t want 10,000 cannabis stores in Ontario and clustering to occur. There have been obvious obstacles with the general roll-out of this entire experience, and people getting into it for the wrong reasons… having retail experience, or operational experience is crucial,” he says.

Munro believes this has led to a flood of independents that lack the retail experience entering the market believing it’s still a gold rush.

“What’s going to happen is you’re going to see this flood of stores enter the market, but because of COVID and delays and everything, we’re really going to see that get whittled down and the true players that have a great experience and have a brand people can connect with are the ones that are going to survive longer.”