Investor Ideas #Potcasts, #Cannabis News
and #Stocks on the Move: (NASDAQ: $TLRY) (NASDAQ: $CGC) (OTCQX: $CURLF) (NASDAQ:
$OGI)
Delta, Kelowna, BC, August 21, 2023
(Investorideas.com Newswire), investorideas.com, a global news source covering leading sectors
including marijuana and hemp stocks and its potcast site
release today’s podcast edition of cannabis news and stocks to watch plus insight
from thought leaders and experts.
Listen to the podcast:
https://www.investorideas.com/Audio/Podcasts/2023/082123-Cannabis.mp3
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this in full at https://www.investorideas.com/news/2023/cannabis-potcasts/08211TLRY-CGC-CURLF-OGI.asp
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Today’s podcast overview/transcript:
We’re back! After two months away we are
back to discussing cannabis news and the industry as it stands today.
In today’s podcast we go over a few
public company announcements, how these announcements are indicators of overall
industry trends and where the cannabis industry goes next.
Canopy
Growth Corporation (TSX: WEED) (Nasdaq: CGC) announced last Thursday that it has entered
into an agreement to sell its Hershey Drive facility in Smiths Falls, Ontario,
as part of the Company's transformation to a simplified, asset-light operating
model. Canopy Growth will retain its Smiths Falls-based post-harvest
manufacturing facility.
Pursuant to the terms of the Agreement, the
Facility will be sold to Hershey Canada, Inc. for cash consideration of
approximately CAD$53 million.
"We are pleased to have reached an
agreement with Hershey on this important sale. This is the latest milestone in
our focused effort to reduce costs and further enhance our balance sheet,"
said David Klein, Chief Executive Officer of Canopy Growth. "Each of the
steps we have taken as part of our transformation to a simplified, asset-light
operating model supports our ability to deliver in-demand products from brands
our customers love, with greater agility and less execution risk. Once again,
we have demonstrated Canopy Growth's ability to achieve significant
organisational and operational change to position the Company for future growth
in the Canadian market."
"Our intent to purchase the Hershey
Drive property in Smiths Falls is another example of the strategic investments
we're making in our supply chain network and our Canadian operations to support
growth," said Jason Reiman, Chief Supply Chain Officer, The Hershey
Company.
Upon the completion of the Transaction,
Canopy Growth will have sold a total of seven properties for an aggregate gross
amount of approximately CAD$155 million since April 1, 2023. Net proceeds
received from the sale of the Facility will be used primarily to pay down the
Company's senior secured credit facility.
The sale of the Facility follows the
centralization of post-harvest manufacturing at the Company's former beverage
facility in Smiths Falls, as well as the consolidation of all flower
cultivation in the Company's purpose-built sites in Kincardine, Ontario, and
Kelowna, British Columbia.
By centralising the Company's core
activities in purpose-built facilities and working with contract manufacturers
for edibles, beverages, and vape products, Canopy Growth has optimised its
capability to deliver winning products with greater agility and at improved
margins, while reducing execution risks and investment in permanent capacity.
Shawn Pankow, mayor of Smiths Falls, said
Hershey coming back to the town is significant for the community that relied on
the employer for decades before it shut down in 2007.
“It’s almost like that time warp effect.
Are we going back in time? Is this really 2023 or are we back here in 1960 when
the Hershey story first started in Smiths Falls,” Pankow said in a Global News interview Thursday.
Canopy Growth unfortunately does not stand
alone in this trend of consolidation for debt financing when looking at the
Canadian Cannabis landscape. Several companies of varying sizes have announced
layoffs, closures and selling off of assets, primarily production facilities,
over the last two years.
There is no singular factor to blame for
this but rather a myriad of issues the industry faces such as high taxation,
regulatory inconsistencies and issues, low sales and product loss,
oversaturation in the market, price competition with the illicit market as well
as the overall inflation being witnessed in Canada and the U.S.
On a different side of the cannabis story, Tilray Brands, Inc. (Nasdaq: TLRY) (TSX: TLRY), last week announced the acquisition of the
remaining 57.5% equity ownership of Truss Beverage Co.™ from Molson Coors Canada (NYSE: TAP).
