Photo: Contributed
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%, while B.C.-born Tilray has shaved only 1.7% 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.”
The country’s cannabis producers have a glut of product they are 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 an 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% or $1.26 to reach $9.39 in trading.
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