The signs point to further consolidation on the immediate horizon in the Canadian cannabis retail market, according to Frederico Gomes of ATB Capital Markets, who in a February 16 report said that the larger retailers are likely to benefit most from the movement in cannabis retail.
In Gomes’ view, large retailers stand to benefit on account of having more stable access to capital.
“AB has the lowest average annual sales per licensed store in Canada ,” Gomes said.
“LPs are struggling with a lack of consumer loyalty and pricing power and no built-in cost advantage due to inconsistent large-scale cultivation, early-stage manufacturing, and continually evolving consumer preferences,” Gomes said.
Going forward, Gomes believes solid investments can still be made by basing decisions on the quality of a particular operator, its capital position or access to capital, and its diversification.
“With a diversified platform that has exposure to Canadian cannabis retail, accessories, and US CBD, we believe that HITI is aggressively competing for market share in Canada, while continuing to grow international sales.
“As consolidation takes place, larger retailers will increase share and outpace the overall industry’s growth,” Gomes said.