Canopy Growth Archives - Green Market Report

Video StaffOctober 28, 2022

4min16430

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This week Canopy Growth (NASDAQ: CGC) surprised the markets with news that it was creating a Canopy Holding company for its U.S. properties. The Canadian company has options to acquire some American cannabis companies like Acreage Holdings and Wana Brands, but those deals weren’t supposed to happen until cannabis was federally legalized. Now it seems Canopy has decided not to wait until that happens. The question though is whether the Nasdaq will allow the company to continue to trade on its exchange. The exchange has been firmly against trading plant-touching cannabis companies and so far it looks as if they aren’t on board with Canopy’s plans. 

The SEC has been busy this week with bad actors in the cannabis industry.  Cronos Group settled with the SEC for some accounting errors. The company agreed to pay over $1.3 million and the company’s accountant was also fined and barred from serving in that capacity for the next 3 years. NewAge Beverage also found itself in hot water with the SEC for continually making false statements about the company The CEO was ousted and the stock was delisted from the Nasdaq. The SEC also targeted CannAwake for not filing its financial statements.

Turning Point Brands, Inc.  (NYSE: TPB) announced its third-quarter sales fell by 1.9% to $107.8 million. However, it beat analyst estimates. The company is seeing good growth in ZigZag sales products, but vape products keep sliding.  

Verano is being sued by Goodness Growth over the company’s decision to walk away from the planned acquisition. In addition to that, Verano has refinanced its debt and pushed out its maturity dates. The company is also going to lean harder on debt secured by its real estate holdings. 

And finally, the state of Florida threw cold water on the plan to combine medical dispensaries with Circle K convenience stores. GTI has recently announced that it had arranged to work with the store chain that is owned by Alimentation Coutard, which already owns 20% of Fire & Flower. GTI said the dispensaries are next door to Circle K, not inside, but regulators don’t seem amused with the thought of gas station grass.


StaffOctober 26, 2022
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5min10150

The Daily Hit is a recap of cannabis business news for Oct. 26, 2022.

ON THE SITE

South Dakota Moves to Restrict Medical Marijuana Program Further

A South Dakota state legislative panel this week gave initial approval to a bill that would restrict the MMJ program by making it harder to add qualifying conditions and by writing a handful of medical ailments directly into state law. If the bill succeeds, it may be the first time in the history of the U.S. marijuana industry that a state moved to restrict its MMJ program instead of broadening it. Read more here.

Verano Sued on Busted Acquisition

Verano Holdings’ (OTC: VRNOF) breakup with Goodness Growth looks like it’s going to be messy and expensive. Chicago-based marijuana company Verano called off its planned $413 million purchase of Goodness Growth on Oct. 13, citing unspecified breaches of “covenants and representations.” Goodness says Verano tried to back out of their deal without justification. Read more here.

Stifel Downgrades Canopy to a Sell

Stifel analyst Andrew Carter has downgraded Canopy Growth (NASDAQ: CGC) to a Sell rating following the company’s announcement to create Canopy USA. Stifel has a price target of C$2.90, roughly US$2.14. The stock was lately selling at $3.00. Carter noted: “Overall, we take a negative view noting the deal does not alleviate Canopy’s risks which are enhanced given Acreage’s financial position.” Read more here.

Turning Point Vape Sales Plunge as Zig-Zag Lights Up

Turning Point Brands Inc.  (NYSE: TPB) announced financial results for the third quarter ending Sept. 30, 2022, as sales fell by 1.9% to $107.8 million. However, it beat the Yahoo Finance average analyst estimate of $106 million in sales.  Turning Point also reported that its net income decreased by 14.3% to $11.5 million. Read more here.

IN OTHER NEWS

Harmony Foundation

Workers at Harmony Foundation, and its Harmony Dispensary in Secaucus, New Jersey, voted to unionize as members of the United Food and Commercial Workers (UFCW) Local 360. Recently, Harmony announced its intention to expand into the adult-use marijuana market and to open locations in Hoboken and Jersey City, as well as a new cultivation site in Lafayette. Read more here.

