Investor Presentation April 2019 Caution on c con once cerning - - PowerPoint PPT Presentation

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Investor Presentation April 2019 Caution on c con once cerning - - PowerPoint PPT Presentation

Investor Presentation April 2019 Caution on c con once cerning f for orward-look ooking s g statements This document contains forward looking statements or information (collectively "forward-looking statements") within the


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Investor Presentation

April 2019

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Caution

  • n c

con

  • nce

cerning f for

  • rward-look
  • oking s

g statements

This document contains forward looking statements or information (collectively "forward-looking statements") within the meaning of the "safe harbour" provisions of applicable securities legislation. All statements and information other than statements of historical fact contained in this document are forward-looking statements. In particular, this document contains forward-looking statements, with respect to, without limitation, our future financial position, capital and liquidity, cash dividends, business strategy, proposed acquisitions, expansion plans, budgets, government regulation and laws, projected costs, plans and objectives of or involving Alcanna. Prospective investors can identify many of these statements by looking for words such as "believes", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words and the negative thereof. Forward-looking statements reflect the Company’s current plans, intentions, and expectations, which are based on Management’s perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The Company’s plans, intentions, and expectations are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. There is no assurance that the plans, intentions, or expectations upon which these forward-looking statements are based will occur. Forward looking statements are subject to risks, uncertainties and assumptions, including, but not limited to, those discussed elsewhere in this document. Although Management believes that the expectations represented in such forward looking statements are reasonable there can be no assurance that such expectations will prove to be correct and such forward-looking statements included in this document should not be unduly relied upon. Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward looking statements contained herein include, but are not limited to: risks relating to government regulation and changes thereto (whether by court decisions, citizen referenda, or otherwise); competition; the state of the economy including general economic conditions in Canada (including Alberta) and the U.S.; the unpredictability and volatility of Alcanna’s common share price; restrictions on potential growth; availability of sufficient financial resources to fund the Company's capital expenditures; changes in commodity tax rates and government mark-ups; risks relating to future acquisitions and development of new stores; the ability of management to execute the Company's business and strategic plans; Alcanna’s ability to locate and secure acceptable store sites and to adapt to changing market conditions; poor weather conditions; dependence on key personnel; labour costs, shortages and labour relations including Alcanna’s ability to hire and retain staff at current wage levels and the risk of possible future unionization; supply interruption or delays; dependence on suppliers; reliance on information and control systems; income tax changes; leverage and restrictive covenants in agreements relating to current and future indebtedness of Alcanna; credit risks arising from operations; dilution and future sales of Alcanna common shares; and the potential lack of an active trading market for Alcanna’s common shares and convertible debentures. These factors should not be construed as exhaustive. The information contained in this document, including the information set forth under "Risk Factors", and as disclosed in other filings made by the Company with Canadian securities regulatory authorities and available on SEDAR at www.sedar.com, identifies additional factors that could affect the operating results and performance of Alcanna. Readers are cautioned that this list of risk factors should not be construed as exhaustive. The forward looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward looking statements included in this document are made as of the date of this document and Alcanna assumes no obligation to update or revise them to reflect new events or circumstances except as expressly required by applicable securities law.

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New Name, New Company

ALCANNA signals a departure from the Company’s previous history and a transformed business focused on growth in our two divisions: Alcohol and cannabis

  • One of the largest private sector retailers of alcohol in North America and the largest in Canada
  • Revenues in 2019 will be in excess of $700 million per year, with 20+ million transactions processed annually
  • 236 liquor retail stores: Large-format / “category-killers”, convenience-format, and discount-focused stores
  • Five retail cannabis stores launched Oct 17, 2018, with a multi-year growth plan grounded by good business sense

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Highligh ghts

Focused on Growth – Alcohol

ALCANNA is aggressively focused on winning market share in its alcohol division through growth in its new discount partnership (Canadian Liquor Retailers Alliance) and expansion of its Wine and Beyond brand, and further buildout of its private label program in current markets and new potential markets such as Ontario

Fully Funded Plan

ALCANNA has a strong balance sheet to execute its growth plans with no amounts drawn on its credit facility and ~$90 million in inventory fully paid for.

