GTEC Holdings Ltd. (GTEC.V), the company behind several craft cannabis brands, has completed a multi-million-dollar acquisition of a pot retailer that will serve as its flagship brick-and-mortar store in Western Canada.
The acquisition follows a flurry of financing and strategic partnership activity that have strengthened GTEC’s position as one of Canada’s leading vertically-integrated cannabis companies.
GTEC announced on Tuesday that it completed the purchase of “RetailCo” for an aggregate price of $2.113 million. The newly acquired venture will be transformed into Cake Cannabis Co and will operate under GreenTec Retail Ventures, a wholly owned subsidiary of GTEC.
The store, which is located in Vancouver, was previously licensed to operate and sell recreational pot by the city’s Medical Marijuana Related Use program. It contains over 4,000 square feet of retail space in one of Vancouver’s busiest and most desirable neighborhoods.
Cake Cannabis Co will be located in an affluent area that is home to many pot connoisseurs. The fact that 40% of the area is inhabited by 20-39-year also bodes well for the new venture.
Commenting on the purchase, GTEC Founder, Chairman and CEO Norton Singhavon issued the following statement:
“With the recent M&A activity in the retail cannabis sector in Vancouver, we have seen some stores produce significantly higher than expected sales and revenue, which we believe is a clear indication of the demand for adult-use retail cannabis stores in the city. We are extremely excited about this opportunity and are confident that its location will serve as a great flagship location, as it is currently the largest store in our portfolio of diversified and vertically integrated assets.”
Flagship Retail Location
GTEC’s acquisition of high-end Vancouver retail space was strategically crafted after several months of aggressive expansion. The company, which is based in Kelowna, B.C., recently completed a $12.5 million financing round that will allow it to grow its retail footprint and strategic partnerships with some of Canada’s biggest licensed producers.
Despite being only two years old, GTEC has built an expansive portfolio of integrated pot companies.
This includes 100% ownership of:
- Alberta Craft Cannabis
- Grey Bruce Farms
- Tumbleweed Farms
- GreenTech Bio-Pharmaceuticals
- Zen Labs
- Spectre Labs
The company also owns a majority stake in GreenTec Retail Saskatchewan and a minority position in Cannabis Cowboy. Its operations span B.C., Alberta, Saskatchewan and Ontario.
GTEC has completed three cultivation facilities and is now eyeing cannabis sales as its next major milestone.
Retail Cannabis Sales in a Holding Pattern – For Now
Since peaking in December, retail cannabis sales in Canada have leveled off due to an acute supply shortage and lack of brick-and-mortar options in provinces like Ontario. Activity have declined the least in B.C, where revenues are actually up compared with December.
According to the latest StatsCan figures, B.C. pot retailers generated $1.923 million in sales in February compared with $1.239 million in December.
In Ontario, sales have declined to $7.539 million in February from $8.721 million at the end of 2018.
Clearly, GTEC has picked the right province for its flagship retail store. But in the long haul, its retail expansion could succeed anywhere in the country once supply shortages are addressed.
And we also shouldn’t underestimate the presence of retail stores in fueling demand.
Supreme Cannabis Company Inc. president John Fowler recently predicted that the presence of brick-and-mortar shops in Ontario would boost per-capita spending by a factor of two.
GTEC’s Cake Cannabis Co will begin operations in B.C., but the same logic applies. It’s reasonable to expect that at least some of the 1,400+ pedestrians that walk through that busy Vancouver neighborhood each day will stop by on their way from work. The old adage, if you build it, they will come certainly applies, especially in an industry with so much pent-up demand.
GTEC’s flagship location has space for further expansion. This includes the capacity to develop a “consumption lounge.” Building out such a facility isn’t set in stone because there are some regulatory bottlenecks that need to be cleared with the city first.
In Vancouver, like most places, getting drunk on a patio is fine but consuming recreational pot in an indoor lounge needs more policymaking. Perhaps this has something to do with smoke in enclosed areas.
In any case, the recreational marijuana space is getting bigger by the day. Cake Cannabis Co could make a bold statement in a region known for its large retail segment.
Full Disclosure: GTEC Holdings Ltd. Is an Equity Guru marketing client.