Strategic Investment Analysis

Company Overview

Alcanna Inc. (TSX: CLIQ.TO) is a leading Canadian specialty retailer focused on alcohol and cannabis products. Headquartered in Edmonton, Alberta, the company operates 176 liquor retail locations across Alberta and British Columbia, along with 53 cannabis retail stores in Alberta, Ontario, and Saskatchewan. Formerly known as Liquor Stores N.A. Ltd., Alcanna rebranded in 2018 to reflect its diversified business model, which includes the sale of wines, beers, spirits, and cannabis. The company was acquired by Sundial Growers Inc. in March 2022, positioning it within a broader cannabis ecosystem. Alcanna serves a consumer cyclical market, leveraging its extensive retail footprint and regulatory expertise in Canada’s tightly controlled alcohol and cannabis sectors. With a strong presence in Western Canada, Alcanna benefits from regional market dominance and a vertically integrated retail strategy.

Investment Summary

Alcanna Inc. presents a mixed investment profile. On the positive side, the company demonstrated solid FY 2020 performance with CAD $680.3 million in revenue and net income of CAD $68.3 million, translating to a diluted EPS of CAD $1.70. Its operating cash flow of CAD $46.5 million suggests healthy liquidity, though its high beta of 1.64 indicates significant volatility relative to the market. The acquisition by Sundial Growers could provide synergies in cannabis retail but also introduces risks tied to the broader cannabis sector’s instability. Alcanna’s debt load of CAD $310.9 million is notable, though mitigated by CAD $60.7 million in cash reserves. Investors should weigh its established alcohol retail business against the more speculative cannabis segment.

Competitive Analysis

Alcanna Inc. holds a competitive advantage in Western Canada’s tightly regulated alcohol retail market, where its extensive store network (176 locations) provides scale and brand recognition. Its expansion into cannabis retail (53 stores) leverages existing logistics and regulatory expertise, though this segment faces intense competition from both private and government-operated dispensaries. The company’s acquisition by Sundial Growers may enhance vertical integration but also exposes it to the volatile cannabis industry. Alcanna’s alcohol retail business competes with provincial liquor monopolies (e.g., BC Liquor Stores) and private retailers, where its regional density offers pricing and selection advantages. In cannabis, rivals include larger players with national footprints. The company’s dual focus on alcohol and cannabis is unique but requires careful execution to avoid overextension. Its high beta suggests sensitivity to regulatory changes, particularly in cannabis.

Major Competitors

• Canopy Growth Corporation (WEED.TO): Canopy Growth is a dominant player in the Canadian cannabis market with a broad product portfolio and international reach. Its strengths include strong branding and distribution partnerships (e.g., Constellation Brands). However, it has struggled with profitability, posting consistent losses. Compared to Alcanna, Canopy has less focus on alcohol retail but greater scale in cannabis.
• Aurora Cannabis Inc. (ACB.TO): Aurora Cannabis is another major Canadian cannabis producer with global operations. It has faced significant financial challenges, including restructuring and dilution. Unlike Alcanna, Aurora lacks an alcohol retail segment, making it a pure-play cannabis competitor with higher volatility.
• Supreme Cannabis Company Inc. (FIRE.TO): Supreme Cannabis focuses on premium cannabis brands but operates at a smaller scale than Alcanna. Its niche positioning contrasts with Alcanna’s mass-market retail approach. Financial instability and limited retail presence are key weaknesses.
• BC Liquor Stores (BCL): BC Liquor Stores is a government-run monopoly in British Columbia, competing directly with Alcanna’s private retail locations. Its strengths include pricing power and regulatory advantages, but it lacks the agility of private retailers like Alcanna.
• Sundial Growers Inc. (SNDL): Sundial Growers, Alcanna’s parent company, is a vertically integrated cannabis firm. Its acquisition of Alcanna provides retail distribution but also ties Alcanna’s performance to Sundial’s uncertain cannabis operations. Sundial’s weak profitability is a concern.