Cannabis Retailer Fire & Flower Continues to Leverage Couche-Tard Partnership as It Considers the U.S. Market

Exclusive Interview with Fire & Flower CEO Trevor Fencott

Cannabis retailer Fire & Flower (TSX: FAF) (OTCQX: FFLWF) continues to strengthen its retail network across Canada, and in 2021, it is exploring what expansion into the U.S. could look like. CEO Trevor Fencott last spoke with New Cannabis Ventures in May 2020 and checked in at the beginning of 2021 to discuss how the company’s digital platform is driving growth, the recent acquisition of Friendly Stranger and his outlook on the rest of the year. The audio of the entire conversation is available at the end of this written summary.

The Friendly Stranger Acquisition

At the end of last year, Fire & Flower completed the acquisition of Friendly Stranger. The acquisition gives the company access to a different consumer base, an accessories brand with a long history and a stronger retail position in Ontario. Fire & Flower now has 25 stores in the province. With a cap of 30 stores, Fire & Flower is close to reaching the curent maximum allowable retail footprint in Ontario, according to Fencott.

The Friendly Stranger Acquisition Strengthens Fire & Flower’s Ontario Footprint.

Retail Presence

Fire & Flower is opening stores at a brisk pace; it currently has 74 retail locations, according to Fencott. The company’s largest presence is in Alberta, and it also has a significant footprint in Saskatchewan. Following the Friendly Stranger acquisition, Fire & Flower has a big presence in Ontario as well. The company has one store in Manitoba and plans to add more. In British Columbia, the company has completed store build-outs and is waiting on licensing.

The Company Continues to Open Retail Locations in Canada.

In the early days of the cannabis industry, there was a rush to build and open stores. As time passed, it became clear that retail requires a disciplined approach. Brick and mortar expansion slowed, a trend further driven by the early months of the COVID-19 pandemic. Now, construction has begun to pick up again, but Fire & Flower is taking a more precise approach, according to Fencott.

The company will consider M&A opportunities that are immediately accretive going forward according to Fencott, but he believes organic growth is more cost-effective from a capital allocation perspective.

The Hifyre Platform

Fire & Flower’s investment in technology has helped it to navigate the pandemic, facilitating delivery and curbside pickup. The company’s Hifyre digital platform also drives customer acquisition and communication. More than 190,000 consumers use the platform, according to Fencott, and that number continues to grow.

Creating an omnichannel connection with consumers was always the company’s intent as it developed a retail 2.0 strategy. And the Fire & Flower team is seeing the value of that approach. The company’s digitally engaged consumers driver further revenue with a bigger basket size, according to Fencott.


The Hifyre platform gives Fire & Flower access to powerful analytics. By examining consumer behavior, the company was able to identify a market opportunity. Over the summer, it launched product private label brand Revity CBD. Fencott expects the CBD product category to continue to grow in markets like the U.S.

Fire & Flower Recently Launched Revity CBD.

Cannabis 2.0 Products

In Canada, the rollout of cannabis 2.0 products has progressed in fits and starts, affected by supply constraints and regulations. Fencott offered the example of beverages. This product category is crowded with many different brands, but purchase limits remain, and penetration in this category is relatively low thus far. He expects that some of the barriers for 2.0 products will begin to lower over time.

Couche-Tard Partnership Update

Fire & Flower continues to find new ways to leverage the strategic partnership it has with Alimentation Couche-Tard. Recently, the company announced a pilot project focused on opening cannabis retail locations near Circle K stores. The pilot program is a reflection of the company’s focus on consumer convenience. Fire & Flower plans to have smaller store locations conveniently located and stocked with the products consumers want, as determined by the company’s analytics. Fencott expects that the pilot program will progress to other phases this year.

The company is also looking at other ways to work with Couche-Tard. For example, it is currently involved in a pilot program for gift cards, and it is exploring merchandising opportunities between the two companies.

Additionally, Fire & Flower has a shared services agreement that allows it to make use of Couche-Tard’s depth of real estate experience. Couche-Tard has 16,000 stores, which means it has an advanced store selection process, according to Fencott.

Looking to the U.S.

Fire & Flower was built from the ground up to be a best-in-breed, tech-enabled cannabis retailer. Canada was always meant to be the testing grounds for the company, according to Fencott. The partnership with Couche-Tard, which has thousands of stores in 25 countries, means Fire & Flower ultimately wants to be in each of those countries where cannabis is legal.

As it considers opportunities in the U.S., the Fire & Flower team wants to find markets that are similar to Saskatchewan: a market where the company can do distribution, delivery, ecommerce and bricks and mortar retail. As a retailer, the company is less interested in states that require vertical integration. A state like California, according to Fencott, would make be appealing.

Funding Outlook

In December, Fire & Flower exercised warrants, receiving more funding through the partnership with Couche-Tard. The company also announced an at-the-market equity program at the end of 2020. The ATM was about a low cost of capital for the company, according to Fencott. The company has a strong balance sheet, and he wants to make it even stronger. Cash in the bank is important, particularly during the ongoing pandemic.

The company achieved its goal of positive operating EBITDA last quarter, and positive cash flow opens the door to more funding options, according to Fencott. Going forward, he expects the company to focus more on non-dilutive financing like debt raises.

Growth in 2021

Now that the company has reached the point of positive operating EBITDA, it wants to continue that momentum and demonstrate sustainable positive EBITDA to its shareholders. This year, the company plans to continue opening stores in Canada and pursuing aggressive financial growth. While Canada is a relatively small market, Fire & Flower has honed its approach to hub and spoke distribution and its technology infrastructure, which could give it a competitive advantage as it breaks into other markets, according to Fencott.

As the company grows, the Fire & Flower team will be closely watching the weighted average cost of capital. Capital efficiency is particularly important now, according to Fencott. The company also tracks traditional retail metrics like revenue per square foot, same-store growth and year-over-year sales growth.

While the company is bullish on its growth prospects, Fencott is still cognizant of competition from the illegal market. Regulatory issues and the illegal market are two closely related challenges. He is also excited about the opportunity to enter the U.S. market. He anticipates that Fire & Flower’s efficient business model and digital infrastructure will give it a competitive advantage.

While the Democratic sweep in the U.S. has sparked even more interest in the cannabis industry, Fencott still believes the retail sector is undervalued by investors. He expects retailers are the group most likely to be profitable the fastest in this business.

New Cannabis Ventures provides an Investor Dashboard for Fire & Flower, which is a client of New Cannabis Ventures. Listen to the entire interview:

Exclusive article by Carrie Pallardy
Carrie Pallardy, a Chicago-based writer and editor, began her career covering the healthcare industry and now writes, edits and interviews subject matter experts across multiple industries. As a published writer, Carrie continues to tell compelling, undiscovered stories to her network of readers. For more information contact us.

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