Despite Canadian producers struggling to meet demand, retailers like Fire & Flower have leapt at the opportunity to expand
Fire & Flower CEO Trevor Fencott sees technology as the key to his goal of building Canada’s largest cannabis retail chain.
Throughout his growing dispensary empire, Fencott focuses on the concept of Retail 2.0, which emphasizes the use of technology to engage with customers and meet their needs.
“We have this idea to be the Whole Foods of the cannabis curated experience — doing the work for consumers to help them understand the confusing array of products so they can get what they need,” he says.
Fencott founded Fire & Flower in 2017. On October 17, 2018 — the day Canada’s national legalization of recreational marijuana went into effect — the company had five stores open and in less than a year, has now opened 20 locations across Alberta, Ontario and Saskatchewan. And that’s just the beginning. Fire & Flower plans to have 27 stores by November of this year, 65 by August of 2020 and 85 by 2021.
“The goal is to be the biggest chain in Canada,” he says.
Fencott is a lawyer by trade with a background in software and tech entrepreneurship. He got into the cannabis industry in 2012 and co-founded Mettrum Health Corp., a licensed producer that grew to one of the biggest marijuana companies in Canada, before being acquired by Canopy Growth for $430 million in 2017.
When the Canadian Senate approved a measure legalizing recreational cannabis, Fencott began developing a strategy to grow his own retail chain.
“I took the summer (of 2018) off and thought about it, read a lot of books on Retail 2.0, which includes using data to create a retail footprint,” Fencott says. “In Retail 2.0, you know your customer better than anyone else, and you have a digital dialogue with them. The store, then, is a lab with observation of human interaction with product. It’s far beyond just e-commerce.”
In Fire & Flower’s first 90 days of operations, when it had about nine stores open, it posted $10 million in sales, Fencott says.
Customers at Fire & Flower can sign up at the store or online to create a profile and join the company’s insider program. That information is then compared against point-of-sale data, so the company can match customers with what they usually buy. If a preferred strain or other product comes into the shop that the customer wants, Fire & Flower can send an email or other notification and put the product on hold for them, Fencott explains.
“Retail 1.0, on the other hand, is basically ‘if you have cannabis, people will come buy it,’” Fencott says, calling it an outdated method of selling merchandise. “We can use technology now instead, and we’ve got our customers nailed.”
The ability to connect inventory with individual customers is particularly important now as markets come online with varying supply challenges in each province.
“In Canada there’s a supply shortage, so the No. 1 thing for our consumers is going to a store and knowing it has product,” Fencott says. “You can build a loyalty program out of that and an enhanced consumer experience.”
If consumers know ahead of time that their store has flower, it saves them a great deal of hassle, he adds.
Fire & Flower’s business plan has drawn the attention of David Kideckel, a financial expert on the Canadian cannabis market who works for Altacorp Capital. Altacorp invests in Canadian and U.S. cannabis companies and has offices in Toronto and Denver. It’s backed by ATB Financial, Western Canada’s largest bank.
“We feel management at Fire & Flower is very strong,” Kideckel says. “Overall it’s a very well-rounded company. They’re leveraging data play to really gather, collect and subsequently execute on customer information.”
Fencott, who is on the board of the Cannabis Canada Association and The Law Society of Upper Canada, says Fire & Flower also benefits from another skill — filing paperwork — which has been critical because each Canadian province has its own licensing and purchasing system. Some provinces allow vertical integration, some don’t. Creating a retail chain across a wide variety of regions with different laws can be challenging, but Fencott’s legal background gives Fire & Flower and advantage.
“It’s a patchwork quilt of regulations,” Fencott says. “We have teams in each province working on various licensing. But I think the provinces will eventually look at each other to find the best model.”
Kideckel says he thinks Fire & Flower’s plans are solid, and that the company will benefit from all the regulatory hassles because it has the potential to become a recognized and consistent national brand.
“They’ll be able to brand and buy from licensed producers while focusing on the retail experience,” Kideckel says. “Fire & Flower is one of the few pure play retailers. They’re not engaged in vertical integration. They’re really a premium retail company.”
Because of the uncertainty and variation across provinces, Fire & Flower decided that it wasn’t interested in being a producer. Instead, the company is focusing on opening stores in each province, even if they don’t have cannabis yet. Stores that don’t have supply will operate as paraphernalia shops until supply comes online.
“In Canada at the moment we only have dry cannabis and no extracted oils available,” Fencott adds. “October will be the next round of legalization where edibles, vapes and wax are discussed. Vape pens are really going to be a game changer.”