CIBC Analyst John Zamparo wrote in a report on Wednesday that Village Farms jumped to the top spot in the country’s cannabis producer ranks from its prior standing in third place after data provider Hifyre changed its methodology of how it accounts for sales in Quebec.

Village Farms now has a 7.8 per cent share of the country’s cannabis sales, while Tilray saw its ranking slip to second place with a 7.3 per cent share and Calgary -based Decibel Cannabis Company Inc. now sits in third with a 6.5 per cent share.

Hexo Corp. and Organigram Holdings Inc. round up the rest of the top five producers, according to Zamparo. Notably, Canopy Growth Corp. fell to eighth place with a 4.3 per cent share despite having the largest amount of cash on hand in the industry with $1.1 billion, and was once the top-selling producer in Canada when cannabis was legalized more than four years ago.

Quebec represents about 13 per cent of all cannabis sales in Canada, a figure that analysts believe is constrained given the lower store count relative to other provinces as well as rules restricting the sale of popular products like edibles and vapes, but Zamparo still sees the new calculation employed by Hyfire in aggregate to be reliable.  

“Hifyre's data for Quebec previously used—and still uses—extrapolations, but the data firm now also receives feedback directly from producers, which Hifyre believes provides a more accurate representation,” Zamparo wrote in a report. “For now, the new method leads to a material change in output, with [Village Farms] ranking as the nation’s top seller.”

Zamparo found that only five Canadian cannabis producers saw monthly sales gains in December, yet another sign of how volatile and hypercompetitive the domestic industry has become.

Cronos Group Inc. and Decibel both posted double-digit monthly sales increases in December, while Auxly Cannabis Group, Hexo and the newly-merged BZAM/The Green Organic Dutchman Holdings Ltd. also increased their sales activity last month.

The report also highlighted how cannabis producers will increasingly have to “stand on their own” and generate positive free cash flow to fund operations or rely on existing cash reserves, as access to capital has dried up following the failure of the U.S. Congress to pass meaningful cannabis-related legislation including the SAFE Banking Act.

“Although valuations are almost certainly attractive relative to recent months and quarters, we do not believe investor demand exists to absorb the typical cannabis equity deal,” Zamparo said.

According to Zamparo’s analysis, only Tilray and Decibel were the Canadian operators that generate positive free cash flow although both operators have debt figures that are substantially higher than the cash they have on hand. Cronos, Aurora Cannabis Inc. and Organigram were the only three Canadian companies that currently have more cash on hand than debt on their balance sheet, while no U.S. cannabis producer is in a net positive cash position.


Tilray CEO 'frustrated' with 'slow' march toward U.S. legalization, reports Q2 loss

Tara Deschamps, The Canadian Press


Tilray Brands Inc. reported a second-quarter net loss of US$61.6 million in its most recent quarter as it temporarily slowed cannabis production because of the "longer-than-anticipated march toward legalization" in some markets.

Among the markets whose timing is hampering the Leamington, Ont. pot company is the U.S., where its chief executive said, "we do not expect (legalization) to happen at any time in the near future."

"In the U.S., participation in the adult-use cannabis market has always been very important to us and integral to our long-term strategy," Irwin Simon told analysts on a Monday call.

"However, as long as cannabis remains federally illegal in the U.S. we will not engage directly in business that touch the cannabis plant to fully optimize the value and strength of our U.S. business."

Cannabis is legal for medical purposes in about 39 states and for recreational use in 19, including D.C. However, federal law still considers it a Schedule I controlled substance with high risk of abuse and no accepted medical use, placing it in a group with harder drugs like heroin, LSD and peyote.

But last year U.S. President Joe Biden revealed he will pardon people convicted under federal law of possessing cannabis and review the status of pot as a Schedule 1 substance.

The U.S. has also seen discussion around the Safe Banking Act, a Democratic bill with some Republican support that would allow financial institutions to work with cannabis companies without retribution, and the Marijauana Opportunity Reinvestment and Expungement (MORE) Act, which would pave the way for federal legalization.

"I'm frustrated that legalization, whether it's Safe Bank, whether it's MORE Act, whether it's descheduling, nothing has happened within cannabis," said Simon.

Yet even talk of such moves has spurred excitement at cannabis companies like Tilray, Canopy Growth Corp. and Aurora Cannabis Inc.

They have long been purchasing stakes in U.S. brands in anticipation that the U.S. would loosen its cannabis regulations and legalize pot on a federal basis.

Germany is also on these companies' radar.

Olaf Scholz, the country's chancellor, said in October that Germany would become one of the first places in Europe to achieve legalization and his health minister has since presented outlines of potential regulation.

Simon feels Russia's 2022 invasion of Ukraine has held up Germany's plans as the battle between the two countries triggered energy troubles and further fueled inflation.

"I'm sure if Ukraine didn't happen, Germany might be legal today, but we're ready and will be ready," he said.

Simon's remarks came as he announced Tilray's US$61.6 million second quarter net loss, which compared with net income of nearly US$5.8 million in the same quarter a year earlier.

The cannabis company, which keeps its books in U.S. dollars, said the loss amounted to 11 cents per diluted share for the three months ended Nov. 30 compared with net income of zero cents per diluted share a year earlier.

Net revenue for the quarter totalled US$144.1 million, down from nearly US$155.2 million in the same quarter last year.

The results came as Tilray's cannabis business reported US$49.9 million in revenue, down from US$58.8 million in the same quarter last year, while its distribution business saw revenue of US$60.2 million compared with US$68.9 million a year ago.

To offset the competitive nature of Canada's recreational cannabis market, which has seen a race for lower prices and an oversaturation of stores in some regions like Toronto, the company has also focused on beverages.

Tilray has a roster of alcohol and beverage brands, which include Montauk Brewing Company, SweetWater Brewing Company, Alpine, Green Flash and Breckenridge Distillery.

"All the major alcohol companies have an eye on cannabis, no different than the tobacco companies," said Simon. "So with that, if I today can't do anything in the U.S. and have to sit there, why not get bigger into some of these craft brewers like a SweetWater, like a Montauk, like a Breckenridge?"

Tilray's beverage alcohol business had US$21.4 million in revenue, up from US$13.7 million last year, and its wellness business revenue totalled nearly US$12.7 million, down from US$13.8 million a year ago.

On an adjusted basis, Tilray said it had a net loss of US$35.3 million or six cents per diluted share in its latest quarter compared with an adjusted net loss of US$38.8 million or eight cents per diluted share a year earlier.

The results pushed Tilray's stock to close the day down by eight per cent or 32 cents at $3.64.