Meet The New Costco Of Cannabis

Photo courtesy of High Tide

Meet The New Costco Of Cannabis

The cannabis retailer changing the game with their customer discount club.

The Calgary-based vertically-integrated company High Tide has made waves across the United States, Canada, and several other nations.

On Wednesday, ATB Capital markets analyst Frederico Gomes kept High Tide’s clients up to date by sharing a statement that the company is maintaining an “Outperform” rating and target price of $14.00/share with a forecasted return of 89.7%.

Meet The New Costco Of Cannabis

Photo courtesy of High Tide Malibu

High Tide is responsible for designing, manufacturing, and distributing smoking accessories in their adopted companies and the wholesale/retailing of cannabis products. They even have a beautiful storefront in Malibu that was L.A. County’s first official dispensary.

This analysis follows High Tide’s announcement that it would transform all Canna Cabana dispensaries in Canada into a discount club retail model. Gomes mentioned that the new layout positions the stores as a Canadian Costo for cannabis. 

“We view a discount club as a way for HITI to capture market share and differentiate itself from other retailers while building customer loyalty and brand equity,” Gomes explained. “We note, however, that this model would have to be adapted to the unique circumstances of the Canadian cannabis market, therefore carrying uncertainty and execution risks.”

Meet The New Costco Of Cannabis

Photo courtesy of Canna Cabana

He continued by noting that High Tide’s Canna Cabana club members, which is currently over 245,000, will receive access to low prices, special deals, and proprietary accessories from its many product lines. Now looking for a change, High Tide is currently preparing to roll out a membership fee and subscription-based box model in the future.

The company will also discontinue the wholesale sale of proprietary accessories in Canada but will continue the sale of proprietary consumption accessories in the company’s stores located in Canada.

On Oct. 20, the president and chief executive officer of High Tide, Raj Grover, had this to say in the company’s press release, “While other retailers have made moves to service the value segment, our strategy sets us apart as the only retailer in Canada which will have a discount club loyalty plan.”

Meet The New Costco Of Cannabis

Tijana Martin / The Canadian Press

“Today’s news represents an acceleration of our value-focused strategy, which was initially planned to be rolled out under the Cannabis Chop Club brand in select locations only.

By expanding this strategy across all of our retail stores instead, we can focus on continuing to build the Canna Cabana brand and its rapidly-growing base of over 245,000 members, and grow our strong brand equity, while saving time, capital, and resources by avoiding conversions of existing locations,” he continued.

Meet The New Costco Of Cannabis

Photo by CNW Group / High Tide Inc.

To execute this transition successfully, Gomes believes that the company would need to have a shared economics scale model similar to Costco’s. “We note that, for this strategy to work, the retailer needs to compete on price, have significant bargaining power over suppliers, operate efficiently, and offer exclusive deals,” Gomes said.

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