Focused on Growth – Cannabis

ALCANNA has quickly become an industry leader in the Canadian cannabis retail industry with the launch of its Nova Cannabis brand and industry leading sales per store metrics

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Q4 2018 Same-store sales growth vs. LY:

  • Canada: 7.4%
  • Alaska: 6.0%
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Capital Markets P Prof

  • file

Analyst Coverage: TSX:

CLIQ (common shares) CLIQ.DB (convertible debentures) Shares

  • utstanding:

Market capitalization:

37.1 million

Recent price (April 5, 2019): $5.87

~$216 million

52-week high / low: $11.56 / $4.00

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Leadership T Team

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Executive Team Role Brief Biography James F.C. Burns Vice Chair and CEO Former private equity investor and Partner at Gordon Investment Corporation and Gordon Capital Corporation, Managing Director at CIBC Wood Gundy, Co-

  • wner Director & CFO of Scott’s Restaurants and priszm brandz Inc., served 12

years in the Federal Government where he had many roles including the Chief

  • f Staff to the Deputy Prime Minister of Canada.

Paul Reid President & COO, Liquor Division 27 years of retail experience. Former VP, Corporate Retail Operations at FGL Sports with responsibility for $1.2 billion in sales from 216 corporate retail stores and 13,000 sales associates for the Sport Check, Nevada Bob’s Golf, Atmosphere, and Hockey Experts banners. David Gordey, CPA, CA CFO & EVP Corporate Services Served as an officer of Alcanna since March 2012 in the roles of Chief Operating Officer, Liquor (2016-2018), CFO (2014-2016), and VP Finance (2012-2014). Formerly of KPMG LLP where he served in their public company audit practice. Marcie Kiziak, B.Mgt., CPHR Managing Director (Cannabis Division) SVP Human Resources Formerly the Vice President of Human Resources and Safety for Corrosion and Abrasion Solutions Ltd. which included a secondment into Operations to lead a business transformation. 15 years in the oil and gas and construction sectors focused on senior HR Leadership, M&A and Integration.

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Current St Stor

  • re Loc
  • cation
  • ns and G

Growth P Pot

  • tential

Alaska

Anchorage: 17 Secondary Markets: 4

Total: 21 British Columbia

Lower Mainland: 12 Vancouver Island: 11 Interior: 10

Total: 33 Alberta Liquor

Edmonton: 82 Calgary: 42 Secondary Markets: 57

Total: 181 Ontario Cannabis + Liquor

– Private sector cannabis retailing now allowed + private liquor retail model has been announced

  • 1 cannabis store to open in spring 2019

Alberta Cannabis

  • 5 cannabis stores opened in Alberta on October

17, 2018 7

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Al Alcohol

  • hol R

Retail D Division

  • n
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Restor

  • re ou
  • ur Pos
  • sition
  • n a

as the Market L Leader i in Liquor

  • r
  • New Leadership: Our new President and COO, Liquor, Paul Reid, brings great breadth of retail experience, particularly in Alberta and Western Canada.

He is driving the culture-shift the Company needed and has recently reorganized the Liquor leadership team by adding strong, experienced leaders to lead the marketing, buying and store operations teams.

  • Increase the Company’s scale and market presence by repositioning existing stores through our new Alliance partnership and/or building or acquiring

new liquor stores in more desirable trade areas of the Company’s existing operating regions. The cornerstone of this initiative is the opening of up to 4 new Wine and Beyond large format stores in Alberta in 2019 and up to 6 more by 2021.

  • Drive same-store sales growth and in our liquor business through enhanced targeted marketing and short-term investment in margin. Once we solidify

footsteps we will selectively increase margin to translated increased customers traffic to the bottom line. Q4/19 same-stores in Canada were 7.4% and 6.0% in Alaska.

  • Rationalize and improve the private label product assortment and improve inventory turns and sales from these products. Management believes that

this program is a key element to the future success of Alcanna’s Liquor Division through volume sales and margin enhancement. 2018/2019 are transition years in the program. Will be in fully swing by Q4 2019.

  • Deliver a superior customer experience by investing in the right level of pay, benefits and other resources required to drive a customer service culture

that consistently exceeds expectations and is distinctive in the market and reduces staff turnover. The adult beverage retail experience in the Company’s core markets has become commoditized which presents an opportunity to distinguish our business and increase the Company’s market share.

  • Improve the brand image of the Company by completing renovations of Alberta, British Columbia and Alaska store locations. This effort has been

substantially accomplished 2017/2018 and has driven sales increases and better positions the Company against intensifying competition.

