David George-Cosh

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THIS WEEK'S TOP STORIES

Fire & Flower appoints former Couche-Tard exec as new CEO

Fire & Flower has a new boss. The company announced on Wednesday that former Alimentation Couche-Tard executive Stéphane Trudel will be running the cannabis retailer as its new CEO, with Trevor Fencott stepping down from the role and his board duties effective immediately. Couche-Tard owns 35 per cent of Fire & Flower and has warrants that, when exercised, would give it majority control of the pot retailer. Trudel has served on Fire & Flower’s board and has been involved with the retailer since Couche-Tard first invested in the space in 2018. Echelon Partners Analyst Andrew Semple said in a note to clients that despite the CEO transition, it’s business as usual for Fire & Flower. “Although the surprise resignation of the Company’s CEO and Founder may result in increased investor uncertainty in the near-term, if operational improvements materialize we believe investors may view this transition positively,” Semple said.

Alberta’s pot watchdog warns on retail inducements following complaints

Alberta's cannabis regulator warned retailers that agreements tied to sales data in exchange to carry products in their stores is considered an inducement and isn’t permitted. The Canadian Press reports Alberta Gaming, Liquor and Cannabis received six complaints about the practice recently, although each didn’t have enough evidence to determine if a formal offence took place. The regulator continues to monitor the situation, CP said. While the practice isn’t allowed across provinces that have established private-sector retailers, one source told BNN Bloomberg that it happens frequently between producers and retailers despite the threats of licence suspensions.

Scotts Miracle-Gro taking long-term view of legal cannabis market

Lawn and garden giant Scotts Miracle-Gro is taking a very long view of the U.S. cannabis industry as it looks to establish itself as a key player in a post-legalization world, CNN reports. The company’s Hawthorne Gardening Company subsidiary has added several products and companies to position itself as the leading seller of cannabis-growing equipment such as hydroponics and lighting. Hawthorne accounted for nearly 30 per cent, or US$1.4 billion, of Scotts' overall sales in 2021, an increase of 25 per cent a year prior, CNN said. Another Scotts subsidiary funded RIV Capital’s purchase of a New York-based dispensary, positioning the company to eventually own a plant-touching business.

Marketing pot to consumers in the metaverse

The metaverse may be the next frontier that cannabis companies turn to in the latest effort to reach out to fickle consumers, The Wall Street Journal reports. The buzzy, Web3 platform is seen as a “wide open space” for cannabis marketers to be able to discuss their products without the same restrictions they could find on other social media platforms such as Facebook or Instagram. One dispensary opened its digital shop on a metaverse-like platform called Cryptovoxels, which has seen more than 1,000 people visit it each day even if they can’t purchase any items there, the WSJ said. Kandy Girl, another brand that sells infused gummies, bought land on the Decentraland platform and has sold more than US$30,000 worth of non-fungible tokens (NFTs), the WSJ reported. “When there’s a million people logged into a metaverse at any given time, that’s when it is going to make sense to staff [a virtual] dispensary with a real live human being,” said Ben Boyce, Kandy Girl’s head of marketing.

Israeli researchers use virus to enhance cannabinoid levels in plants

Researchers in Israel have enhanced the potency levels of several cannabinoids in a cannabis plant by manipulating a plant-based virus, according to The Times of Israel. The virus was used to modify the genes of a cannabis plant and change the levels of active substances it produces, the newspaper reported. Hebrew University of Jerusalem researchers were able to successfully grow a cannabis plant with higher levels of THC and cannabigerol, a non-psychoactive cannabinoid that has been proven to help ease inflammation and pain, as well as a higher presence of terpenes. Manipulating a cannabis plant and affecting the levels of its active components or their proportions has never been done before, the university noted, and could improve medical marijuana treatment options.

ANALYST NOTE OF THE WEEK

ATB Capital Markets takes a look at Sundial Growers

ATB Capital Markets Analyst Frederico Gomes sees Canadian cannabis conglomerate Sundial Growers as a “consolidator in the early innings” of legalization. While Sundial has seen its stock fall 34 per cent from the start of the year, Gomes describes the company as “well-positioned” to lead the next wave of deal activity in Canada. He points to Sundial’s cash on hand that will allow it to expand its retail footprint by acquiring assets at discounted prices while not falling into the trap of buying unprofitable market share. Sundial’s investment joint venture business SunStream has deployed about $470 million of the $538 million that has been committed to the fund and has been able to take advantage of deteriorating debt markets to seek further opportunities, Gomes said.

Sundial’s retail network – it recently acquired Alcanna’s majority stake in Nova Cannabis and now has roughly 180 stores under its management – will help the company stay on top of consumer trends and seize acquisition opportunities, Gomes added. He noted Sundial has roughly 31 cents per share in net cash and investments that hasn’t been absorbed by the market. He maintains an outperform rating (the equivalent of a buy) and a US$0.80 per share 12-month price target on Sundial’s shares.

CANNABIS SPOT PRICE

$5.11 per gram

-- This week's price is up 0.4 per cent from the prior week, according to the Cannabis Benchmark’s Canada Cannabis Spot Index. This equates to US$1,838 per pound at current exchange rates.

WEEKLY BUZZ

$10.54 billion

– The annualized amount of cannabis purchased by Canadian households in the first quarter of the year, according to Statistics Canada. That figure is down 2.1 per cent from the prior quarter, and 7.9 per cent higher from a year earlier, the data showed.