Selling Buds & Booze 🍹

Sundial is expanding into the liquor industry following its acquisition of Alcanna...

In Today’s Issue:

  • → Sundial’s Latest Strategy. 💸

  • → Cannabis M&A In Florida. 🏦

  • → The NBA’s Announcement. 🏀

From Buds To Booze

Sundial is acquiring Canadian retailer Alcanna for $276 million USD…

As Canadian cannabis producers struggle to bring their plans of reaching profitability into fruition, several producers have begun revising their initial strategies to reach this goal.

For some producers, partnering with craft cannabis producers is the right path forward, for others focusing on the medical cannabis market is the right play, however, for Sundial Vertical integration is the name of the game.

Building Sundial…

Sundial is based in Alberta, Canada.

While the province of Alberta has exceeded expectations since Canada legalized cannabis for adult-use purposes, the same cannot be said for Sundial Growers.

Since Sundial went public on the 6th of August 2019 when they raised $143 million USD, their share price has declined 96%.

A change of plans…

On the 20th of July, Sundial announced its acquisition of Spirit Leaf — one of the largest Canadian cannabis retailers.

This acquisition cost $107 million USD, which provided them with 86 stores at the time — 18 corporate stores and 63 franchise locations.

This was their entrance into owning retail stores, however, they are now doubling down on this strategy as they announced their acquisition of Alcanna for $346 million CAD in stock.

Alcanna has 171 retail locations throughout Canada, and they also own 63% of Nova Cannabis who owns 62 cannabis retail locations in Canada.

Alcoholic beverages…

With this acquisition, Sundial is one of the first Canadian cannabis companies to move from cannabis to alcoholic beverages.

With Sundial producing products for the cannabis retail stores they own, it remains unclear if they will seek to do the same with alcoholic beverages.

Granted there are similarities from a regulatory standpoint between cannabis and alcoholic beverages, however, cannabis and alcohol are very different product categories.

Looking forward…

Understanding consumer needs in cannabis where many new consumers are still learning the types of products they like is no easy task.

One key aspect of this strategy Sundial has emphasized is its usage of point of sale data to understand consumer needs which is a smart move.

With platforms such as Headset that readily provide all of this information, one has to wonder how necessary it is to own a network of retail stores to obtain this data?

Our Take 

Who knows what the winning strategy is for cannabis in Canada.

In an industry that is clearly so early in its development, what works today is not guaranteed to work tomorrow & at the very least Sundial is willing to try a new strategy to achieve its goal.

A Race To Capture Market Share

Breaking down the billions being spent to win market share in Florida…

Cannabis companies have spent billions to enter the medical cannabis market in Florida.

This ever-increasing interest in Florida stems from their ever-increasing medical cannabis sales.

  • → Sales surpassed $200 million in 2018.

  • → Sales surpassed $400 million in 2019.

  • → Sales surpassed $1.2 billion in 2020.

Leading the way…

Of the 2.31 million ounces of cannabis sold in Florida since the beginning of this year, Trulieve has sold more than 2.7x more cannabis than two of its largest competitors combined.

  • → Parallel sold 194,469 ounces.

  • → Curaleaf sold 255,719 ounces.

  • → Trulieve sold 1.15 million ounces.

Trulieve is leading the way, however, competition is coming from all angles.

The details of the deals…

Many of the most successful U.S cannabis companies are all headed for Florida to win a piece of this multi-billion dollar market.

  • → In September 2020 Cookies acquired a vertically integrated license.

  • → In November 2020 Verano Holdings agreed to acquire Alternative Medical Enterprises.

  • → In December 2020 Ayr Wellness agreed to acquire Liberty Health Sciences for $290 million in stock.

  • → In January 2021 Cresco Labs agreed to acquire Florida Bluma Wellness, for $213 million USD in stock.

  • → In May 2021 Trulieve agreed to acquire Harvest Health & Recreation, for $2.2 billion USD in stock.

  • → In September 2021 Planet 13 Holdings agreed to acquire a medical cannabis license in Florida for $55 million USD.

Store growth = sales growth

The number of people certified to receive medical cannabis has increased 46% in the last year.

  • → Florida had 424,224 patients in October 2020.

  • → Florida had 619,278 patients in October 2021.

During this same period of time, where the total number of certified patients has increased 46%, the number of cannabis retail stores open to service this ever-increasing demand has only increased 33%.

Consolidation…

There has been significant consolidation in Florida.

Of the 350+ cannabis retail stores open today, there are four companies that have captured over 60% market share.

  • → Curaleaf has 37 stores.

  • → AltMed Florida has 38 stores.

  • → Liberty Health has 42 stores.

  • → Trulieve has 105 stores.

Our Take

Florida has very quickly become one of the most important markets for cannabis in North America.

The importance of this market is likely only going to increase as medical sales continue to reach record highs, alongside the increasing likelihood of adult-use sales being permitted.

No More Random Cannabis Tests

The NBA is extending its policy to allow players to consume cannabis…

Should professional athletes have to ask for permission to consume cannabis?

Although professional leagues have been debating this question for decades as players continued to consume cannabis — this specific issue took center stage following Sha'Carri Richardson's ban.

Following the lead…

Both the National Hockey League and National Football League have amended their cannabis policies to say players testing positive for cannabis will no longer be suspended.

Major League Baseball does not test players for cannabis use anymore, in addition to the UFC having announced they would no longer penalize fighters for consuming cannabis.

Next on this list? → The NBA

In 2020 the NBA stopped testing players for cannabis as they all entered the NBA covid-bubble, where teams completed the season at Disney World.

Building on this…

This decision was not based on an examination of the evidence for cannabis, instead, the league emphasized that this decision was simply to reduce the likelihood of players catching COVID-19.

Now, the NBA has agreed to extend this decision to not randomly test players for cannabis during the 2021 season.

“We have agreed with the [National Basketball Player’s Association] to extend the suspension of random testing for marijuana for the 2021-22 season and focus our random testing program on performance-enhancing products and drugs of abuse.” NBA spokesman Mike Bass said.

It’s important to note that cannabis remains prohibited under the league’s policies, however, last year, NBA Commissioner Adam Silver said that the league was considering turning this temporary policy into a permanent one.

Cannabis and the NBA

It is virtually impossible to assess how many of the current NBA players consume cannabis, however, anecdotal evidence suggests consuming cannabis is a norm within the NBA.

Kenyon Martin, who played 15 seasons in the NBA estimated that 85% of professional basketball players consume cannabis.

Adding weight to this anecdotal evidence — in 2020, six NBA players anonymously surveyed by NBC Sports indicated at least 50% of the league consumed cannabis in some form.

From basketball to buds…

The industry has seen no shortage of former professional basketball players entering the industry.

  • → Kevin Durant was an early investor in Dutchie, in addition to recently partnering with Weedmaps to create a cannabis podcast.

  • → Basketball star Al Harrington founded the cannabis brand Viola.

  • → Former NBA champions Matt Barnes and Stephen Jackson created a cannabis-focused podcast called All The Smoke.

  • → Gary Paton created his own cannabis strain with Cookies which is available across California & now Canada.

  • → Hall of Famer Isiah Thomas has invested $3+ million USD into cannabis startups.

Our Take

It’s amazing to see how many professional basketball players have suddenly come out of the cannabis closet — with many of these individuals now founding their own cannabis companies.

I suspect this trend will continue for many years to come as the stigma surrounding cannabis in society continues to be erased.

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