TORONTO – The number of new entrants to the cannabis market combined with falling prices have created an “unsustainable” situation, Tilray executives said on Monday, who believe they can overcome the situation.
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According to the president of the Canadian operations of the cannabis company, Blair MacNeil, 157 new brands of cannabis were launched in the country in the past year and prices in the market fell 22.6%, while Tilray did reduced his only by 1.7%.
“We have definitely protected our downward margins and I think that as an authorized producer, we have more space than many of our competitors to be able to reduce our prices,” he explained at a conference. telephone with analysts.
“The market is greatly diluting and we will significantly step up our innovation to combat this.”
The country’s cannabis growers have a glut of products they can’t wait to launch as Canada grapples with new pandemic restrictions and the cannabis black market continues to show resilience.
Cannabis companies, which have been hit by lengthy lockdowns on retailers and are already limited in how they market their products, have spent much of the health crisis cutting prices and reviewing their offerings with care. a critical eye.
Along with several provincial cannabis competitors and distributors, including the Ontario Cannabis Corporation, Tilray has embarked on a SKU and brand rationalization program to control costs.
But she still intends to redouble her efforts in the area of innovation, in the hope of gaining as much market share as possible.
“Can we do it cost effectively? Yes, we think we can, ”said MacNeil.
“We have other costs that we can take out of this business to make sure we can do that and increase our gross margins. It’s going to be a bit bumpy for the next couple of quarters, but we’re definitely in the best position to be able to resist. ”
Resisting this period will require recovering market share lost in recent months, as acknowledged by CEO Irwin Simon.
“We are responsible for some of these losses,” he admitted on the same conference call.
“The easiest way is to lower the prices and give up market share, but we are here to build something for the long term.”
This means that profits will also have to continue to climb.
Quarterly loss down
Tilray posted a net loss of nearly US $ 6 million for its most recent quarter on Monday, which compared to a net loss of around US $ 89 million for the same period a year earlier.
Tilray’s net earnings per share for the quarter ended November 30 were nil, compared to a loss of 41 cents per share for the same period last year.
Those numbers allowed Tilray’s stock to climb $ 1.10, or 13.5%, on the Toronto Stock Exchange on Monday, to close at $ 9.23.
Tilray’s revenue climbed approximately 20% to US $ 155 million from US $ 129 million a year earlier.
The company clarified that US $ 58.8 million, or 38% of revenue, was attributable to its cannabis business, while US $ 13.7 million, or 9%, came from its SweetWater Brewing division and that US $ 13.8 million, or 9%, came from Manitoba Harvest.
Simon said the company will attempt to take a larger position in the hemp market over the next few months and look to meet demand for beverages and other products infused with cannabidiol, a compound present in cannabis and hemp which does not produce a psychoactive effect, but which would have a relaxing effect on consumers.
It will also focus on its recent acquisitions of Breckenridge Distillery and SweetWater Brewing, purchased in 2020, to drive growth in the beverage category and ensure Manitoba Harvest grows its share of the consumer packaged products market.
To reflect the scale of these initiatives and its transition from a licensed Canadian cannabis producer to a global consumer packaged goods company, Tilray’s parent company will begin using Tilray Brands as a new name.
Company in this story: (TSX: TLRY)
Tara Deschamps, The Canadian Press