DreamField Brands

Two disgruntled customers are suing a California marijuana company, alleging that their prerolled joints were not as strong as claimed. The lawsuit was filed on Oct. 20 against DreamFields Brands Inc. for allegedly falsely claiming that their products have a high THC component, according to the suit. Read more here.


StaffSeptember 27, 2022
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5min7910

The Daily Hit is a recap of cannabis business news for Sept. 27, 2022.

ON THE SITE

10 Multistate Cannabis Companies Owe Half a Billion in Federal Taxes

All told, the 10 multistate operators owe the Internal Revenue Service an eye-popping $507,193,000, according to their second quarter financial reports. Much, or perhaps all, of the tax debts have been deliberately not paid by companies so that the businesses can use the cash to fund operations or other plans, multiple sources said. Read our analysis here.

Canadian Cannabis Giant Canopy Growth Quits Retail Game

The once-high-flying Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC) announced Tuesday that it’s selling off all of its retail cannabis stores across Canada in order to focus on “its path to profitability.” That path means being more of a core consumer packaged goods business instead of a vertically integrated cannabis company, according to a news release from the company. Read more here.

Real Brands to Buy Boulder Botanical for $12 Million

Real Brands (OTCQB: RLBD) agreed to acquire Boulder Botanical & Biosciences Laboratories, a manufacturer of white-label and private-label wellness and sports medicine herbal supplements and CBD products, from Frankens Investment Fund LLC, which acquired Boulder Botanical in April 2022. Read more here.

IN OTHER NEWS

Charlotte’s Web Signs Distribution Agreement with Southern Glazer’s Wine & Spirits

Charlotte’s Web Holdings, a manufacturer of hemp-derived cannabidiol extract wellness products, has signed a multiyear distribution agreement with Southern Glazer’s Wine & Spirits, a distributor of wine and spirits. Charlotte’s Web CBD gummies, capsules and oil tinctures will be available through Southern Glazer’s retail customer network. Read more here.

The Parent Co. Completes Acquisition of Calma

TPCO Holding Corp. (The Parent Co.) (NEO: GRAM.U) (OTCQX: GRAMF) completed its acquisition of the remaining 15% equity of its Calma Weho LLC dispensary following receipt of all necessary regulatory approvals. Located in the Los Angeles metropolitan region, the 3,250 square foot dispensary is one of only 11 stores in the West Hollywood area licensed for storefront retail. Read more here.

Entourage Launches Medical Cannabis Marketplace

Entourage Health Corp. (TSX-V:ENTG) (OTCQX:ETRGF) (FSE:4WE), a Canadian producer and distributor of cannabis products, has launched Syndicate, a direct-to-patient medical cannabis marketplace. The Syndicate marketplace showcases a variety of specially curated products and formats made in-house and/or sourced from microcultivators looking for a medical distribution outlet. Read more here.


Debra BorchardtAugust 22, 2022
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10min3980

As markets mature in the U.S., some companies are turning their focus to Germany. Canadian companies have faced tremendous competition causing many business models to break down. Too many licenses and plunging prices have forced several companies to merge or restructure. In the U.S., the California market is in disarray over outrageous taxes and a resurgent illicit market, while Colorado learns that having a first market advantage doesn’t mean it’s lasting. 

New Jersey has undoubtedly given a boost to the lucky licensees that have been the first to sell adult-use cannabis. New York’s adult-use launch has been disappointing to say the least. That’s why some companies have zeroed in on Germany.

Market Start Date

Cantor Fitzgerald issued a report today looking at the German adult-use cannabis market and sizing it up. While the program isn’t even established yet, Analyst Pablo Zuanic believes sales could begin in early 2025. He wrote, “The actual start of sales may be more dependent on whether imports are allowed (a big if) or if only domestic production can supply the German rec market (Canada, the only G-7 rec market, does not allow imports). If imports are allowed (more likely from within the EU only, at first, at least), we think sales could begin as soon as early 2024E (assuming potential exporting countries enact rules that allow the export of rec cannabis).” 

