It looks like there is another cannabis planting the seeds for convenience store cannabis. I've written before about Fire & Flower's exposure to Alimentation Couche-Tard, or ACT, the owners of Circle K. The French conglomerate will own approximately 19.9% of Fire & Flower following the conversion of approximately $23.6 million principal amount of 8.0% unsecured convertible debentures issued to 2707031 Ontario Inc.
Now Turning Point Brands (TPB) is showing its cards when it comes to the convenience store strategy. The company is known for its sales of ZigZag rolling papers and Stoker's chewing tobacco. In addition to selling traditional rolling papers, Turning Point also sells paper cones, which cannabis consumers only have to fill, pack and burn. They are way easier to prepare and require less skill than rolling a joint from scratch.
The company's paper cone sales were over 19% of its U.S. paper sales in the first quarter and the company said it would expect it to continue to ramp through the year. In Turning Point's recent earnings conference call, Graham Purdy, Chief Operating Officer, said, "We continue to lead the growth and penetration of product in convenience stores and are expanding our presence in the non-measured alternative channel, including head shops and dispensaries, where most of that market currently exists and where Zig-Zag is still underrepresented." The company said it is leading the growth in selling paper cones in convenience stores. Granted, that's just papers and not actual cannabis, but the point is that Turning Point has an established foot in the door with convenience stores. In fact, Turning Point said it is in 210,000 stores at this time.
Many believe that cannabis could eventually be treated much the same as tobacco or alcohol. This would mean that cannabis products like pre-rolls and vapes could be sold from behind the counter of convenience stores like Circle K. Cigarettes are sold this way and the stores are trained to check IDs for age in order to buy the products. It isn't a stretch to think that the cannabis companies that are able to sell through convenience stores would do massive volumes in sales. A model that is similar to basic beers like Budweiser or Miller beer.
Turning Point recently announced an $8.7 million strategic investment in Docklight Brands, Inc., a cannabis company with brands like Marley Natural cannabis and Marley CBD. In addition, TPB has obtained exclusive U.S. distribution rights for Docklight's Marley CBD topical products. The company said at the time that the Marley CBD skincare line is currently available in over 12,000 stores including select 7-Eleven, Circle K, Safeway, and Dollar General (DG) locations, with additional availability expected through TPB's partner network. If cannabis was federally legal, it isn't a stretch to think TPB would stock Marley Natural cannabis with the partners already selling Marley CBD.
In October of 2020, Turning Point also made a $15 million strategic investment in Dosist and signed for an exclusive co-development and distribution agreement of a new national CBD brand, created in partnership with Dosist's thc-free business unit. Additionally, TPB has an option to invest another $15 million within the next 12 months. Dosist vape products are known for the proprietary dose-controlled devices, which includes an inhalable disposable dose pen, a newly launched dose pen rechargeable system, and the dose dial, which dispenses a 3.7 mg sublingual tablet. The company has said that in the coming 3-6 months, Dosist plans to expand its current platform with a substantial innovation pipeline including tinctures, gummies, and dynamic live resin and full-spectrum formulas.
Turning Point Brands has lined up a flower company, a CBD topical company, a vape company and potentially a gummy and resin company for its portfolio. An established relationship with the convenience stores positions them to expand beyond currently legal products to eventually include THC products. While that may not be in the very near future, Turning Point and Fire & Flower are clearly in it for the long game. These two companies are planting the seeds early for what is eventually going to be the entry of THC cannabis products into convenience stores.
