High Tide Welcomes Doubling of Ontario Retail Cannabis Store Cap

Rhea-AI Summary

High Tide Inc. (HITI) welcomes Ontario's amendment of Ontario Regulation 468/18 under the Cannabis Licence Act, 2018, increasing the number of stores that licensed retail cannabis operators and their affiliates can operate from 75 to 150. The company sees this change as a significant growth opportunity, leveling the retail playing field in Ontario and creating new jobs for Ontarians. High Tide anticipates a boost in revenues and a shift in their long-term growth target to 300 bricks and mortar stores in Canada.

Insights

Market Research Analyst

The amendment to Ontario Regulation 468/18 is a significant development for the cannabis retail sector in Ontario and by extension, companies such as High Tide Inc. This regulatory change is poised to alter the competitive landscape by enabling larger operators to expand their retail footprint. The lifting of the store cap from 75 to 150 stores per operator is expected to intensify competition among cannabis retailers, which could lead to increased market consolidation. Larger players with strong capital reserves and established supply chains, like High Tide, stand to benefit from economies of scale and enhanced market presence.

With the potential to double its store count, High Tide's revenue projections and market share are likely to see substantial growth. The company's claim of a 3.4 times higher annual run rate compared to provincial peers indicates a robust performance that could be further amplified by the expansion. This strategy may also drive job creation and tax revenue growth for Ontario, aligning with broader economic objectives.

However, it's important to monitor how smaller retailers and new entrants will fare in this new environment. The increased cap could pose challenges for these players, potentially leading to a market dominated by a few large entities. Investors should consider the implications of such market dynamics on long-term industry health and diversity.

Financial Analyst

High Tide's strategic positioning as a non-franchised cannabis retailer is reinforced by the regulatory change, offering a clear pathway to escalate its growth trajectory. The company's plan to expand to 300 brick-and-mortar stores in Canada reflects aggressive growth targets that could be facilitated by this amendment. For investors, the anticipated revenue increase from an additional 100 locations in Ontario should be weighed against the capital expenditure required for such expansion.

Furthermore, the company's historical performance in Ontario, with a reported average annual run rate significantly higher than peers, suggests operational efficiency and strong market penetration. These factors are likely to enhance investor confidence in High Tide's ability to capitalize on the expanded store cap and could be reflected in the company's stock valuation.

It is crucial to evaluate the sustainability of High Tide's growth in the context of evolving regulations, market saturation and competition. The company's financial health, including its ability to manage the costs associated with rapid expansion while maintaining profitability margins, will be a key determinant of its long-term success and impact on shareholder value.

Economist

The regulatory change in Ontario can be seen as a response to the economic principle of market saturation. By increasing the store cap, the province is likely addressing the supply-demand imbalance, aiming to curb the illicit cannabis market by providing consumers with more legal options. This move could theoretically lead to a more efficient allocation of resources within the cannabis industry and contribute to economic growth through job creation and tax revenues.

The decision to align Ontario's cannabis retail market with provinces like Alberta, Saskatchewan and Manitoba, which do not have a store cap, suggests a shift towards a more liberalized market approach. This could attract further investment into the province, stimulate competition and potentially lower consumer prices through increased supply.

However, the long-term economic impact will depend on the industry's response to the regulatory change, including how existing and new players scale their operations, their ability to maintain profitability in a potentially oversupplied market and the effectiveness of the legal market in displacing illicit transactions. The potential for increased tax revenue and job creation must be balanced against the risk of market volatility and the financial stability of cannabis enterprises as they navigate this expansion.

Province Amends Ontario Regulation 468/18 Under the Cannabis Licence Act, 2018 to Increase the Number of Stores That Licensed Retail Cannabis Operators and Their Affiliates Can Operate From 75 to 150

CALGARY, AB, Jan. 2, 2024 /PRNewswire/ - High Tide Inc. ("High Tide" or the "Company") (Nasdaq: HITI) (TSXV: HITI) (FSE: 2LYA), the high-impact, retail-forward enterprise built to deliver real-world value across every component of cannabis, welcomes today's amendment of Ontario Regulation 468/18 under the Cannabis Licence Act, 2018 that increases the number of stores that licensed retail cannabis operators and their affiliates can operate from 75 to 150.

"We welcome Ontario's move today to make good on its previously stated intent to double the provincial store cap to 150. The increase comes as some operators who have a franchise model are already approaching, or have exceeded, 75 stores in the province. The move will have a positive impact on Ontario's cannabis retail market as it brings the province closer to Alberta, Saskatchewan and Manitoba, which don't have a store cap and have demonstrated success at illicit market capture," said Raj Grover, Founder and Chief Executive Officer of High Tide.

