Canopy Growth Corp. is continuing to pin its hopes on the U.S. as competition in Canada’s cannabis industry intensifies amid a wave of mergers and acquisitions.
The Smiths Falls, Ont.-based cannabis company said Tuesday that it remains focused on advancing its U.S. operations and is encouraged by pot reforms sweeping the country.
In recent months, the U.S. House passed an act aimed at giving cannabis companies more access to banks, a bill was introduced that would decriminalize cannabis, New York pursued adult-use legalization and federal pot legalization is gaining support.
“I’m really bullish and have been for a while in terms of the speed that I think things are going to move,” said chief executive David Klein in a call with analysts.
“I personally believe (federal legalization) will move faster than maybe a lot of people think.”
Canopy and its competitors have been increasingly turning their attention to the U.S. because they believe they can quickly apply what they’ve learned from Canada’s legalization process to the U.S.
They also think a strong presence in the U.S. market will help them in their ongoing fight over market share in Canada.
Desjardins Securities recently said Canopy controls about 14 per cent of the Canadian market, trailing Hexo Corp. at 17 per cent and Tilray at 15.5 per cent., but beating Aurora Cannabis Inc. at 6.5 per cent.
Much of that market share has been built through acquisitions and mergers.
Canopy, for example, bought Supreme Cannabis and Ace Valley Cannabis, while Hexo went after Redecan, 48North Cannabis Co. and Zenabis Global Inc. and Tilray merged with Aphria Inc.
Klein believes this consolidation is good for the market and consumers, but that doesn’t mean Canopy will continue to snatch up Canadian players at its previous speed.
“If you look at where we would focus next with our balance sheet and with an eye toward mergers and acquisitions, it’s going to be the U.S.” he said.
“We think we’re positioned the way we want to be positioned in Canada, so I wouldn’t see us doing much more in the way of mergers and acquisitions in Canada.”
Canopy has begun to create a foothold in the U.S. market with a line of Martha Stewart products, including gummies inspired by chewy French confections called pate de fruit, which come in flavours like passionfruit, huckleberry and kumquat.
Her products now rank ninth in sales across the CBD supplement category, Canopy said.
Alongside Martha Stewart products, Canopy launched its Quatreau cannabidiol drinks to the U.S. and in Canada, introduced its first gummy and new Tweed iced tea beverages in lemon and raspberry flavours in recent months.
It also began to sell 40 per cent more cannabis in Canada than it harvests, the company revealed in its most recent financial results.
Canopy’s net loss attributable to the corporation totalled nearly $700 million or $1.85 per diluted share in its fourth quarter.
The result compared with a loss of $1.3 billion or $3.72 per diluted share in the same quarter last year.
Net revenue for the period ended March 31 grew to $148.4 million, up from $107.9 million a year earlier.
The increase came as net revenue from Canadian recreational cannabis rose to $61.1 million compared with $43.9 million a year ago, while medical cannabis and other net revenue rose to $40.2 million compared with $35.6 million last year.
Canopy reported revenue from other consumer products totalled $47.1 million, up from $28.4 million a year ago.
This report by The Canadian Press was first published June 1, 2021.
Companies in this story: (TSX:WEED)