Retail cannabis sales have now been growing at a double-digit rate for three months. Phase 2 of legalization in Canada is imminent. And a cannabis “pot of gold” remains to be tapped.
One cannabis company especially well-positioned to capitalize on this next stage in Canada’s cannabis industry is Choom Holdings Inc (CAN:CHOO / US:CHOOF).
On July 30, 2019; shareholders of Choom woke up to a pleasant surprise. The Company announced that a retail sector veteran with senior management experience with both Aritzia and Walmart Canada has joined Choom at its new President.
Corey Gillon spent eight years with Walmart Canada. During that time, he rose from Store Manager all the way to Regional Vice President of Operations and Vice President Ecommerce.
In March 2016, Gillon became Senior Vice President, Retail Operations for Aritzia Inc (CAN: ATZ / US: ATZAF). For those not familiar with that company, Aritzia is a dynamic lifestyle clothing brand. Born in Canada, it now actively retails its popular lines across North America.
Exporting Aritzia success to cannabis
What lured this Harvard Business School graduate from his senior position at Aritzia to opportunities in Canadian retail cannabis? In Choom’s announcement, Gillon himself provided some guidance for investors.
“I am excited to lead a growing part of the Choom business, particularly during such a dynamic and exciting period. Choom is building an iconic brand and I look forward to stewarding the expansion of the Choom cannabis retail network as it prepares for rapid growth within the Canadian cannabis retail landscape.”
Taking Choom’s strong foundation and leveraging that with the marketing/branding savvy of a retail sector veteran with impressive credentials.
That explains why Gillon chose to join Choom now. Investors following the Company are probably asking themselves a second question.
Why did Choom reach out to this heavy-hitter from Canadian retailing at this particular time? The simple answer is that if someone with Gillon’s resume becomes available, it would be foolish for Choom to not add such depth to its management team.
Investors looking deeper, however, may see more than mere coincidence with this new appointment.
Phase 2 of cannabis legalization in Canada looms
To begin with, there are the new markets for cannabis products in Canada. This will be opened up by Phase 2 of cannabis legalization. These products become officially legal for the Canadian marketplace in October 2019. New cannabis products could begin to reach store shelves as early as mid-December.
These value-added cannabis products create new opportunities to develop high-margin revenue streams. Brand development will be crucial.
This also means the need for additional expertise in marketing and branding. Enter Corey Gillon.
That’s reason #1. Even as new cannabis markets in Canada are about to come online, the existing Canadian retail market for cannabis is finally starting to ramp-up effectively.
Cannabis retailing accelerates in Canada
Building a strong retail market for cannabis is all about adding more retail cannabis stores. That has been clearly illustrated in Canada’s largest province, Ontario.
When legal cannabis was only available online, sales for this province of 14+ million people were a mere trickle of potential demand. The province finally began opening retail cannabis stores in April 2019. Opening “just a few stores” caused retail sales to immediately more-than-double in a single month.
Ontario now has 22 cannabis stores, with plans to add an additional 50. Choom has a lucrative foothold in this key Canadian market.
Canada’s (legal) cannabis leader is the province of Alberta. It has already awarded more than 100 licenses for retail cannabis stores. Dozens more stores will be opening soon. Hundreds more will be opening over the longer term.
Choom is one of the leaders in Alberta cannabis retailing. Other important Canadian cannabis markets (notably British Columbia) are also showing signs of finally ramping-up the pace of new store licenses.
Enter Corey Gillon.
The pot of gold for retail cannabis
There were already two good reasons for Choom to add Corey Gillon to its operations at this particular time. Is there a third?
The Seed Investor has been actively reporting on what we see as the single biggest (potential) revenue stream for recreational cannabis: as an alcohol substitute. A previous article explained both how and why cannabis products can be expected to claim enormous market share from the alcohol industry.
If just 15% of Canadian alcohol consumption shifts to cannabis, this would represent an additional $3.6 billion per year in cannabis industry revenues.
To put this into context, a New Frontier Data estimate pegs the size of Canada’s entire cannabis market at $9.2 billion by 2025.
As consumers become more familiar with legal cannabis, old biases and stigmas will continue to fade. Increasingly, they will reach for a cannabis consumer product rather than an alcohol product.
Claiming a major portion of this market share – in Canada’s fully legal market – requires the expertise to cash in on those potential revenues. Enter Corey Gillon.
Choom Holdings has just added impressive retail sector clout to its management team.
This tells investors a lot about Choom. It may also give them a better idea of the potential of cannabis retail in Canada.
DISCLOSURE: Choom Holdings Inc is a paid client of The Seed Investor