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Cannabis Group Aphria Sees Sales Jump Following Canadian Legalization

January 11, 2019

Aphria Inc., the Canadian cannabis company that recently became the subject of a hostile takeover bid, reported 63% net revenue growth in a quarterly earnings report this morning. The period in question ended November 30 and includes the first recreational cannabis sales in Canada. The company also announced that co-founder Cole Cacciavillani and CEO Vic Neufeld will both leave the company in the coming months.

Revenue for the company’s second quarter totaled C$21.7 million ($16.4 million), up from C$13.3 million ($10 million) the quarter before and C$8.5 million ($6.4 million) in the same period last year. The gains were driven by a 92% increase in kilogram equivalents sold as a result of the opening of Canada’s recreational market. Aphria sold more than 1,900 kilogram equivalents of recreational cannabis between the October 17 legalization and November 30. As a result of the new recreational market, medical-use sales dropped slightly from 1,466.2 kilograms to 1,443.6 kilograms.

The shift from medical to recreational demand hurt Aphria’s margins a bit, as recreational products cost less; a gram of recreational product had an average selling price of C$6.32 ($4.77), inclusive of excise tax, while a gram for medical use went for C$7.51 ($5.67), on average.

Outgoing CEO Vic Neufeld explained that the margin decline reflected “lower effective selling prices in the adult-use market, as well as temporarily lower yields and higher production costs in the quarter as we moved aggressively to build out production facilities and implement new automation processes.”

The details of Neufeld and Cacciavillani’s departure were limited. They will work with Irwin Simon, Aphria’s recently appointed independent chair, and president Jakob Ripshtein (formerly of Diageo), to find replacements in order to “complete a smooth and responsible transition to a globally minded executive leadership team.” They added that following the transition Neufeld and Cacciavillani will continue to act as special advisors to Simon and Ripshtein. Aphria’s report did not acknowledge the recent announcement of a hostile takeover bid by U.S.-based retailer Green Growth Brands.—Danny Sullivan

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