‘Not where we want to be’: Canopy Growth CEO Says Market Share Diminished in Q1

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The CEO of Canopy Growth Corp. said the company’s grip on the cannabis market had been threatened in recent months, even as it embarked on a wave of acquisitions and tried to reorganize its business.

The CEO of Canopy Growth Corp. said the company’s grip on the cannabis market had been threatened in recent months, even as it embarked on a wave of acquisitions and tried to reorganize its business.

“Our market share has weakened and we’re not where we want to be from a margins standpoint,” Klein said on a conference call Friday with analysts.

Son Smiths Falls, Ont. The cannabis company said it had a 15.2% market share – the largest company in the Canadian recreational pot market – in the first quarter of the year and chairs the highest part of the category. flowers at 17.9%.

However, the company only has the third highest market share in the vape category and the second highest in the gummy candy category.

Klein attributed the slowdown he saw to prolonged but temporary cannabis store closures during the COVID-19 pandemic, internal supply and fulfillment issues, and a recent spike in competitors launching single-strain products. at low cost and high levels of tetrahydrocannabinol, the main psychoactive component of marijuana.

CFO Mike Lee also identified missed revenue opportunities due to the timing of some of Canopy’s U.S. products to market and the company’s fill rates, a term for the proportion of customer orders that can be met by current inventory. .

“It all comes down to execution,” he said. “This is the main factor behind our loss of share in Canada.”

These challenges came after Canopy spent much of the pandemic laying off hundreds of workers and shutting down facilities in a bid to streamline operations and align the company’s production with demand.

“As with any organization undergoing a great transformation, there are growing pains and adjusting to new ways of working takes time,” Klein said.

But Klein and Lee seemed convinced the company could alleviate its problems.

Canopy, Klein said, has removed all underperforming products from its list and has a slew of new ones in the pipeline. It recently started selling smaller pre-rolls in larger packages to meet demand from consumers who avoided sharing joints during the pandemic.

He is also confident that the slow movement towards federal cannabis legalization in the United States will benefit Canopy and wants to use the recent acquisitions of Supreme Cannabis and Ace Valley to prepare the company for new cross-border legislation.

Meanwhile, Lee said the company is on track to achieve $ 150 million to $ 200 million in cost savings and operational efficiency over the next fiscal year and has been encouraged by the hundreds of cannabis stores whose opening is scheduled for later this year.

The executives’ remarks came as Canopy said it earned $ 392.4 million or 84 cents per diluted share in its most recent quarter, down from a loss of 30 cents per share or $ 108.5 million a year earlier. early.

Its revenues for the first quarter increased from $ 110.4 million to $ 136.2 million, an increase of 19% excluding acquisitions.

Cannabis revenue for the quarter ended June 30 increased 17% to $ 93 million, due to a 35% increase in recreational cannabis sales in Canada, a 3% decline in sales of Canadian medical cannabis and an 8% drop in international sales.

Consumer products revenue increased 39% to $ 43 million.

Canopy is expected to lose 23 cents a share on $ 149 million in revenue, according to financial data firm Refinitiv.

The results pushed Canopy’s stock to $ 23.71, down 25 cents or about 1% by mid-morning.

This report by The Canadian Press was first published on August 6, 2021.

Companies in this story: (TSX: WEED)

Tara Deschamps, The Canadian Press



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