Second Toke?

Coffee retail brand Second Cup was in the news yesterday for considering getting into the cannabis business by converting some of their coffee shops into cannabis stores. Their shares instantly rose with this news.

It’s worth considering for these very compelling reasons:

  1. Second Cup – once the pioneer up upscale coffee – has been struggling to compete with international juggernauts in the hyper-competitive café industry and has been losing market share to McDonalds and Starbucks, as well as the hometown hero Tim Hortons. Second Cup just does not have the resources to compete effectively with the big boys. Their same-store sales history in the last decade proves that.
  2. Ontario government announced earlier this week that it was dropping the previous plan to sell cannabis through government-run stores in favour of allowing private sales. This announcement has the potential to thrust Second Cup into gaining category leadership overnight with first-mover advantage.
  3. There is plenty of potential upside and minimal investment required given that Second Cup already has brand recognition, retail and merchandising expertise and distribution, a healthy retail footprint, committed franchisees looking for enhanced margins and strong operations and marketing capabilities.

They may even find a way to keep their high margin coffee business – and grow their late-night snacking product line.

It’s all just smoke for now… but it could be the second coming of Second Cup.

By: Matt Kelly, Managing Partner

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