Ottawa’s National Access Cannabis is staking its claim to Western Canada’s retail cannabis market with the help of coffee shop Second Cup.
The two companies announced an agreement Thursday to convert a number of Second Cup’s cafes into pot dispensaries and lounges in provinces where private retail will be permitted once the drug is legalized for recreational use later this year.
The Ottawa company will apply for licences to dispense cannabis products and work with Second Cup and applicable franchisees to construct NAC-branded stores carrying cannabis products.
Some of those products will come from another Ottawa-based cannabis firm, CannaRoyalty, which has been rapidly building a portfolio of pot distributors in California in recent years. CannaRoyalty announced a partnership to provide products through NAC’s sales channels last month.
Conversion of any Second Cup cafes to dispensaries will be conditional on obtaining a licence from provincial regulators as well as the approval of the applicable franchisee and landlord.
Though the deadline for federal legislation has shifted, once recreational cannabis is legal, private operators with appropriate licences will be able to sell pot products in provinces including British Columbia, Alberta, Saskatchewan and Manitoba. NAC is already among the organizations selected by Manitoba's government to handle retail sales of recreational pot once legal.
Cannabis lounges won’t yet be coming to any of Second Cup’s Ottawa locations, however. Ontario, Quebec, New Brunswick and Prince Edward Island will only sell cannabis and adjacent products in outlets run by their provincial liquor commissions.
NAC chief executive Mark Goliger said Thursday the deal with Second Cup “allows us to quickly expand our footprint in proven high-traffic retail locations across Canada.”
Second Cup, which has more than 300 cafes across the country, has seen a slowdown in sales. Same-store sales were down 0.2 per cent in 2017, Second Cup said in February. For the 2017 financial year, Canada's second-largest specialty coffee retailer reported adjusted net income of $110,000, an improvement from the $975,000 loss it reported in the previous year.
Second Cup CEO Garry Macdonald said Thursday that in addition to the agreement with NAC, it remains focused on “growing our Second Cup brand and sales through continued product innovation and expanding our network across Canada.”
“This strategic relationship provides Second Cup with a great opportunity to leverage our select real estate assets to increase value for shareholders and franchisee partners,” said Macdonald in a statement.
As well, NAC has issued to Second Cup warrants to purchase five million common shares of the company at an exercise price of 91 cents per share. The warrants expire in April 2023.
- With reporting by OBJ staff