High Tide Inc. (HITI): Strategic Growth & Market Leadership

The TDR Three Key Takeaways regarding High Tide and Raj Grover:

• High Tide reports $124.2 million in revenue for the latest quarter, with a 12-month trailing revenue surpassing $500 million.
• CEO Raj Grover outlines High Tide’s strategic growth and diversification, including significant expansion in Canada and potential US market entry.
• High Tide’s innovative discount club model has driven its market share from 3% to 11%, showcasing effective customer-centric strategies.

High Tide Inc. (NASDAQ: HITI, TSXV: HITI), CEO Raj Grover gave an exclusive interview on “Trade to Black” Podcast. Raj Grover highlighted the company’s strategic expansion in Canada, potential US market entry, and innovative discount club model, which has increased market share from 3% to 11%. High Tide aims and strategy to increase its market share in Canada to 15% within two years and how much they are prepared to capitalize on potential federal legalization in the US.

The company reported revenue of $124.2 million for the latest quarter (Q2) and achieved a 12-month trailing revenue exceeding $500 million. Additionally, High Tide generated $9.4 million in positive free cash flow this quarter, contributing to a cumulative $22.7 million over the past four quarters. This performance is complemented by a transition from a $1.6 million net loss to a $200,000 net gain year over year. Grover remarked, “Our turning point happened a little while ago. This is our fourth consecutive quarter of free cash flow generation.”

High Tide’s innovative business model, particularly its discount club initiative, has been a significant driver of its market share growth. Since the launch of this model, the company’s market share has surged from 3% to nearly 11%. “We have Elite today, which has grown at its fastest pace since inception for three quarters in a row now. So, 226% year over year and 38% sequentially,” Grover noted. This model not only ensures customer loyalty but also provides valuable data for tailoring offerings to customer preferences.

The company’s diversified portfolio includes retail, e-commerce, and consumption accessories. High Tide operates under the Canna Cabana brand, which is the largest Canadian retail chain with 172 locations and the second-largest globally. The company also runs three of the top five consumption accessory platforms and three top-tier CBD platforms. Grover highlighted, “We have 5 million total customers, including our Cabana Club members, which is now sitting at 1.43 million members.”

Grover emphasized that 70% of Canadian cannabis consumers prioritize price, a critical insight that has shaped their discount club model. “We read into that data and now we please our customers and our club members with the lowest price guarantee, with the largest selection,” Grover explained. This data-driven approach has allowed High Tide to stay ahead of market trends and continuously refine its offerings.

The company aims to increase its market share in Canada to 15% within the next two years through a combination of organic growth and strategic mergers and acquisitions (M&A). “We added 10 stores organically this year. We communicated to the market that we’ll add 20 to 30 stores, and I think we will meet that target,” Grover stated. Additionally, High Tide is poised to capitalize on potential federal legalization in the US, with a ready base of 3 million online customers who can be converted to cannabis buyers. “We have 3 million US customers, which I alluded to in the beginning that we can easily start converting,” Grover pointed out.

In Ontario, the company’s average store generates $3.4 million, significantly higher than the peer average of $923,000. Nationally, High Tide’s stores average $2.6 million in revenue, compared to the industry average of $1 million. “Our same store sales are up 111% over the last 10 quarters, while the average operator in the country is down 10%,” Grover highlighted, emphasizing the effectiveness of their innovative discount club model. Want to be updated on Cannabis, AI, Small Cap, and Crypto? Subscribe to our Daily Baked in Newsletter!