A cannabis retail chain in Alberta is seeking to become more competitive in a highly saturated retail cannabis market by offering three new discount outlet cannabis stores.
Four20 Premium market, a chain with 24 locations across Alberta, will be opening three new locations this month under a new brand, the FOUR20 Outlet. The focus, the company says, is on serving specific, competitive markets with larger-volume, lower-cost cannabis.
The three new locations are in Okotoks, Lethbridge, and Sherwood Park, with Okotoks and Lethbridge both opening on September 18.
Consumers will have a chance to find larger volume, lower-priced products at these locations, says Scott Morrow, CEO of Four20, while their other two dozen stores will maintain the standard Four20 Premium (stylized FOUR20) branding and format.
“We’ll be focusing on larger format sizes in the outlet stores because that’s where the value customer is most focussed,” explains Morrow. “The ounces, the one gram vapes, the multi-pack pre-rolls. That kind of customer is much more price aware and price sensitive, and that’s what these stores will serve.”
For customers coming into the new Four20 Outlet stores, he says the focus will still be on the same customer service as their Four20 Premium locations, but with a different look and feel, and lower prices.
Morrow says the intention with the new Four20 Outlet store model is to better compete in certain Alberta regions where there are a large number of competitors per population. Lethbridge, for example, has nearly 30 stores for a population of less than 100,000.
Although all retailers in Alberta purchase products at the same price from the Alberta Gaming, Liquor and Cannabis (AGLC), recent store acquisitions have given Four20 the chance to not only secure new locations but provide these newly acquired inventories to customers at a lower cost than their own Four20 Premium store.
“I think we’re hitting the point of saturation now, or maybe even crossed it already,” says Morrow. “We’re seeing locations closing around us. We’ve bought inventory from a competitor that is closing their doors, and we’re getting more phone calls every week from competitors that are either wanting to get out of the business or look at some type of potential joint venture.”
Although Ontario surpassed Alberta earlier this year in terms of total number of stores, Alberta—with about 4.4 million people and around 680 cannabis stores—has a per capita rate of one store for every 6,470 people. Meanwhile Ontario—with about 14.5 million people and about 1,000 stores—has a per capita rate of one store for every 14,500 people. For Ontario to be on par with Alberta, they would need to have about 3,000 stores.
Although this is not the first outlet or discount chain in Canada, Morrow says Four20’s approach is a little different than their competitors, in that they don’t intend to transition all their stores over. All three new locations are the result of recent acquisitions, rather than changing any of their existing two dozen stores.
“I think there’s a market for (discount stores) but I don’t think every single market requires it,” he says. “I think it’s really about understanding your demographic and your competitive marketplace to make that decision. I don’t see everyone discounting where that’s their entire business model. I think some will, some will carve out niches on service and selection, as we’re doing.”
Acquisitions and closures of cannabis stores will continue in Alberta and other provinces, he says, as more people get a better understanding of how competitive the retail market is. It’s a complicated space with many layers of government and red tape in a highly competitive market.
“I think everyone is realizing, not like any other retail business, that scale will matter in this space. The industry is in consolidation mode right now and we’re hearing from a lot of people interested in selling because they have heard we’ve been acquiring some stores. So we’re still very bullish on the industry and think there’s a long great runway for us here.”
“But you need to understand the regulatory environment you’re operating in. I think what’s unique in cannabis is you have three levels of government regulations you deal with, you have the federal, the provincial, and then the municipal governments. There’s a lot to understand when you get into this space and I think a lot of people got into this industry without thinking that all the way through.”
FOUR20 Outlet Okotoks will open on Saturday, September 18th at 609, 200 Southridge Drive. FOUR20 Outlet Lethbridge will also open on Saturday, September 18th at 3724 Mayor Magrath Dr South.