Delta 9 growing like a weed, adds 3 more stores

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This article was published 17/09/2022 (1349 days ago), so information in it may no longer be current.

Delta 9 Cannabis controls about 20 per cent of the Manitoba cannabis retail market and has increased that dominance with the recent acquisition of three Garden Variety stores, two in Winnipeg and one in Brandon.

The company paid about $1 million per store — the three stores have total revenue of about $8 million — paying for the acquisitions exclusively with stock in the company.

Garden Variety was owned by a partnership that included the successful Colorado cannabis dispensary, Native Roots.

Officials from Garden Variety company were not able to be contacted, but there is some speculation that its decision to exit this market has at least something to do with an over-supply of retail stores here.

With about 2,500 cannabis stores in the country — the vast majority of them independently owned — there is a growing trend towards both consolidation and downsizing.

John Arbuthnot, Delta 9’s CEO said the pace of rationalization in the market is heating up.

“Our phone is ringing every day,” he said. “My understanding is that there have been about seven or eight stores closed in Manitoba in the past few months. In Alberta during the last six months the number of closures have exceeded the number of store openings ”

The company has made it clear in the past that the more stores it owns and operates, the better it is able to move product that it produces itself.

Now with a total of 38 stores and about $60 million-to-$70 million in retail revenue, Arbuthnot said Delta 9 still needs more scale

“We still feel we need to grow to reach critical mass to be competitive in a tough market,” he said.

Because of consumers’ desire for choice Delta 9 can’t exclusively sell its own product in its own stores at the exclusion of products that are popular with consumers.

But Delta 9 does try to stock each of its own stores with at least 25 per cent of its licensed production, thus ensuring strong distribution for its wholesale operation, an advantage it has over other cannabis retail chains that are not also licensed producers.

Delta 9 also has a retail infrastructure in place, with distribution and management that is able to be amortized over an increasingly large number of retail units.

But even some of the larger players are being forced to close locations these days.

Fire and Flower, with about 90 stores from B.C. to Ontario, recently shut down nine stores.

While Delta 9 is not immune to challenges of a crowded market, as an acquirer it is able to pick and choose the locations to buy. The company looks for stores with positive EBITDA and increased sales over the previous 12 months.

This month Delta 9 raised just over $200,000 in a private placement with management, including CEO John Arbuthnot, and insiders taking up about half of that amount.

After the Garden Variety acquisition Delta 9 Cannabis now has 16 stores in Manitoba including two in Brandon, one in Selkirk and one in Thompson; 21 in Alberta; and one in Saskatchewan.

martin.cash@freepress.mb.ca