Market Size

As the actual timing for the opening of the market remains a product of guesswork, the size of the market is equally hard to pin down. It’s hard to say how much cannabis the population will want to consume. Zuanic looked at the various U.S. states to try to gauge a number. If California clocks in at $130 per capita spending and Colorado comes in at $350, a conservative assumption would be $150 per capita for Germany. The analyst says that would imply a $3 billion market and if he bumps that up to $200 per capita, it could be a $17 billion market. A big caveat to these numbers is the currently existing medical marijuana in the country. That market, which started in 2017, has been slow to materialize, with only €300 million in sales. Besides Cantor, in 2018, Prohibition Partners had projected a €1Bn MMJ market by 2020 for Germany, and BDS Analytics predicted €800Mn by 2022. Both have been far off those targets leading Cantor to be more conservative.

German doctors have often only prescribed medical cannabis as a last resort. A separate option for cannabis consumers in the country has been the newly created wellness centers. These are typically associated with private prescribers, online pharmacies and out-of-pocket costs. It’s described as a ‘quasi-rec’ market giving medical marijuana access to more people willing to pay. However, it demonstrates the stigma that cannabis continues to face in the country as doctors are reluctant to jump on board without more studies to back up the prescriptions.

Market Players

The companies that have targeted the German market are a mix of well known public players and some private companies. The publicly traded companies are:

  • Aurora Cannabis (NASDAQ: ACB)
  • Canopy Growth (NASDAQ: CGC)
  • Tilray (NASDAQ: TLRY)
  • Clever Leaves (NASDAQ: CLVR)

The privately owned companies include:

  • CannaMedical Pharma 
  • Four20 Pharma
  • Demecan
  • Bedrocan
  • Little Green Pharma

Tilray – Tilray claims it is the market leader both in flower and full-spectrum extracts, and claims the best distribution reach. However, Cantor notes that several other sources question the notion that Tilray is the market leader in flower MMJ. Market data points to Tilray having a 15% market share, while the company suggests the actual number is closer to 20%. The report stated, “Tilray flower is sold to pharmacies at €8.59 per gram, above the market average estimated at €7. Tilray began domestic production last year (one of three licensees, together with Aurora and Demecan), and it also imports from its facilities in Portugal (where we were told by management it can produce up to 20 tons). Based on its current German presence, global scale, and proven expertise, we expect the company to be a relevant player in the future German rec market.”

Aurora Cannabis –  Zuanic wrote that Aurora management says its number two in medical flower with 17% volume share and that Bedrocan is number one (but the Bedrocan product is distributed across various wholesalers, and not always captured by the Insight Health under the Bedrocan brand).  The report said, “Aurora also holds one of the three licenses to produce med cannabis in Germany (combined, the three licenses amount to a 2.6-ton quota), and we were told by management that operations began in July 2022.” Cantor thinks Aurora could snag one of the adult-use licenses and become a key player.

Canopy Growth – Cantor says that Canopy Growth remains a top-five player in the German flower market, with consistent supply from its Canadian facilities, selling under its own brands(although it seems it will need to transfer its Spectrum brand to the new owners of C3). Zuanic wrote, “In our view, if Germany decides to allow only domestic production and imports from only within the EU, Canopy Growth will need to find local partners or build new capacity.”

Clever Leaves – The Cantor report said, “In our view, the company is more in an early-stage phase in Germany compared with its larger peers, but its five-pronged route to market in Germany gives it options depending on the framework that Germany ends up implementing for rec cannabis.” According to Cantor, Clever Leaves supplies two CBD-only extracts to Ethypharm (a small local pharma company); it supplies bulk cannabis extracts to FoliuMed and it ships high THC cannabis flower to wholesale/distributor Cansativa (in which it owns a 9% equity stake). Cantor also said Clever Leaves distributes its own medical flower brand Iqanna; and recently announced an agreement with importer/wholesaler Cantourage to sell a second high potency flower SKU under the Iqanna brand. 

In Closing

While it’s too soon to know who will be the winners or losers in the German market, Aurora and Tilray currently seem to be the best-positioned. Cantor also pointed out that Curaleaf recently acquired Four20 Pharma, one of the top five players. So, the Curaleaf competition can’t be measured just yet. Zuanic thinks as the U.S.legalization situation remains undetermined, some investors may want to shift their focus to Germany and put these names back on the radar.

 


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