Pay-to-stay for shelf space as the number of brands grows
With more brands and SKUs entering the market, retail shelf space is becoming competitive as the growth of retailers has not kept pace. Driving the increase is vaping products – between 2017 and 2019, the number of vape brands increased by 49% in Colorado and 38% in Washington. However, tighter shelf-space has prompted adult-use retailers to adopt slotting fees or pay-to-stay practices increasingly. Slotting fees are typically used by supermarket distributors to charge companies or manufacturers a fee to place their products on their shelves. Already in use in states like California and Nevada, slotting fees can range from anywhere between $500 to $15,000 a month for premium shelf space. The growing adoption of the practice by cannabis retailers will raise the barrier of entry for smaller businesses that lack the cash flow of larger companies.
Ayr Strategies (CSE: AYR.A) previews Q2 2020 results
Ayr is a vertically-integrated MSO in the U.S. with operations in Massachusetts and Nevada. The company cultivates and manufactures branded cannabis products for distribution. Revenue for June is expected to set an all-time monthly record at approximately $12.7 million, representing a 14% increase over the Q1 monthly average and a 46% increase over June 2019. Due to COVID related closures, Q2 revenue is expected to be approximately $28.4 million, a 15% sequential decline. Despite the topline hit, adjusted EBITDA is projected at $9.1 million, an 8% sequential increase, with an estimated 55% of the adjusted EBITDA contribution coming from June alone.
In their Massachusetts operations, medical dispensary sales continue to increase, with June revenue up 76% from the Q1 monthly average despite adult-use retail dispensaries reopening in late May. The average transaction volume was up 40% per day in June compared to the Q1 monthly average, with an average spend per ticket up 20%.
Organigram (OGI) cuts workforce by ~25%
The downsizing of the Canadian Cannabis market continues. Organigram, a Canadian marijuana grower and producer, announced that it would reduce its headcount by approximately 25%, or 220 workers. According to the company’s press release, the downsizing comes as “an effort to better align its production capacity to prevailing market conditions.” This comes a few months after about 400 employees or 45% or the workforce were temporarily laid off in early April. Organigram also plans to grow less the target production capacity at its main facility in New Brunswick and opted to delay filing its most recent quarterly results. The company expects FYQ3 revenues to decline sequentially.