  • Invest in home delivery and ecommerce: Alcanna is the industry leader for home delivery and Ecommerce and it is an area that we will continue to

build out. We offer home delivery within 1 hour on leading brands, and offer over 12,000 products online for pickup at the customer’s local store or delivery to home within 48 hours.

The Company is implementing initiatives in the following areas to drive sales, improve profitability and ultimately regain market share lost to new competitors in recent years:

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Larg rge-Format S Stor

  • res: W

Wine and Beyon

  • nd

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Canada’s largest liquor stores (up to 20,000 sq ft in size) Largest selection in Canada (over 6,000 wines, 2,500 spirits and 2,000 beers)

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Con

  • nvenience

ce-Format S Stor

  • res: L

Liquor

  • r Depot
  • t / Brown Jug

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Always close by Easy in, easy out Open late All the good stuff you’re looking for

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Discou

  • unt S

Stor

  • res: Ace

ce L Liquor

  • r Discou
  • unters

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  • Ace Liquor Discounters (acquired by the Canadian

Liquor Retailers Alliance, owned 71% by Alcanna, in January 2019) offers market leading prices on national branded products

  • The Alliance has 62 stores operating as Ace Liquor

with several M&A transactions under review.

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Preferred L Label P Progr

  • gram – Incr

creasing M Margi gins a and Loyalty

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Strategy

  • Source, sell and promote

preferred label products

  • Grow as percentage of respective

product categories (wines, spirits & beer) by using these product to drive increased customer traffic and deliver higher margins Implementation

  • Training staff, aligning incentives
  • Customer sampling programs
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Can annab abis R s Retai ail D Divi visi sion

  • n
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Nova C Cannabis

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The environment is both comfortable and safe for existing and new users. The stores were designed to encourage education and social interaction amongst customers and staff We have targeted ‘A class’ convenient locations (shopping centres, grocery anchored sites) along with ensuring we have a presence in trendy/urban areas to help establish the brand

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Launch ch a a Market L Leading R Retail Cannabis B Business

 Leverage our Relationship with Aurora

  • Aurora Cannabis is our largest shareholder owning 25% of our shares
  • To the extent allowed by provincial regulators, Aurora Cannabis has provided ongoing expertise and support

 Leverage existing company infrastructure and invest in new executives

  • A key competitive advantage over our competition, which are largely new to retail, is our 25 year track record of retailing

controlled substances in Western Canada and the infrastructure already in place (back office: finance, IT, Supply Chain, government and community relations; excellent relations with provincial regulatory agencies, and store focused departments: real estate, store construction and design, HR)

  • We’ve invested in an experienced retail team with the experience and capacity to lead the cannabis division through extended

growth and expansion

  • Exceptionally strong balance sheet and investment capability

 Obtain superior cannabis store locations

  • Strong and long established relationships with major national landlords have enabled us to secure the best locations
  • Key locations throughout Alberta have been secured for future expansion when the license moratorium is lifted by the provincial

regulator

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Launch ch a a Market L Leading R Retail Cannabis B Business

 Develop a market leading brand and store design

  • We were the first to open 5 stores in Canada and remain an industry leader as the cannabis retail market evolves
  • Our new store on Queen West in Toronto will take cannabis merchandising to a new level in Canada
  • Leveraged our leading retail industry team’s experience and knowledge of consumer behavior and preferences in our core market
  • f Alberta
  • Operating ‘best in class’ retail cannabis stores that are focused on executing a customer service and education culture.
  • The Company has significant experience in building, opening and operating mass market stores selling controlled substances that

it believes many of its competitors will not possess.

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Su Summary

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Summa mmary

Gain significant market share in the alcohol retail business by leveraging the new

Canadian Liquor Retailers Alliance (convert underperforming Liquor Depots to Ace Liquor Discounters and consolidate a portion of the fragmented liquor industry in Alberta) and growing Wine and Beyond (a “Category Killer”)

Open 100+ cannabis retail locations 52 locations in Alberta and 50 locations in Ontario by end of

2021, and continue to be a leader in a rapidly evolving industry. Opportunistically acquire weak and failing competitors in all provinces.

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Improve financial performance through the aggressive enhancement of the private label program

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Prepare to enter new markets the Ontario government will be announcing regulatory framework for

allowing private sector liquor retail across the province this spring and Quebec’s newly elected provincial government has signaled its intentions to consider a private liquor retail model

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