Aurora Cannabis (ACBFF) and Alcanna (LQSIF) reached a license agreement whereby Alcanna has been given exclusive rights to open retail cannabis stores under the brand name Aurora across Canada. Alcanna's position as the biggest private sector liquor retailer in Canada aligns with Aurora's position as one of the world's leading cannabis companies.
In February, Aurora announced its strategic investment in Alcanna (formerly Liquor Stores NA), the Edmonton, Alberta-based retailer of alcoholic beverages with 229 retail outlets in Western Canada and Alaska, with a view to establishing a leading brand of cannabis retail outlets. This forward-thinking partnership combines Aurora's brand leadership, high-quality products, customer care and scientific innovations with Alcanna's well-established retailing infrastructure and expertise.
Aurora and Alcanna have created a unique consumer retail concept that aims to deliver an inviting, inclusive, and educational experience. Highly trained Category Specialists will engage both new and experienced consumers with superior product knowledge and socially responsible advice. The stores will operate under the "Aurora" banner but will represent a house of brands, carrying a carefully curated, but broad selection of products from Licensed Producers across Canada, including Aurora, MedReleaf, and CanniMed.
- Alcanna will build, own and operate the new cannabis stores, where permitted, leveraging its experience and expertise as a responsible retailer of controlled substances.
- The stores will operate under the Aurora name, providing immediate brand recognition based on the company's reputation as a producer of high-quality cannabis products.
- Alcanna is currently converting several of its existing liquor stores into cannabis retail outlets.
- When permitted by government, Alcanna is well-prepared to open a large number of retail stores in any province in Canada.
- In Alberta, Alcanna anticipates opening 37 stores, starting October 17, 2018, the maximum number permitted to a single operator under provincial regulations in year one of legalised adult consumer use.
- Alcanna will retain Aurora through CanvasRx, CanniMed and MedReleaf, which have deep experience working with cannabis users, and unparalleled data regarding efficacy and customer experience to assist in training its in-store associates to know as Category Specialists.
HotHouse Consulting enhances ALPS
In addition to the above, this week Aurora Cannabis also entered into a letter of intent to acquire the cannabis business of HotHouse Consulting, a provider of advanced greenhouse consulting services. HotHouse specialises in hybrid greenhouse growing techniques. With more than 70 years of combined experience, HotHouse's team of consultants currently provide services for approximately 50 customers globally.
Through this acquisition, Aurora enhances ALPS post-construction services offering, providing customers with ongoing support and consulting by HotHouse's crop specialists. These services will include grower training to ensure ALPS designed facilities continue to run at optimal efficiency following client handover in addition to crop planning, irrigation strategies, control, nutrition, climate and integrated pest management.
Aurora and its clients also gain industry-leading insight and knowledge of large-scale, component-based irrigation systems which offer more precision but require a detailed operational understanding. For example, the systems deployed at Aurora Sky in Alberta require the ability to monitor crop health, determine deficiencies and make corrections while being aware of several interrelating factors. Producing results such as an improvement of just 1% in this area will yield measurable increases in top-line annual revenue growth from a facility of Aurora Sky's scale.
OK, so Aurora are the big movers in this space right now. Aggressive expansion (through aggressive acquisitions) has seen them ramp up in all areas of the business. From production capacity and supply to medical patients, research and laboratory testing, they have done it all. Not to mention the two largest acquisitions in the industry to date (CanniMed and MedReleaf).
The above are both great moves by Aurora. The Alcanna deal gives them serious reach once recreational legalisation takes place post 17th October. The ultimate gains are going to be made in owning the customer and Aurora have really positioned themselves well with this joint venture. Their reach, coupled with brand recognition, will undoubtedly capture market share in the Canadian greenish. And the HotHouse deal will significantly impact their greenhouse yield and this can be leveraged across every single one of their domestic and international production facilities.
Although the stock has performed very poorly in 2018, there are a number of reasons for this. The biggest one being the fact that post their stock-only acquisitions of CanniMed and MedReleaf, there was a large amount of selling (by the aforementioned shareholders) as they excited for cash rather than taking stock (paper) and this put severe pressure on the stock. At the same time, the market as a whole has been in a period of serious consolidation (read correction) since the turn of the year and Aurora has been dragged with it. We are still super bullish on Aurora and are currently adding to the paper portfolio at these prices.
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