Tonik’s Guide to Exponential Growth as a Small Business in Canada’s Adult-Use Market

Founded in April 2021, Tonik Cannabis has created its foothold as a small business in Canada’s adult-use market.

© Courtesy of Tonik

Connor(left) Bronson(middle) Anthony(left)

Anthony Horvath, owner of Tonik, said the birth of Tonik was inspired by his sons Bronson (23) and Connor (27) who both use cannabis to help treat a rare genetic condition they share.

“As a family, we decided to open Tonik to help spread this knowledge to our community. We wanted to create a business that we could pass on to our sons when they are ready to take it over, and for all of us to become more involved in our community,” Horvath wrote in a statement to Cannabis Business Times.  “Having a local business is a great way to meet and educate people and answer any questions related to cannabis. Our store is designed in a way where everyone feels included, whether they are cannabis experts or first-time consumers who have no idea what they are looking for.”

Since Tonik opened, it has grown exponentially, despite an increase in competition. According to in-house data, the company has seen a growth rate of 12% to 15% nearly every month since opening, and was recently voted by the community as the best cannabis shop in Brantford, Ontario–where 20 retailers reside. Brantford is a small town with a population of a little over 102,000.

Here, Horvath shares how the company has established itself as a small business in Canada’s adult-use market and has continued to grow despite an increase in competition.

AR: You mentioned Tonik has seen a growth rate of 12% to 15% roughly every month since opening. Can you describe that in more detail?

Anthony Horvath: I run monthly sales revenue reports every month, and we can see how we’re doing month to month, and we’ve been extremely fortunate in that we’ve seen a positive growth and cash flow increase every month.

The only month that we plateaued was between October and November [2022,] and that’s not unusual in this industry. Typically, that’s when everyone is harvesting. So, considering that flower and prerolls are some of the top sellers [here], people where we are grow cannabis in their backyards or their homes. So typically, when it’s harvest season around October, people tend to start to smoke their own products for a little while, and then when they get tired of that, they come back and start shopping. So, while we plateaued over the months of October and November, many stores saw a significant decline of anywhere between 10% to 20%, but we held our own.

December [2022] was the most stellar month for us; we actually had a 26% increase in sales over November. … In speaking with other reps, [I learned] that many other stores just kind of plateaued and didn’t really make any real positive gains. But we’ve been fortunate enough to be able to continue that positive growth.

AR: What do you think are important factors leading to Tonik’s month-over-month growth? Do you implement new tactics monthly? What’s making your business stand out from the competition?

AH: I think there’s a number of factors that have led to our success so far. One is that our focus here is all about education, which we refer to as an effortless customer experience, which simply means that as clients come into the store, the store is extremely welcoming.

The store is not like an Apple store where it’s very minimal, white, has a couple of tablets, and then that’s the only way you’re going to see the product. We have products laid out throughout the entire store; everything that we carry, you can visually see. It’s a large space, so you feel the comfort of being able to walk around and browse.

We have very highly educated budtenders that work for us. They’re all cannabis consumers. All of them have a niche area that they have an expertise in. We have a high focus on wellness areas, dealing with pain management, sleep and anxiety. Although we are a recreational shop, and we recognize that we’re not supposed to be speaking medicinally and providing medical advice, we can still speak to our own experiences, and what the products and the properties that they contain, the cannabinoids [and] some of the effects. Then, the consumers just have to take that information and kind of make their own decisions based on that.

It’s that close contact we have with the clients and spending the time with them that they feel is necessary to be able to make an informed decision about their products [and] matching the right product to their needs. We had fantastic word-of-mouth as a result of the story behind the inception of Tonik. A lot of people knew about my boys through their involvement in the community. Before we opened Tonik, Connor and Bronson both were very social, so people got to know them, … and I think it brought a lot of people to know who we are. They just felt that trust immediately.

AR: You mentioned consumer education and creating one-on-one customer experiences. Why are those one-on-one experiences important to Tonik’s overall success?

AH: We definitely see that clients are coming to us with very little information or misinformation. There are some that are just … looking just for something to replace maybe alcohol, and then we have those looking for help in managing, like I mentioned, pain, anxiety, or just challenges with sleeping.

We will spend 15 minutes, 20 minutes or a half hour with our consumers just to provide them with all the information they need to make an informed decision and to feel comfortable about the products that we’re providing.

AR: What is some advice you have for new business owners looking to enter the space on how they can establish themselves in an oversaturated market like Brantford?

AH: It’s definitely a very challenging, oversaturated market. Perseverance is important and key. Strong client service is the only way. Everyone’s selling the same product overall, and so you do have to find your differentiator, a unique niche on which you can focus.

In our situation, based on the area that we’re physically located in, the majority of [our clients] are 35 years of age and older, and we have 50:50 ratio of men to women, which is interesting. So, find your niche; cater to those less focused segments of the market.

And it’s really just focusing on educating your staff members, making sure they buy into what you are carrying, and that they are also avid consumers of the product you find. They don’t need to know everything about all your products, but they should have at least a real positive interest in some part of the cannabis industry that really drives them forward. If you don’t believe in the product that you’re selling, that comes through when you’re in front of a client. That passion is extremely important. And if that’s lacking in your business, and in the team members that are your front of house, it’s really going to come across. And that, I think, is what really differentiates us and will differentiate others coming to the market now, especially when you’re competing against so many others.

AR: Price compression has been a significant challenge for operators in the market. How is Tonik navigating the effects of price compression?

AH: There definitely are those shops that are all about price. They’re going to [be] the discount dispensary. We have one that just moved in recently [in Brantford]. It’s, you know, the guaranteed lowest price or people will price match anyone plus take 5% off, so there’s a value discount place. We are not that shop, and we will never be that shop.

The saying, “You get what you pay for,” is absolutely true. We stand by that. We are not the lowest price in town, we never will be. We sit right near the top third in the price range of our products, but appreciate what we offer in addition to getting the product, and [consumers] are willing to pay that small incremental increase for everything else that they get while working with us. So, I don’t compete on price. I never will. I mean, you obviously need to have fair market value on your product, you don’t want to put price beyond what the market will bear, but we are not your value shop.

AR: What are the company’s short- and long-term goals?

AH: Initially, we were thinking of opening multiple stores, maybe having three stores in a few other towns local to us. … There’s a few smaller towns around [here], and we were thinking maybe once we establish ourselves here, we’re going to open up a few more, but we’ve changed our approach on that.

We’re now focused on our one store, making this a significant brand in the community, growing the business out of just one location, becoming the top retailer in Brantford, … and just focusing on what we do best which is that education, that client service and fantastic curated selection of products.

We are going to continue providing consumers with products that they need. … We are looking at offering additional services as well as involving ourselves more in the community. We’ve done a lot within the community itself, coming up with other smaller businesses and joint ventures, supporting one another. That’s what we’re all about here, and we’re going to continue that, and we’ve sort of put any additional stores on the backburner at this point. If anything, we may just grow our existing footprint a little bit further. But that’s sort of our goal for the next at least 12 to 18 months.

Editor’s Note: This interview has been lightly edited for style, length and clarity.

[Original Source]