Corporate giants, like Anheuser-Busch, may enter cannabis trade if they decide a profit can be made, prof says
The name change of Liquor Stores N.A., which owns the Liquor Depot chain, to Alcanna this week represents the company’s intent to expand into the Canadian cannabis market alongside Aurora Cannabis, the second-largest cannabis grower in Canada.
“They’re our business partner,” James Burns, vice-chair and CEO of Alcanna, told CBC News. “It gives us one of the top, most incredible-leading, fastest-growing cannabis producers in the world.”
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Alcanna — a portmanteau of alcohol and cannabis — reflects the company’s vision of having two separate divisions of alcohol and cannabis, since legislation will likely bar the sale of the two in the same building.
Alcanna, the largest publicly traded alcohol retailer in North America, boasts a star-studded board of directors.
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Chair Derek Burney is a former political strategist to Brian Mulroney’s government and a former ambassador to the United States.
Board member Karen Prentice, widow of former Alberta premier Jim Prentice, was an executive vice-president for Enmax and worked on the Alberta Securities Commission.
The decision to diversify into the cannabis business was a no-brainer for Burns.
He said in the U.S., where the company has stores in states that have legalized cannabis, they’ve seen liquor sales drop as much as 10 per cent.
“When a new product comes in that affects the product we sell, it made sense to us to be involved in the retail of that product as well,” Burns said. “Same customer, in some senses.”
‘A natural fit’: business prof
Kyle Murray, the vice-dean of the University of Alberta’s school of business, said he’d be surprised if liquor retailers didn’t invest in the cannabis market.
“It seems like such a natural fit,” Murray said. “Their ability to grow their current business is fairly limited, [so] they have to look for new opportunities to grow.”
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Alcanna has 25 years of experience working with the Alberta Gaming, Liquor and Cannabis Commission and regulations around the sale of alcohol, which Murray said will give these companies a head start.
“I think what it is is just saying, ‘Hey look, we have this competency — we’re the leader in retailing alcohol, and this new business seems like it’s going to be a lot like alcohol so we’ll probably be pretty good at that as well.’ ”
Murray said he’s not worried the partnership will smother competition, because the two companies are relatively small compared to some of the large retailers in Canada, like Canadian Tire.
What is more interesting, he said, is watching those large companies with experience in retail to see if they’re going to join the cannabis business.
“There are lots of companies out there that are good retailers — how many of them are going to want to get into the cannabis business? I think that’s a pretty short list,” he said.
Bigger companies with more capital have the ability to wait out the market and jump in if they think there’s money to be made.
A company like Anheuser-Busch, for example, could acquire a company like Aurora for about two or three per cent of their market cap, Murray said.
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“There’s a lot of risk there [for big companies] — reputational risk and just unknowns in how big the market will be,” he said. “It’s not clear that they need to rush in.”
Nonetheless, the current deal is a major move locally and one that Burns said can put Alberta on the map for both alcohol and cannabis sales.
“With us and Aurora together, as you say, one plus one equals three sometimes,” Burns said. “We’re proud Albertans and we think from our base in Edmonton we can take on the world.”