Manitoba might not be the first province that comes to mind when you think of successful retail cannabis brands, but wholesaler, retailer, and producer Delta 9 is putting it on the map. In their recently released first-quarter results, they posted a 170% gross profit increase and have plans to keep the retail ball rolling with a dozen new stores in Manitoba and franchise options. It was also just announced that their bid to purchase two stores in Alberta has gone through, initiating their foray into a brand new market.
Great Start to the Year
The uptick in retail sales started in December with the release of Cannabis 2.0 products and the subsequent holiday season. The seasons aren’t quite as cyclical as other retail environments, but cannabis tends to see trends similar to alcohol. Like tiny bottles of liquor, cannabis products make great stocking stuffers and are a welcome addition to most holiday parties.
According to Delta 9 CEO John Arbuthnot, the rise in sales didn’t stop there. While most businesses were seeing a lull in January, Delta 9’s numbers showed a measured increase.
Overcoming Pandemic Challenges
Then the page on the calendar flipped to February and concerns about COVID-19 began to grow.
“We started having daily meetings by mid-February,” says Arbuthnot. “Hourly you’re considering what information is coming out and what that means for our business. We are fortunate that cannabis is an essential business in Manitoba, but by that time we had already taken a number of steps.”
By the time March rolled around, Delta 9 stores were already limiting the number of customers in stores and implemented social distancing practices. They had to close their sensory bar and limit any other activities that were deemed risky. According to Arbuthnot, they were one of the first retailers in the country to install plexiglass barriers at point-of-sale terminals.
“We were fortunate to operate, but you feel a sense of responsibility. There was a lot of fear and we had to do it in a way that emphasizes public safety.”
Luckily, Manitoba already allowed online sales and delivery, so since the chain opened they have offered mail-order purchases and same-day delivery within Winnipeg with their Pineapple Express service. That, along with Canopy Growth deciding to close Tokyo Smoke and Tweed stores, arguably some of their biggest competitors in the city, positioned Delta 9 to continue to grow.
Since March, not only has in-store foot traffic increased, but the average cart size has increased as well. Cannabis markets all over Canada experienced stock-up behaviour, but it doesn’t seem to be stopping for Delta 9. Arbuthnot says that online sales have gone up nearly four-fold in the most recent quarter, and now that people have discovered the convenience of cannabis-on-delivery, it’s safe to say it could stay that way.
Supporting Their Employees
Despite their success, there were still pandemic-related challenges, particularly surrounding staffing. With more staff staying home for various reasons, it was hard to keep up with the increased traffic in the stores and the increased demand for products. In the first quarter, they ended up hiring over 75 new employees in roles ranging from part-time sales to production to corporate.
They also increased the wages of frontline employees in stores and production facilities by $2 per hour with a policy called Grateful Pay. So far, they’ve provided over $100,000 in compensation for their employees.
“Like any business, we saw the difficulties in staffing as things escalated,” he explains. “We wanted to show our staff that yes, we are staying open and taking precautions, but we also appreciate what everyone is doing.”
Besides opening about a dozen new stores in the next two years, Arbuthnot believes that Delta 9 is in a good position to make things easier for existing businesses in rural areas to provide access to legal cannabis in their community. In Manitoba, Manitoba Liquor and Lotteries (MBLL) acts as a distributor between federally licensed producers and cannabis retailers. It’s a good system for retailers who generally purchase large orders, however, it doesn’t work as well for smaller transactions. As a vertically integrated business, Arbuthnot thinks that’s the perfect job for Delta 9. “It’s in our wheelhouse to facilitate those small transactions,” he says.
Ideally, he would like to offer franchising options for regular age-restricted stores as well as controlled access stores, so that established retailers in rural communities have a better chance of making it work. He says it would be perfect for communities that couldn’t sustain a stand-alone brick-and-mortar store.
“What we envision is working closely with an established retailer, helping them with inventory control, supply chain, hiring, and making sure they are properly trained,” says Arbuthnot. “We see this as our opportunity to offer that turn-key partnership with retailers.”
On top of everything else down the pipeline, Arbuthnot shares that they have just closed the deal on the purchase of two stores in Alberta, their first footprint in a new province. There will be more details forthcoming, so he’s not celebrating yet.
“I don’t celebrate until everything is set in stone,” laughs Arbuthnot. “But once it is, there will definitely be a nice drink on the deck.”