By Tara Deschamps, The Canadian Press
The scores of new entrants to the cannabis market combined with plunging prices have resulted in an “unsustainable” situation, Tilray Inc. executives say, but one they feel their company can weather.
Blair MacNeil, president of the cannabis company’s Canadian business, said Monday that 157 new pot brands were launched in the country in the last year and pricing across the market has dropped by 22.6 per cent, while Tilray has only shaved 1.7 per cent off prices.
“We have definitely protected our margins on the way down and I think, as a licensed producer, we have more room than a lot of our competitors do to be able to take from our pricing,” he said on a call with analysts.
“The market is getting very diluted and we are going to ramp up our innovation in a big way to fight that.”
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The country’s cannabis producers have a glut of product they’re anxious to move as Canada grapples with renewed pandemic restrictions and the continued resiliency of the illicit pot market.
Cannabis companies, which have endured lengthy retail lockdown measures and are already limited in how they market their products, have spent much of the health crisis slashing prices and looking at their offerings with a critical eye.
Along with several rivals and provincial pot distributors, including the Ontario Cannabis Store, Tilray has begun a SKU and brand rationalization program to get its costs in check.
But it still intends to double down on product innovation in hopes of snatching up as much market share as it can.
“Can we do it profitably? Yes, we think we can,” MacNeil said.
“We have further costs we can take out of this business to make sure we can do this and grow our gross margins. It is going to be a bit of a bumpy ride over the next couple quarters but certainly, we are in the best position to be able to weather it.”
Weathering it will mean winning back some market share, which chief executive Irwin Simon conceded the company had lost in recent months.
“Some of it was self-inflicted,” he said, on the same call as MacNeil.
“The easiest thing is to drop price and drop share, but we are here to build something for the long term.”
It will also mean continuing to push profits up.
Tilray reported Monday a net income of almost US$6 million in its latest quarter, compared with a net loss of roughly US$89 million in the same quarter last year.
The company, which reports its earnings in U.S. dollars, said its net income for the quarter ended Nov. 30 broke even on a per share basis, compared with a loss of 41 cents per share in the same quarter last year.
Those numbers pushed Tilray’s shares up by 15 per cent or $1.26 to reach $9.39 in trading.
Tilray also said its revenue climbed by about 20 per cent to reach US$155 million, up from US$129 million during the same period last year.
About US$58.8 million or 38 per cent of that revenue in its most recent quarter came from its cannabis business, while US$13.7 million or 9 per cent was attributable to its SweetWater Brewing business and another 9 per cent or US$13.8 million came from Manitoba Harvest.
The quarter encompassed a period when Tilray closed down facilities in Nanaimo and Enniskillen, B.C. and quietly ended its Fluent Beverage Co. joint venture it set up with Anheuser-Busch InBev in 2018.
In quarterly filings, Tilray said it arranged to retain manufacturing equipment and royalty-free licenses associated with cannabis beverages linked to the venture, but did not share why the partnership ended.
In the coming months, Simon teased that the company will take a bigger position in the hemp market and will look to address demand for drinks and other products laden with cannabidiol, a compound found in cannabis and hemp that doesn’t produce a high but is believed to relax consumers.
It will also zero in on its recent acquisition of Breckenridge Distillery and SweetWater Brewing, which it bought in 2020, to deliver growth in the beverage category and Manitoba Harvest to help drive market share in consumer packaged goods.
READ MORE: Cannabis company Tilray buys Breckenridge Distillery in move to grow U.S. business
To reflect the breadth of these ventures and its transition from Canadian licensed cannabis producer to a global consumer packaged goods company, the company will begin using Tilray Brands Inc. as its new parent company name.