Across Canada and legal U.S. markets, regulators have flirted with whether recreational cannabis stores—many of them start-ups—are essential businesses. Retailers have had to fight for this classification, proving to regulators that they can run a responsible business that dually protects public health.
To help understand what operating during a pandemic has looked like for cannabis retailers, we sat down with Theo Zunich, President and CEO of YSS Corp. YSS is a Canopy Rivers portfolio company that operates 17 retail locations in Alberta and Saskatchewan under the YSS and Sweet Tree brands.
A: The first challenge was keeping our team and customers as safe as possible in the face of evolving news and guidance. We moved quickly to implement enhanced health, safety, and cleanliness measures across all our stores.
The next challenge was dealing with uncertainty when government action was still being developed and our understanding of the pandemic was limited. We didn’t know how widespread the pandemic would become, whether we would be mandated to close and, if so, what support would be available for our team and business. With this uncertainty, we were careful not to lose focus and took action to promote mental health within our team and community as a whole.
The most significant challenge came after cannabis retail was deemed an essential service in Alberta and an allowable business in Saskatchewan. This transitioned the responsibility for employee and customer safety from government bodies to the management teams of those businesses. This was a critical time for us as we had to weigh the risks of choosing to stay open against the impact to various stakeholders including employees and their families, customers, shareholders, suppliers, and the general public. Most government relief was only available if business was down or the store was closed. Many businesses decided to close at this time. We focused on providing flexibility and transparency to our frontline team and, through our dedication to the company and commitment to our COVID-19 action plan, we remained open throughout the pandemic’s peak in Canada.
A: In short, whatever we could do to enhance the cleanliness and safety of our stores. This included great suggestions and initiatives from the frontline team.
We increased cleaning/sanitization protocols and supplies, implemented social distancing measures such as in-store indicators and traffic restrictions, acrylic shields, discontinued high touch areas such as sensory jars and in-store tablets, promoted card and tap payment, succinct customer communication on acceptable in-store etiquette, suspension of traffic-driving marketing, strict adherence to sick-leave policies and the launch of our click and collect service.
A: Our click and collect service had been in development since early February. The pandemic just accelerated those plans and we launched in mid-April. It has been a great initiative to encourage local online shopping while decreasing the risk of community spread. Adoption and feedback has been outstanding so far and we continue to promote the service through an ongoing discount on all click and collect orders.
A: Basket sizes and sales spiked in late March as customers engaged in pantry loading ahead of isolation plans. April remained fairly steady and we’ve continued to see growth through June.
It is important to keep in mind that growth has been ongoing throughout 2019 and into 2020. COVID-19 coincided with the launch of many “cannabis 2.0” products as well as new dried flower options and more competitive pricing. We also believe that black market supply chains have been negatively impacted by the pandemic.
So, we don’t believe it is fair to conclude that the pandemic resulted in increased sales outside of basket loading in March, but it definitely has not muted growth. If anything, it may have accelerated growth as black market consumers moved to legal purchasing channels.
In terms of product categories, it is again difficult to isolate pandemic impact versus new product availability. The only category that substantially decreased during the peak of the pandemic in Canada and then rebounded into June is pre-rolls. Logically, this makes sense as pre-rolls are often carried into social settings and shared with others.
A: Be proud of what you have helped the industry and society accomplish. Recognize that your commitment to customer, co-worker, and public health and safety has saved lives. That’s a really big deal.
Canada appears to have relative control of the COVID-19 pandemic for now and this is a reflection of the actions of everyone. Unfortunately, we are not clear of this yet and as the world starts opening up again, the risk of spread increases. We cannot let our guard down and remain committed to the health and safety protocols that remain in place.
A: The cannabis sector has had its share of curveballs during the early innings of this industry in Canada. Like many of the challenges we’ve faced, commitment to guiding principles, teamwork, and patience are critical. This challenge was no different. I’ve been impressed by the resiliency and passion of everyone in this industry and proud of the importance that it plays in many people's lives.
A: Just one thing: on behalf of the entire YSS and Sweet Tree team, a huge thank you to all the healthcare and frontline workers.
This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.
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