What are Canopy ’s Strategic Focus and Moves in 2020?
Canopy Growth (“Canopy”) (TSX: WEED) (NYSE: CGC), like other cannabis companies, suffered a setback in the first quarter of 2020 due to COVID-19. However, its stock has soared over 80% since the middle of March, which relates to some recent moves that could be greatly beneficial as the world moves out of post COVID-19 world.
In April, Canopy announced the shut down of its operations in South Africa and Lesotho, also shuttering facilities in Columbia, Saskatchewan, and New York. Meantime, it signed a regional supply deal with Clever Leaves, who will supply Canopy with extracted goods produced in Colombia.
It is obvious that Canopy is greatly changing its investment from cannabis cultivation to more retail-oriented operations. If that is the case, where does Canopy shift its focus to instead? The answer is cannabis derivatives and cannabis-related products such as vaping devices.
While the time may seem odd with the COVID-19 virus lingering worldwide, the future of vaping may look better than these dark, lung-related illness show right now. Remember, vaping original was a medical device created to help smokers kick the habit of smoking nicotine-based cigarettes. The vaping “craze” as some people have called it, developed when companies like Juul decided to create and market nicotine vaping products to kids and people who did not smoke.
They say it is better to watch what people do as opposed to what they say, so what is Canopy setting up for in the next 12 months and beyond, what do they see for cannabis products and revenue in a post-COVID world?
On April 20, Canopy rolled out their first line of CBD topicals in the US under its brand First & Free. On March 16, Tweed, another one of Canopy’s brands, began to ship its first cannabis-infused beverage product throughout Canada. In late January, it launched its line-up of vape devices, supplied by ALD Group Limited, a top one-stop vape solution provider who also serves the U.S. top 1st THC pod vape brand-STIIIZY, as well as dozens of nicotine vaping brands and tobacco giants, such as British American Tobacco, R.J. Reynolds Tobacco and ITC Limited. Clearly, the cooperation with ALD is correct and successful. So far, the total sale of Canopy’s vape batteries has taken up to 70% market share in Canada.
The strategy of Canopy’s moves is based on what David Klein, the CEO of Canopy, said, “to define a very visible path to profitability and positive cash flow”. Thus, it shrinks investments on cultivation which need a relatively longer time to turn a profit, and shifts to an “asset light” model, focusing on cannabis products and its derivatives, as well as vaping devices, which is more profitable, and is good for cash flow.
Correcting their strategy could help Canopy gain a retail edge down the road. Will Canopy achieve the final aim of 2020? Let us keep in mind the whole cannabis industry moves in ebbs and flow as a publicly traded industry. Canopy is considered by many as the “best in breed play” even after they departure of their famous CEO, Bruce Linton.
One thing that may help Canopy and its stock going forward is the legalization efforts in the US following COVID-19. Many people believe the coming worldwide recession will create a need for jobs and tax revenue. The worse the financial conditions get, the better chance that full federal legalization of marijuana may happen. If the US gets to a point where they are desperate to create jobs and state and federal tax revenue, legalization of marijuana may create over 750,000 jobs in the US alone. It will also allow the UN to change its international drug treaties to remove cannabis, thus allowing over 162 countries to start growing and cultivating marijuana without fear of US retribution. This will help Canopy greatly, as well as the other publicly traded companies, as the US federal classification of cannabis is a schedule 1 drug on the Controlled Substance Act right now.
BRUCE LINTON, EX-CEO OF CANOPY, TALKS....
BRUCE LINTON BUILT A WEED EMPIRE, THEN MADE ONE MISTAKE.
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