THC beverages present a significant
opportunity to engage legal-aged consumers who haven’t explored cannabis as a
lifestyle, medical, or functional choice. In Canada, with over 10.6 million
potential consumers remaining untapped, cannabis beverages are almost $100MM at
retail. Regulatory shifts are expected to facilitate market entry for
beverages, with the possibility of on-tap THC options in restaurants and bars
promising substantial growth for this category. Over time, we expect the
regulatory landscape for beverage distribution to evolve, with authorities
re-evaluating their consumer policies. We expect this shift to fuel strong
growth in the market for cannabinoid-based beverages, catering to diverse needs
and occasions.
Blair MacNeil, President, Tilray Canada,
said, “In addition to acquiring full and direct ownership of a stable of
high-growth brands, this acquisition further strengthens Tilray’s #1 cannabis
market share position in Canada and positions the company at the forefront of
the adult-use beverage sector. We are excited to build upon our leading
portfolio of beloved cannabis brands and to further diversify our product
offerings while broadening our consumer reach and enhancing consumer’s lives.”
This follows the company’s previous announcement to acquire eight beer
and beverage brands from Anheuser-Busch
(NYSE: BUD). Upon satisfaction of customary
closing conditions, Tilray will acquire Shock Top, Breckenridge Brewery, Blue
Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer
Brothers Brewing, Square Mile Cider Company, and HiBall Energy. The transaction
includes current employees, breweries and brewpubs associated with these
brands. The purchase price will be paid in all cash and the transaction is
expected to close in 2023.
These beer and beverage brands possess the
hallmarks of strong consumer loyalty and further diversify Tilray’s growing
U.S. beverage alcohol segment. The expected sales volume of the acquired brands
will elevate Tilray Brands to the 5th largest craft beer business position in
the U.S., up from the 9th, with current brands SweetWater Brewing Company,
Montauk Brewing Company, Alpine Beer Company and Green Flash Brewing Company.
Tilray Brands also owns Breckenridge Distillery, the award-winning spirits brand
and the World’s Best Blended Whisky, and Happy Flower CBD sparkling
non-alcoholic cocktails.
Irwin D. Simon, Chairman and CEO, Tilray
Brands, said, “Today’s announcement both solidifies our national leadership
position and share in the U.S. craft brewing market and marks a major step
forward in our diversification strategy. We are excited to work with the teams
behind these iconic brands that command great consumer loyalty and have a
history of delivering strong award-winning products with tremendous growth
opportunities. Tilray is fully committed to invest in and champion the future
of the U.S. craft beer industry by fueling new innovation that excites and
further accelerates the growth of its consumer base.”
Mr. Simon continued, “Leveraging the deep CPG
expertise of Tilray’s leadership team and acquisition integration track record,
we intend to drive both revenue and cost synergies, while significantly
expanding national distribution to coveted markets across the U.S. and
internationally. In a matter of three years, Tilray has solidified its
leadership position in the craft beer industry, and we fully intend to be that
change agent that reinvigorates the sector. Upon federal cannabis legalisation,
we expect to leverage our leadership position, wide distribution network and
portfolio of beloved beverage and wellness brands to include THC-based products
and maximise all commercial opportunities.”
Andy Thomas, President, The High End at
Anheuser-Busch said “Tilray Brands reached out to us early this year with
interest in purchasing these brands and breweries, and since then, we’ve had
many positive conversations that led to today’s announcement. The talented
people behind these brands and breweries, along with our significant
investments in them over the years, have positioned them for a bright future
with Tilray Brands. We are committed to working with Tilray Brands over the
coming months to ensure this is a smooth transition for the people who are
working every day to get these amazing beers and beverages to consumers across
the U.S.”
Tilray is obviously positioning itself to
be a leader in the beverage sector, both with cannabis beverages, alcoholic
beverages and functional beverages. By focusing on different verticals the
company is in a good position if and when regulations change in Canada or
legalisation shifts in the U.S. but when it comes to regulatory changes in the
cannabis industry, we have seen many promises go unfulfilled.
This brings us to news out of the E.U. with
Germany’s cabinet announcing the approval of a
controversial groundbreaking bill on Wednesday of last week that would allow
adults to buy and possess small amounts of cannabis for recreational use.
The decision, which still has to be passed
by parliament, would allow them to possess up to 25 grams and grow a maximum of
three plants for their personal use.
They would also be able to buy the drug by
joining non-profit “cannabis clubs” which will be allowed to have a maximum of
500 members.
Currently, cannabis can be legally produced
and used in the country for limited medical needs.
Chancellor Olaf Scholz hopes the law will
curb the black market, protect consumers against contaminated marijuana, and
reduce drug-related crime.
“We want to limit consumption and make it
safer, especially for children and young people. But we do not want to expand
it,” said health minister Karl Lauterbach in a news conference.
