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.”
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
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.
