Canopy Growth quits Canadian cannabis retail business

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Image of the counter at a Tweed retail store

A Manitoba Tweed cannabis store opens for business on Oct. 17, 2018. (Photo by Solomon Israel)

Canadian cannabis company Canopy Growth Corp. has thrown in the towel on its bricks-and-mortar cannabis retail operations in Canada, selling off 28 corporate-owned stores under its Tweed and Tokyo Smoke retail brands, closing five more and ending franchising and licensing agreements.

Financial terms of the store sales were not immediately disclosed.

Canopy’s exit from bricks-and-mortar retail “reinforces the company’s focus” on achieving “profitability as a premium brand-focused cannabis and consumer packaged goods (CPG) company,” according to a news release.

The divestitures announced late Tuesday include:

  • 23 Canopy-owned retail stores in Saskatchewan, Manitoba and Newfoundland and Labrador, which will be purchased by Canopy retail partner OEG Retail Cannabis (OEGRC), which already owns and operates franchised Tokyo Smoke stores in Ontario.
  • Five Canopy-owned stores in Alberta, which will be purchased by Calgary-based cannabis retail company Four20 and rebranded.

A Canopy spokesperson confirmed to MJBizDaily that the company owns 10 retail stores in Alberta — but Four20 is only buying five, and the remaining five will be closed.

The spokesperson said Canopy will have no Canadian retail stores remaining.

OEGRC, a division of privately held Katz Group, says it has 64 Tokyo Smoke stores in Ontario “and is well positioned for future success in the early stages of an emerging market.”

In a news release, OEGRC said it will become “the sole owner of the Tokyo Smoke brand and trademark and all Tweed retail stores acquired as part of this transaction will be rebranded.”

OEGRC’s Tokyo Smoke master franchise agreement with Canopy will be terminated when the transaction closes, Canopy said.

Canopy has also terminated a master license agreement with convenience store operator Alimentation Couche-Tard for the Tweed retail brand in Ontario.

However, the Tweed brand will continue to be used for cannabis products.

Canopy’s retail revenue has declined, with business-to-consumer revenue for its quarter ended June 30 falling by about 28% compared to the same quarter a year before.

In a regulatory filing, Canopy attributed that decline to “the continuing rapid increase” in retail cannabis stores in Canada as well as “price compression resulting from the increased competition.”

Canopy said in its release that cost savings from the retail divestiture will allow it to achieve “closer to the high end of the annualized target range” of expected cost reductions the company announced in April, when it laid off 8% of its workforce.

Canopy reported a first-quarter net loss of 2.1 billion Canadian dollars ($1.6 billion) in early August.

Shares of Canopy trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq.

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.