All fired up! Q&A with Stéphane Trudel

You officially became CEO of Fire & Flower on June 1: What excites you about the opportunity?

ST: I've had this question a lot because when you’re in an industry 30 years, why exit? In a sense, I still feel I'm part of the extended family, because this business addresses a large growing market, with very similar demographics to the convenience channel. [Through ACT] I've been involved with Fire & Flower from legalization. I could see the opportunity to establish a very solid business leader in cannabis. The size of the market, both in Canada and the U.S., excites me because it's there for the taking: No one really has an established position. [Former CEO] Trevor Fencott built this collection of great people and assets, so being able to take over at this time and guide the company through the next stages is exciting.

What was the impetus for ACT’s initial investment?

ST: Couche-Tard has grown through acquisitions, but the company is always looking for the next thing to invest in. Their success has been that they've never thought that they had the solution for everything. They're very curious about what they could get into to expand their reach, so that was the driving force behind the investment. Early on, when they saw legalization coming and some of their own products potentially being impacted negatively by this new category, Couche-Tard wanted to see how they could get involved. It’s the same as they've done with other products—make an investment, focus on learning by aligning with the talent to understand how they can scale it the way they've scaled so many other things.

How do you see the partnership evolving over the next 12 to 18 months?

ST: Fire & Flower has been running two co-located stores with Circle K for the last couple of years in Alberta, which proved there is a definite crossover between the two businesses. Now we have five in the GTA—they're built right in a Circle K store, but, following regulations, there's a dividing wall and a separate door. While you can't go from one store to the other inside, Fire & Flower is leveraging the high traffic real estate from Circle K, as well as its loyal customer base. In turn, we are bringing our omnichannel customer experience and half a million Spark Perks loyalty customers. This isn’t just any cannabis store, Fire & Flower has a proven operating model, as well as our Hifyre digital retail platform. The businesses are very much intertwined, and we look to expand on that while we continue to consolidate the industry and become more efficient at what we do. Couche-Tard is going to leverage our best practices, we're going to leverage theirs, but we run as two independent businesses. Having Fire & Flower as an independent entity allows Couche-Tard to learn about the business without being themselves thrown into it. Fire & Flower is building the set of learnings independently, but with them as an investing partner.

What does your research show about how the convenience and cannabis demographics overlap?

ST: Since day one, Fire & Flower has managed the relationship with customers from end-to-end. We understand the demographics, so we bring these data insights to the relationship—we know who we are talking to; we know what we can recommend and what products they're interested in. There is a definite crossover in the customer base. For instance, it's the younger generation who are attracted to Fire & Flower stores and they're also attracted to c-stores. We own our own technology from end-to-end, even up to a point where we control routing software for delivery, so for our partners and for our customers, we're tying it all together to make a seamless experience.

Tell me about your new service—Firebird Delivery—and how that taps into the convenience customer.

ST: Firebirddelivery.com is a virtual retail cannabis store that allows customers to get product delivered, but also, we're piloting delivering snacks alongside as a separate transaction. Kingston, Ont. is a great test market for us. Three stores there offer rush delivery, within an hour, and when customers get to the end of their online cannabis order, we offer the opportunity to do a separate transaction [to purchase additional c-store products]. The fact we're fully integrated allows us to do tests, play with the offers, bring products in, products out.

How do you see this partnership with Couche-Tard playing out on a global level?

ST: About 70% of Americans live in states that have legalized cannabis and President Biden has signalled they want to do something on the federal side—it’s not a question of if, it's a question of when. Circle K is a leader in the U.S., and they own their real estate: Fire & Flower can expand into the U.S. and scale, bringing solutions tested in Canada’s very competitive environment.

Will there be opportunities to shake up the business model in different markets? Do you see cannabis being more closely aligned with convenience in the next five years?

ST: Certainly. Right now, because of the way it's being legalized and regulated differently in various provinces and states, players have had to adapt to the regulation and be vertically integrated. Over time this market will mature and there will be specialization at every level in the value chain. We differentiate ourselves from the licensed producers in Canada because we don't grow or develop product. Over time, the value chain is going to be broken up and there are going to be leaders at every step of the value chain. We intend to be the leader on the retail side.

Speaking of leadership, you were named the Convenience Industry Council of Canada’s 2022 Outstanding Industry Leader of the Year. What did this mean to you, especially considering the new role?  

ST: It was a humbling experience. Over the years, I've had mentors and people I looked up to because they worked for the health of the entire channel, not just their own companies—if the channel is not healthy, there's no point in trying to compete. I've tried to do the same and to receive this award meant that it was recognized in a larger way. Jumping into a new industry the same year is kind of ironic. This industry is very tight and there's a ton of players who are extremely passionate about the business: I'm the new guy. The award gave me confidence and reminded me to approach it the same way I approached the convenience channel all those years—build relationships and trust. I want to make Fire and Flower a trusted player in this industry so that it can attract solid investors and like-minded people that want to grow with us.

Drawing on your experience, what does the future of convenience look like? What needs to happen to create a vibrant channel?

ST: It's a very resilient industry and that's what I admire. It's not the sexiest, but it has rolled with the punches and demonstrated that it’s essential. It's also not the same business that it was 40 years ago when Couche-Tard was founded, and I'm amazed how much the channel has weathered the storms and adapted its offering to remain relevant. Really that’s why I'm in this new role—because Couche-Tard was looking [at cannabis] and saying, this may be another evolution and we want to be a part of it. The convenience industry listens to the market, and I believe it will remain relevant, but we need governments to understand that bringing in new categories, like beverage alcohol, is critical. Look at the number of stores that are closing in regions that don't allow beverage alcohol. One way to keep the channel healthy is to allow it to sell different categories—it shouldn't be taken for granted.

Final thoughts on your new position?

ST: I love talking about this industry because so many people either don't know about it or have a negative view, especially with licensed producers bringing in a ton of retail investors during the hype at the beginning. Fire & Flower is in a different business, one that resembles convenience much more than the licensed producers, which are a mix between CPG companies and farmers.

We're not that: We're retailers and, like convenience retailers, we talk to our customers in a modern way, we’re evolving with them, discovering this new product and creating long-term relationships.