Strategic alliances between cannabis producers and two well-known coffee chains suggests an emerging synergy between cannabis and caffeine.
Licensed producer (LP) FSD Pharma is the most recent player to enter the retail cannabis space, investing $1.3 million to acquire a 9.9% stake in cannabis retailer Huge Shops—which is moving to open a minimum of 10 cannabis stores in Ontario as part of a strategic alliance with Chairman’s Brands, which counts the Coffee Time chain among its assets.
Huge plans to convert at least 10 Coffee Time shops into retail cannabis stores as part of the alliance with Chairman’s, whose brand portfolio also includes Robin’s Donuts, Eggsmart and 241 Pizza. Huge will also have access to additional Coffee Time stores (of which there are 75 in Canada) subject to availability and negotiation.
Coffee Time trails behind established leaders like Tim Hortons and Starbucks, but FSD Pharma executive co-chairman and co-founder Anthony Durkacz told The Message that its brand recognition could allow the new stores—which will be independently operated and branded–to gain a foothold in a crowded retail category.
“In Ontario everybody recognizes Coffee Time, good or bad,” he said. “From a branding perspective that’s really important.”
Huge Shops has publicly stated that it intends to operate 75 cannabis stores across Ontario, contingent on being granted a retail operator license by the Alcohol and Gaming Commission of Ontario. The Ontario government announced recently that it will issue up to 25 licenses for cannabis stores via lottery. Private retail sales are set to commence April 1.
This is not the first time an LP has partnered with a coffee retailer. Earlier this year, the Second Cup coffee chain—which operates more than 280 stores across the country—announced a strategic partnership with National Access Cannabis Corp. to open a network of NAC-branded stores across Canada. In November, the company announced that it had identified 20 Ontario locations it plans to convert into pot shops.
FSD Pharma executive co-chairman and co-founder Anthony Durkacz said that the connection between coffee shops and cannabis can be traced back to Amsterdam, where the first stores to offer cannabis for sale were known as coffee shops. “I think there’s a 30-year association between coffee shops and cannabis,” he said.
Steve Michalopoulous, VP of brand development at Chairman’s, said in a release that the legalization of cannabis presents a “tremendous opportunity” for companies with an existing retail footprint.
“We’ve been observing closely what’s been happening in the cannabis space and what other brands have been doing within the coffee space,” he said. “Aligning our coffee brand with Huge Shops presents opportunity to carefully evaluate our real estate network and potentially maximize the real estate to the benefit of all stakeholders.”
Durkacz told The Message that there is already a nice bit of symbiosis between Huge and FSD, which trades under the ticker symbol “HUGE” in Canada. FSD doesn’t have an exclusive supplier arrangement the Huge, but Durkacz is hopeful the company will carry some of its product in its stores.
FSD has a stated goal of developing the largest indoor growing facility in the world. It owns the former Kraft manufacturing facility in Cobourg, Ont., and plans to convert up to 3.89 million square feet into grow space. “We believe that indoor [cannabis] will be the most valuable going forward, and maintain the highest margin per gram,” said Durkacz.
