CRON - Cannabis Industry News
Last week was a tough week for cannabis stocks as ETFs plummeted with disappointing earnings reports. The ETFMG Alternative Harvest ETF (NYSE: MJ), the AdvisorShares Pure Cannabis ETF (NYSE: YOLO), The Cannabis ETF (NYSE: THCX), the Amplify Seymour Cannabis ETF (NYSE: CNBS) all lost around 6% on average. Even the SPDR S&P 500 ETF Trust (NYSE: SPY) was down 0.4%. The major disappointment was delivered by Aurora Cannabis Inc. (NYSE: ACB)’s beyond disappointing fourth-quarter earnings report. But, the overall industry is not doing bad at all as 2020 will be remembered as a pivotal year.
Expanding market
Despite wreaking havoc on many industries across the world, the legal pot business saw booming revenues as more and more countries legalized marijuana. BDS Analytics Inc., a Boulder-based cannabis market intelligence and research company projected retail cannabis industry is projected to hit $19.7 billion in sales in 2020, marking a 38% jump. Moreover, BDS predicts growth will persevere as sales are expected to reach $47.2 billion by 2025. These results are confirmed by another study by LeafLink, Flowhub, and Vangst that each approached the cannabis industry from a different vantage point – wholesale, dispensaries) and employment. Together, they found that sales stabilized at 40% growth rate, implying growth will remain even after the pandemic.
What happened with Aurora?
The Edmonton, Canada-based company reported a loss of $2.5 billion for the fiscal year. Total net revenue of $54.1 million dropped 5% from the previous quarter. More specifically, revenue for consumer cannabis in the recreational market dropped 9% to $26.7 million. Revenue for medical cannabis only increased 4% as net revenue was $24.2 million, helped by market growth in Canada and Europe. Continuing operations resulted in a loss of $1.40 billion. The shares plummeted following the results, already being down 91% over the past 12 months, reducing the company’s market value to a fraction of its former size.
Departure of Peltz
The past year has been a tough one for Aurora and it doesn’t seem to be getting any easier as on Monday, the billionaire investor Nelson Peltz resigned as advisor. Aurora brought in Peltz after Canadian competitors Canopy Growth (NYSE: CGC) and Cronos Group (NASDAQ: CRON) locked up multibillion-dollar investments from global liquor giant Constellation Brands (NYSE: STZ) and Virginia-based Altria (NYSE: MO), hoping that he will strike a similar deal with his connections to major U.S. consumer goods firms like PepsiCo (NASDAQ: PEP) and Mondelez International (NASDAQ: MDLZ). Being a director of fast-food holding firm Wendy’s Co. (NASDAQ: WEN) and Procter & Gamble (NYSE: PG), he seemed like the perfect person to help the company expand internationally. It was a good idea, but Aurora ended up losing more than $2.6 billion since Peltz joined last year as it failed to catch up to its competitors.
A top line jump that didn’t find its way to bottom line
During the fourth fiscal quarter, The Supreme Cannabis Co. Inc. (OTC: SPRWF) saw its recreational net revenue skyrocket 373% YoY but ended up reporting a loss of $139 million in the fiscal year ending June 30 due to a ripple effect of closed dispensaries and offices.
News
The first and only real estate company on the New York Stock Exchange belonging to the regulated U.S. cannabis industry, Innovative Industrial Properties Inc. (NYSE: IIPR), keeps growing. Last week, it revealed it bought a property in Lakeland, Florida, for roughly $19.6 million.
Curaleaf Holdings Inc. (OTC: CURLF) announced it is collaborating with actor and cannabis entrepreneur Jim Belushi to launch a new vape pen.
CBD is also expanding its footprint in pharmaceuticals as CURE Pharmaceutical Holdings (OTC: CURR) agreed to acquire CBD products company Sera Labs Inc. for $20 million.
Expansion – product, market and range of treatment
Miami-based medical cannabis company PharmaCielo (OTC: PCLOF) revealed it is significantly expanding its product portfolio. With a two-year expansion plan, PharmaCielo is constructing a vertically integrated medical marijuana treatment center to extend the range of quality products that are being offered to patients in Florida.
MediPharm Labs Corp. (OTC: MEDIF) revealed a two-year partnership with a Rio de Janeiro, Brazil-based distributor, positioning the company to take a share of the largest medical cannabis market in Latin America.
IM Cannabis Corp. (OTC: IMCNF) launched its medical cannabis brand in the German market via four distributors through which it will be available to every pharmacy in the country that is licensed to distribute narcotics.
Pharmaceuticals plc ( NASDAQ: GWPH) confirmed that TGA authorized the Epidyolex, the first FDA approved CBD medicine for severe epilepsy in children, to treat Lennox-Gastaut syndrome (LGS) or Dravet syndrome.
New entrant
On September 23, CEO Jason Vegotsky and COO Arun Kurichety launched Petalfast. Both founders are former executives of KushCo Holdings Inc. (OTC: KSHB). With the acquisition of A.P. Keaton’s award-winning cannabis marketing business, the Petalfast team combines cannabis experience with spirits industry expertise to deliver unique solutions and growth for cannabis brands, something the industry still hasn’t seen.
Bright outlook
The industry was not immune to pandemic-induced bottlenecks that clogged industry pipelines, sales funnels and supply chains but studies indicate booming revenues that are here to stay. As for companies, brand building is a different deal. It has been successfully done for years in the consumer-packaged goods and foods & beverages but very few have done it in the expanding cannabis space. The opportunities are there but in order to capitalize on them, companies need to patch up their weaknesses first.
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