Going Green: How Second Cup got into cannabis

By Gregory Furgala

The relationship between cannabis and food feels like an organic one. It’s certainly not new. Cannabis cafes have — illegally — existed in Canada in one form or another for decades. Coffee laden with CBD oil, a compound derived from cannabis, has become a common-ish wellness product, as have other cannabis-infused cafe staples. Deloitte predicts that edible cannabis will make up a $2.7 billion market. For now, though, the legal sale of edible cannabis is still months away, and the exact regulatory framework is in flux. But the door for cannabis is open, and some foodservice operations are finding creative ways to explore it.

Second Cup has a sizeable footprint, counting 270 stores, 24 of which are company-owned. Despite improving its cash position last year to $14.1 million from $3.3 million the year prior, Second Cup hasn’t fared well against its larger competitors. The partnership is a chance to change that. According to April’s announcement, NAC will apply for licences to dispense cannabis products, and afterward work with selected Second Cup franchises. The new dispensaries would be a separate business from Second Cup, with its own branding.

“It is, in a sense, a real estate deal”

In April 2018, Second Cup Coffee announced that it had partnered with National Access Cannabis, a network of medical cannabis centres across Canada. The venture isn’t about edibles (at least not quite yet); it’s about the soon-to-be thriving retail scene for over-the-counter cannabis and how Second Cup and NAC can best leverage each other’s assets and expertise.

It is, in a sense, a real estate deal. Garry MacDonald, CEO of Second Cup, told the Financial Post last November that, going forward, he expects Second Cup to be a very different company. While the largest players in Canadian cannabis are well-funded and thriving, none of them have a chain of retail shops yet. Should the regulatory environment favour Second Cup and NAC’s effort, the pair could jointly fill that void.

“For asset-rich foodservice operators, the non-edible cannabis market could be an opportunity”

Those regulations are a big if, though. As it stands now, only Alberta, B.C., Manitoba, Ontario and Saskatchewan have opened up the sale of cannabis to the private sector, and even then, it’s not an open race. The Alcohol and Gaming Commission of Ontario, which was tasked with regulating cannabis sales in the province, is overseeing a lottery that will see only 25 stores. Alberta Gaming, Liquor and Cannabis limits the number of licenses a single person or business can have at any given time to 15 per cent of the total market or less. With readily-convertible real estate in major urban centres across Canada, though, Second Cup is poised to take advantage of regulatory shifts wherever it operates.

The intuitive approach to cannabis and foodservice might be to focus on edibles, but while Canadians wait for them to be worked into the legal cannabis landscape, the more realistic goal would be to examine how foodservice operators’ infrastructure and penchant for customer service could be leveraged as a new revenue stream. The entry of the large multinationals that Second Cup is competing against, like McDonald’s and Starbucks, may be inevitable, but legal cannabis is in its infancy and the territory is largely unexplored. For asset-rich foodservice operators, the non-edible cannabis market could be an opportunity.

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