Canopy Growth (CGC) (WEED) is ramping up its expansion after Cannabis 2.0. Canada completed the second phase of recreational cannabis legalization on October 17. Canopy Growth had earlier discussed its edibles and vape expansion plans. On October 29, the company announced that its new cannabis products would hit the shelves in late 2019. Let’s see what these new products are.
Canopy Growth to launch new products
In an interview with Cannabis Canada, a part of BNN Bloomberg, Canopy Growth’s president, Rade Kovacevic, said, “What you’ll see is our new products will come to market on retail shelves across late December, early January, based on the province.”
The company plans to launch 30 pot-infused products in the market later this year. The products to be launched are beverages, edibles, and vapes. Canopy also plans to roll out 32 specific items by the end of December and eventually add 20 more over the following 12 months. It will also include distilled cannabis to be used in mixed drinks.
I mentioned earlier in Cannabis Edibles: October 17 Is Almost Here! that cannabis companies are required to go through a mandatory 60-day notice period as per Health Canada requirements before their products hit the markets. For this reason, consumers shouldn’t expect these new products before December.
Canopy’s president also mentioned that depending on the province, some products might require additional time to be shipped and pass through distribution centers before hitting legal stores.
Will Canopy’s next-generation products attract consumers?
The company expects to target a new consumer base through its next-generation products. The company feels the new products will be able to target a wider consumer base that prefers not to smoke marijuana but will try it in an edible or beverage form. Its research has shown that 80% of non-cannabis users would be interested in trying a pot-based drink.
Deloitte’s research data has shown the Canadian market for edibles and alternative cannabis products could reach 2.7 billion Canadian dollars annually.
Canopy’s new products include its Tweed Distilled Cannabis line, which takes on the flavors of particular cannabis strains. Management also mentioned that it includes sparkling waters and ready-made mixed drinks using distilled cannabis, which are shelf-stable at room temperature.
Earlier, Canopy also announced plans to expand into the nutritional beverage market through its acquisition of BioSteel Nutrition Company.
Recently, Canopy’s peer HEXO Corporation (HEXO) also announced that along with Molson Coors, its joint venture, Truss Beverage Company, would launch cannabis-infused beverages later this year. The beverages will include CBD-infused spring water and beverages containing THC (tetrahydrocannabinol). It will launch six weed beverage brands.
Tilray (TLRY) and Anheuser-Busch InBev’s joint venture, Fluent Beverage, will also launch CBD-infused drinks in December. However, Tilray mentioned that it would require more time to develop THC-infused beverages.
Canopy Growth expects to improve revenue and profitability
In Canopy Growth: Is $1 Billion in Sales Still Possible? we talked about how the company still believes it will be able to hit 1 billion Canadian dollars in sales in fiscal 2020. However, due to various headwinds, analysts believe Canopy will only be able to achieve about half that. Analysts now expect the company to achieve sales of 0.54 billion Canadian dollars in fiscal 2020.
A Barron’s report discussed that BMO analyst Tamy Chen expects Canopy to report revenue of around 114.8 million Canadian dollars in the second quarter of fiscal 2020. Canopy will report its second-quarter results next month. In its first quarter of 2020, the company disappointed with its revenue and profitability numbers.
BNN Bloomberg mentioned that the company has high hopes for its next-generation marijuana products, as these products have higher margins than its existing products. The new products could also target a larger consumer base.
The revenue and profitability of these new products won’t be evident until later next year. $1 billion in sales by fiscal 2020 is a long shot, but the company seems positive it will be able to achieve a $1 billion run rate by the end of the fourth quarter. It’s also optimistic about achieving positive adjusted EBITDA on a quarterly basis in fiscal 2021.
Meanwhile, peer company Aphria (APHA) could report revenue of 595.9 million Canadian dollars in fiscal 2020. Aurora Cannabis (ACB) could report 540.9 million Canadian dollars in fiscal 2020. HEXO could report revenue of of 140 million Canadian dollars in fiscal 2020.
Why is the success of Cannabis 2.0 so important?
The cannabis industry has struggled this year amid weaker earnings from major cannabis players, regulation scandals, and a variety of other factors. The recent disaster of HEXO lowering its outlook and saying it expected lower sales affected the sector more. HEXO reported its fourth-quarter earnings results on October 29, dragging its stock down. To learn more, read HEXO Q4 Earnings: Good or Bad News?
At 10:07 AM ET today, HEXO was down 0.89%, while CGC was up 0.19%. ACB was up 1.1%, Aphria was up 1.2%, and TLRY was up 1.2%.
It’s important now for the cannabis sector to show profitability and regain investors’ trust.
For more cannabis-related news and updates, be sure to check out 420 Investor Daily.