‘A higher and higher priority’: Alberta-based weed company buys four Sask. shops for $13M

An Alberta-based cannabis company is making an aggressive play in the Saskatchewan market that will bring their number of stores in the province to six.

Fire and Flower announced Thursday it will acquire four licensed retail shops from Saskatchewan-based Prairie Sky Cannabis for $13 million. The shops currently operate under the name Jimmy’s Cannabis Shop in Battleford, Estevan, Martensville and Moosomin.

“Saskatchewan has been a great market to us and we’re excited to grow,” said Nathan Mison, Fire and Flower’s vice-president of government and stakeholder relations.

Completion of the transaction, expected to occur around May 13, will bring Fire and Flower’s store count to 17 across Alberta, Saskatchewan and Ontario. Fire and Flower already operates a shop in each Yorkton and North Battleford. The four Saskatchewan shops will be re-branded as Fire and Flower.

Mison said Fire and Flower hopes to retain current staff at all four locations.

The sale price includes Prairie Sky’s interest in the leases, equipment, furnishings, inventory and provincial and municipal licences and permits. The purchase price will be paid on the completion of certain unspecified milestones and will consist of $6.5 million in cash and the other half in common shares in the company.

Mison said this aggressive expansion is the result of an already successful strategy.

Fire and Flower invested in Open Fields, a wholesale and distribution company opened in partnership with the Saskatchewan Liquor and Gaming Authority (SLGA), which is responsible for regulating the industry. Open Fields allows Fire and Flower to supply their stores and others in the province.

“We found that very successful,” Mison said. “It has allowed us to control supply. Some of the supply changes you’ve seen in other provinces, Saskatchewan hasn’t had.”

He said Saskatchewan became “a higher and higher priority” as more opportunities opened up in the market. The company hopes to become the leading corporate cannabis retailer in Canada.

With more market power, this move puts Fire and Flower on the trajectory to become a major player nationally, said University of Regina economics professor Jason Childs.

“The independent retailers are having a horrible, horrible time getting product in, so that’s the real challenge,” Childs said. “If they’ve solved that, that will give them a real competitive edge and give them the ability to really be quite aggressive moving forward.”

Childs was surprised by the sale figure, saying he would have guessed a lower value than $3.25 million per store. He said the industry is flooded with money and people are willing to take risks to get a better position in the market.

“It’s still gold-rush mentality,” Childs said. “Somebody is going to end up making a lot of money, I have no idea who it’s going to end up being.”

Childs said one of the ways to “win the game” is to become big, to have enough market power to offset the market power at the production side.

Prior to legalization, the Saskatchewan government received 1,502 submissions vying for 51 permits to legally sell cannabis.

Saskatoon, which has the most permits available at seven, received 177 submissions. Regina received 169 submissions competing for six available permits.

Of those six permits in Regina, four shops have opened so far, but at least one more is set to open in the coming months. Two of Regina’s stores, The Cannabis Co. YQR and Wiid, are locally owned.

Mison believes there is room for both small, independent companies and larger groups because “people want a different experience.”

In an email, Jimmy’s Cannabis co-founder John Thomas said he’s not concerned with larger companies entering the Saskatchewan market.

“The industry still has many opportunities for local entrepreneurs,” he said.

“We have seen this in many other provinces that allow private alcohol retail sales and I am sure we will see the same in Saskatchewan.

Thomas and his brother David will remain in the cannabis industry.

“We’ve enjoyed it so much it would be very tough to not be participating in it,” he said.