"This change not only levels the retail playing field in Ontario but also creates a significant growth opportunity for High Tide and others that will help Ontario's legal cannabis industry better compete with an entrenched illicit market, creating new jobs for Ontarians and increasing tax revenue for the province. As of July 2023, the 50 Canna Cabana stores we had open in Ontario had an average annual run rate that was 3.4 times our provincial peers'. Accordingly, an additional 100 locations will help meaningfully boost our revenues and power our growth trajectory over the next couple of years, further solidifying our leadership position as the largest non-franchised cannabis retailer in the country. With this change, our long term growth target has now shifted upwards to 300 bricks and mortar stores in Canada," added Mr. Grover.

ABOUT HIGH TIDE

High Tide, Inc. is the leading community-grown, retail-forward cannabis enterprise engineered to unleash the full value of the world's most powerful plant. High Tide (HITI) is uniquely-built around the cannabis consumer, with wholly-diversified and fully-integrated operations across all components of cannabis, including:

Bricks & Mortar Retail: Canna Cabana™ is the largest non-franchised cannabis retail chain in Canada, with 162 current locations spanning British Columbia, Alberta, Saskatchewan, Manitoba and Ontario and growing. In 2021, Canna Cabana became the first cannabis discount club retailer in North America.

Retail Innovation: Fastendr™ is a unique and fully automated technology that integrates retail kiosks and smart lockers to facilitate a better buying experience through browsing, ordering and pickup.

E-commerce Platforms: High Tide operates a suite of leading accessory sites across the world, including Grasscity.com, Smokecartel.com, Dailyhighclub.com, and Dankstop.com.

CBD: High Tide continues to cultivate the possibilities of consumer CBD through Nuleafnaturals.com, FABCBD.com, blessedcbd.de and blessedcbd.co.uk.

Wholesale Distribution: High Tide keeps that cannabis category stocked with wholesale solutions via Valiant™.

Licensing: High Tide continues to push cannabis culture forward through fresh partnerships and license agreements under the Famous Brand™ name.

High Tide consistently moves ahead of the currents, having been named one of Canada's Top Growing Companies in 2021, 2022 and 2023 by the Globe and Mail's Report on Business Magazine and was ranked number one in the retail category on the Financial Times list of Americas' Fastest Growing Companies for 2023. To discover the full impact of High Tide, visit www.hightideinc.com. For investment performance, don't miss the High Tide profile pages on SEDAR+ and EDGAR.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release may contain "forward-looking information" and "forward-looking statements within the meaning of applicable securities legislation. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Company's current belief or assumptions as to the outcome and timing of such future events. The forward-looking statements herein include, but are not limited to, statements regarding: the effect of the regulatory amendment on illicit market capture in Ontario, the expected annual revenue run rate for current and future Ontario stores, and the growth opportunity for High Tide in Ontario. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements. Although the Company believes that the expectations reflected in these statements are reasonable, such statements are based on expectations, factors, and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond the Company's control, including but not limited to the risk factors discussed under the heading "Non-Exhaustive List of Risk Factors" in Schedule A to our current annual information form, and elsewhere in this press release, as such factors may be further updated from time to time in our periodic filings, available at www.sedarplus.ca and www.sec.gov, which factors are incorporated herein by reference. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement and reflect the Company's expectations as of the date hereof and are subject to change thereafter. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results, or otherwise, or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.

CONTACT INFORMATION

Media Inquiries
Omar Khan
Chief Communications and Public Affairs Officer
High Tide Inc.
omar@hightideinc.com
403-770-3080

Investor Inquiries
Vahan Ajamian
Capital Markets Advisor
High Tide Inc.
vahan@hightideinc.com 

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SOURCE High Tide Inc.

FAQ

What is the impact of Ontario's amendment on High Tide Inc. (HITI)?

The amendment creates a significant growth opportunity for High Tide Inc. (HITI) and levels the retail playing field in Ontario, potentially boosting revenues and shifting the company's long-term growth target to 300 bricks and mortar stores in Canada.

How many stores can licensed retail cannabis operators and their affiliates operate in Ontario after the amendment?

Licensed retail cannabis operators and their affiliates can now operate up to 150 stores in Ontario, following the amendment of Ontario Regulation 468/18 under the Cannabis Licence Act, 2018.

What is High Tide Inc.'s (HITI) response to the amendment?

High Tide Inc. (HITI) welcomes the amendment and sees it as a positive move that will create new jobs for Ontarians and help the legal cannabis industry better compete with the illicit market.

What is the anticipated impact on High Tide Inc.'s (HITI) revenues?

High Tide Inc. (HITI) anticipates a boost in revenues as a result of the amendment, with the potential for a significant growth trajectory over the next couple of years.

What is High Tide Inc.'s (HITI) long-term growth target in light of the amendment?

High Tide Inc. (HITI) has shifted its long-term growth target to 300 bricks and mortar stores in Canada following the amendment of Ontario Regulation 468/18 under the Cannabis Licence Act, 2018.