"What we also do is offer preventive
measures for those who are caught. And in the case of problematic consumption,
the youth welfare offices are even called in so that we don`t let this
slide," he added.
However opposition parties have warned that
it will encourage the use of the drug and put minors at risk, while a grouping
of judges has said it will likely increase rather than decrease the burden on
the judicial system.
Lawmakers will debate the bill on their
return from summer break on September 4th.
While there is no assurance this bill is
passed in full or how this will play out, again many promises go unfulfilled
when it comes to cannabis, some companies are already buying in.
Curaleaf
Holdings, Inc. (CSE: CURA) (OTCQX: CURLF)
who just today announced that it has commenced adult use
sales at its Manchester, Connecticut location, is also eyeing the outcome in
Germany..
In a recent article from the Financial Times, Curaleaf expects to start
selling the drug for recreational purposes in Germany by the end of next year,
targeting a potential windfall after Olaf Scholz’s government agreed to broaden
its use. Curaleaf expects the market for recreational use in Germany will grow
significantly following the legalisation.
According to a survey cited by the
government, 4.5mn Germans claimed to have smoked marijuana at least once last
year.
“Many people will be coming into cannabis
for the first time and trying it out,” said Miles Worne, president of Curaleaf
International, a London-based subsidiary of the US company. He pointed to how
recreational sales of cannabis have surpassed those for medical use in American
states that have lifted restrictions in recent years. “We will do everything we
can to build up the business,” said Worne, adding that he expected to start
selling to customers in Germany by the end of 2024.
While Curaleaf made 60 per cent of its
$1.3bn in revenue last year from customers using the drug for recreation,
profits have been harder to generate in the nascent and heavily regulated legal
industry. The group reported a loss of $370mn last year.
Stephen Murphy, chief executive and
co-founder of London-based cannabis consultancy Prohibition Partners, said he
expected delays to the German rollout of the new plans “as with any domestic
policy related to cannabis”. Most cannabis companies in Germany did not expect
the change would generate significant revenues quickly, he said, but added that
the medical market would benefit from the move as public awareness around
cannabis would “grow the patient base and make it easier to access”.
There has been heavy speculation around the
potential of the E.U. marketplace for the cannabis industry since federal
legislation in Canada, however so far we have seen only minor growth in the
medical industries and strong opposition to any form of recreational sales. There
is potential that Germany could open the door to recreational use, but when
looking at the overall trends towards cannabis consumption in the E.U. this
seems unlikely as of right now.
Lastly we see Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), who announced the relaunch of one of Canada’s best
known cannabis brands, Trailblazer, exemplifying the Company’s commitment to
keeping consumer insights at the heart of its brand and product development
strategy.
More than a year in the making, Trailblazer’s
modernised brand identity and revitalised product lineup represent a
significant opportunity to connect with a large and important consumer segment
whose needs were previously unmet by the Organigram brand portfolio. Featuring
THCV gummies, CBG infused pre-rolls and a high-potency 1x0.5g pre-roll,
Trailblazer will re-enter the market with a range of differentiated offerings.
According to the Company’s segmentation
research, the target audience for the new Trailblazer brand identity represents
approximately $1.2B in total cannabis retail sales. One key differentiating
factor for this segment is the prioritisation of whole-plant wellness and the
self-administered benefits of the cannabis plant for restorative needs such as
relaxation as opposed to pure recreational product enjoyment. They also prefer
high THC products and the presence of minor cannabinoids.
"By understanding the unique
preferences and aspirations of our Trailblazer target audience, we strived to
create a deeply rewarding brand experience that fosters a sense of
understanding, positivity, and empowerment. The brand positioning reflects the
emotional aspirations of this consumer segment, reflecting a brand that is
designed for a modern legal cannabis consumer. Trailblazer aims to create a
positive and uplifting experience for its consumers, supporting them in their
cannabis journey", says Megan McCrae, Senior Vice President, Marketing and
Communications at Organigram.
We have seen many attempts to bring about
brand recognition and awareness within the cannabis industry but so far most
companies have struggled to make much inground. We may see more companies try
to refocus on where they have seen some success as the industry continues to
have issues in both Canada and the U.S. and this is most likely a good thing
overall as brand oversaturation and the massive growth of new companies we saw
early on with legal adoption has only hindered the industry in the long term.
When looking at the industry as a whole we
are certainly in a time of consolidation and restructuring and hopefully we
will see a stronger more competent industry moving forward.
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