Sundial Growers Is Going All In On The Adult-Use Canadian Cannabis Consumer

Sundial Growers Inc. (Nasdaq: SNDL) made a splash and entered the cannabis retail market through the acquisition of Inner Spirit Holdings Ltd. (CSE: ISH) (OTCQB: INSHF).

In regards to the Canadian cannabis retail market, we consider Inner Spirit to be an attractive opportunity. Over the last few years, the Spiritleaf retail network has grown to 86 stores that operate in British Columbia, Alberta, Saskatchewan, Ontario, and Newfoundland and Labrador. 

Sundial will pay approx. $131 million to acquire Inner Spirit and the combined company will continue to focus on providing cannabis to consumers through a responsible and disciplined approach. 

The transaction has been unanimously approved by the Boards of Directors of Sundial and Inner Spirit and is expected to close in the third quarter. The companies expect the acquisition to provide modest synergies and economies of scale due to the different business models of each operator.

Through the acquisition of Inner Spirit, Sundial will become a more diverse cannabis company and we will monitor how the businesses are able to integrate. For Inner Spirit, the business combination will play an important role how the platform expands and should open new market opportunities for it. 

One of the reasons for our positive view in Inner Spirit is related to how the brand has been able to secure strategic relationships with industry leaders like HEXO Corp (HEXO.TO) (HEXO) and Tilray, Inc. (TLRY). Going forward, we will monitor how these strategic relationships change as a result of the acquisition. 

In 2020, Inner Spirit reported to have served approx. 2.3 million guests and the brand has earned a reputation as a trusted source of recreational cannabis. This represents significant growth on year-over-year basis (served more than 700,000 customers in 2019) and we are favorable on the trend. By the summer, Spiritleaf expects to be operating 100 retail outlets and this would prove to be a major milestone for the combined company. 

Over the next year, we expect Canada’s recreational cannabis market to benefit from an increasing number of retail outlets and Inner Spirit should be a major beneficiary of this. We have been favorable on the long-term opportunity that is associated with the Canadian cannabis retail market and believe the vertical is in the early innings of a major growth cycle.

If you are interested in learning more about Canadian LPs that are capitalizing on the retail market,  please send an email to support@technical420.com with the subject “Leading Canadian Cannabis Retailers” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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