Workers sort plants at an orchid-growing operation at Bevo Farms in Leduc, Alta. on Tuesday, October 10, 2023.
When Miguel Martin first visited Bevo Agtech Inc.’s Langley, B.C., greenhouse, he saw potential bursting from every corner.
Hundreds of trays of tomato seedlings stretched away under the glow of LED lights. Baskets of blossoming flowers hung from the rafters. And the company was convinced it already had its next big product line: orchids.
Martin is CEO of Aurora Cannabis Inc. and may have seemed like an unlikely buyer for Bevo, an agriculture stalwart still run by the Dutch family that founded it in 1986. But it was a good match: the Edmonton-based pot giant already had the hulking, temperature-controlled greenhouses Bevo needed to expand, while for Aurora, Bevo’s stability would provide some reprieve from the volatile weed industry.
“It’s a company that makes money. It’s a company that’s growing,” Martin saidin a September interview, a year after Aurora bought a 50.1 per cent stake in Bevo for $45 million.
“It’s a company that’s not broken. It doesn’t need us to do everything for them.”
In the cannabis world, where facility closures, layoffs and multimillion-dollar writedowns have become the norm, “growing” and “not broken” are crucial elements for survival.
Over the five years since cannabis was legalized in Canada, pot companies have been constrained by the strength of the illicit market, packaging and tax rules they see as too restrictive and U.S. regulators that have been slow to make national changes.
As the industry continues its slow crawl toward profitability, many are now heavily focusing on other parts of their companies to protect themselves from further upheaval.
For example, Village Farms International Inc., the Vancouver-based owner of cannabis companies Pure Sunfarms, Leli Holland and ROSE LifeScience, has a subsidiary growing tomatoes, cucumbers and peppers.
SNDL Inc., the Calgary-based firm behind the pot shops Value Buds, Spiritleaf and Superette, owns hundreds of liquor stores across Western Canada.
“A lot of cannabis companies have evolved and are different than maybe what they were before,” said Martin.
That’s certainly true at Tilray Brands Inc., a Leamington, Ont.-based company whose chief executive, Irwin Simon, joked, “I have four children — beer, cannabis, medical cannabis, Manitoba Harvest — and love them all equally.”
Tilray began as a pure-play cannabis firm, but shortly after legalization it dropped $277.5 million on Manitoba Harvest, a purveyor of hemp-based foods, oils, and supplements with a history dating back to 1998.
As its buying spree continued, alcohol became Tilray’s new focus.
It first obtained exposure to beer through its merger with cannabis company Aphria Inc. in 2021. Aphria had paid US$300 million in 2020 for SweetWater Brewing Co., an Atlanta brewer best known for its “420” beer that smells like weed but contains no pot.
Then, Tilray bought Colorado-based whiskey and spirits producer Breckenridge Distillery as well as California’s Green Flash Brewing Co. and Alpine Beer Co. in 2021, followed by New York’s Montauk Brewing Co. in 2022.
And it wasn’t finished. Over the summer, Tilray announced a deal with Anheuser-Busch Cos. that would see its beverage portfolio gain eight more brands — Shock Top, Breckenridge Brewery, Blue Point Brewing Co., 10 Barrel Brewing Co., Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Co., and HiBall Energy.
“Most of these eight brands were declining somewhat and we are glutton for punishment. We like a challenge,” said Simon. “We felt, ‘Hey, we can turn these around.’”
The deal put Tilray on track to become the fifth-largest craft beer operation in the United States and gave the company a sizable share of a multi-billion-dollar industry Simon said has “got a little stale.”
He’s confident Tilray can “make craft beer cool again,” but admits part of the reason why the company is even interested in the task is because other markets that were expected to welcome cannabis haven’t done so.
“The reason we’re diversifying, ultimately, is … the U.S. markets and the European markets,” said Simon.
“We don’t see legalization from a recreational (standpoint) happening in the U.S. any time soon.”
Canadian cannabis companies were hopeful the U.S. would move forward with national legalization after President Joe Biden revealed he would review the status of pot as a Schedule 1 substance in 2022.
Schedule 1 controlled substances are considered to have a high risk of abuse and no accepted medical use. The group includes harder drugs such as heroin and LSD.
While the U.S. has moved toward easing federal financing restrictions for pot companies, national legalization is not on the immediate horizon, leaving Canadian companies that had poured cash into American weed prospects to look elsewhere for opportunities.
But Peter Simeon, co-leader of law firm Gowling WLG’s cannabis division, warned diversification doesn’t always work out.
“Look at BioSteel and Canopy. That’s a failure,” he said, referencing Canopy Growth Corp.’s foray into the sports drink business, which recently wound up with BioSteel Sports Nutrition Inc. filing for creditor protection and in debt to teams like the Los Angeles Lakers, even after Canopy advanced $366 million to keep the firm going.
“To go to other industries can be challenging, I think,” said Simeon.
Yet executives like Aurora’s Martin are willing to take the risk.
When Aurora bought its stake in Bevo, its 800,000 square foot, high-technology greenhouse Aurora Sky was slated for closure. Instead, Bevo moved in, delivering big savings.
“To have a facility that could keep an orchid at that exact humidity and temperature (needed) would have been wildly expensive,” said Martin.
“If you wanted to build it from ground up, it probably wouldn’t have made a lot of sense.”
The facility near Edmonton International Airport, which previously grew weed destined for flower, pre-rolls, oils and edibles, could handle an orchid’s 18-month growing cycle. Its close proximity to the U.S. border allowed the company access to a new market.
These buyers would have typically been served by growers in Southeast Asia, from where the bulk of North American orchids are shipped on ocean freighters, revitalized and then sent out to stores.
The delivery process from western Canada was far quicker when Bevo made its first sale of orchids a few weeks ago, and Martin is hopeful that will continue as successive rounds of the delicate flowers reach maturation.
Though he’s pleased with how Bevo has progressed, he insists Aurora’s core focus hasn’t shifted.
“We are first and foremost a Canadian-based medical cannabis company. That’s the vast majority of our profitability,” he said.
“It’s the vast majority of our revenue. It’s what we spend the most amount of time on.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
