The opening of Toronto's first adult-use cannabis store helps build awareness and educate customers in the nascent industry, according to Piper Jaffray.
Analyst Michael Lavery commented on the industry after Piper Jaffray visited Toronto on Monday, the first day of legalized sales in the province.
The Thesis
The report noted that only one store, The Hunny Pot, opened in Toronto on the day legalized sales commenced. Despite fewer than expected openings for the day, customer excitement "was clear across the city," Lavery wrote in a note.
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Customer excitement included lines outside in the freezing cold reaching wait times of about 40 minutes, the analyst said. Some shoppers camped out the night before. Security mentioned to Lavery that some in line were over 80 years old, he said.
With Canada's restrictions on branding, cannabis companies were out marketing their brand to customers, including handing out T-shirts and rolling papers.
"Plain packaging is required of actual cannabis, but ancillary products (such as papers) can have unique packaging to help differentiate brands. The Flowr rolling papers had a magnetic seal that adds a premium branding touch," Lavery said.
The Hunny Pot's three-level store had over 50 employees working on opening day. This allowed for the company to individually match consumers with staff, giving Piper Jaffray an "educational and welcoming approach" to the store.
What’s Next
The early excitement doesn't equate to expedited market development in Toronto or Ontario, Lavery said. Other provinces have similar stumbling blocks, such as regulatory and licensing hold-ups, he said.&
"We believe retail stores help build an important presence that can help reduce stigma, educate consumers, add visibility and build brand awareness, but we expect this to be a long process," the analyst said.
"Ontario contains [an estimated] 40 percent of the Canadian population, and Toronto is an important city for building brand momentum."
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