Canopy Growth, the world's largest publicly traded cannabis company, has come up against substantial difficulties in the second quarter as a result of poor earnings, revenue misses and the recent surprise firing of Bruce Linton, one of two co-CEOs, Yahoo Finance reported.
Relations are strained with Canopy's backer, Constellation Brands, which invested $4 billion in the Canadian company last year. Canopy has yet to name a permanent CEO. In the meantime, the company's new CFO, Mike Lee, is attempting to quell investor concerns by outlining a growth plan and business model in the wake of Canopy's C-suite shuffling.
"While we remain happy with our investment in the cannabis space and its long-term potential, we were not pleased with Canopy's recent reported year end results," Constellation’s CEO, William Newlands, said in a June earnings call, according to Food Dive. "However, we continue to aggressively support Canopy on a more focused long-term strategy to win markets and form factors that matter while paving a clear path to profitability."
Lee, who took over the finance function in early June, appeared this month at the Barclays Consumer Staples conference to address his company’s weak profitability and recent large operating losses, Yahoo reported.
Lee said the company had three large growing facilities available when it launched, and it went “pedal to the metal," with an aggressive production schedule, allowing it to capture market share. However, the rapid pace led to operational inefficiencies, and now Canopy is "in the midst of reworking its production" to regain healthy 40% gross profit margins, he told Yahoo.
Canopy executives said the Canadian cannabis sector will swell as new products, such as edibles and vaporizers, become available to sell online. To that end, Canopy has had its team develop in-house vape manufacturing capabilities. Canopy will soon sell "multiple devices, a variety of price points [that] will grow the category and perhaps convert some of the illicit market into the legal market," Lee told Yahoo.
As one of the only publicly traded companies on the market to develop its own cannabis vaping products, Canopy’s forward-looking prospects might bring the boost investors are looking for, despite the recent ban of certain unregistered vapes in California.
Canada's department of health published regulations allowing the sale of cannabis edibles, starting in December, Food Dive reported.