Tilray Focuses on Brand Growth in Crowded Canada Pot Market
(Bloomberg) -- Tilray Inc. is overcoming market saturation in Canada, showing how branding strategies are paying off for some companies in the crowded cannabis space.
The company, which leads Canada in cannabis market share, on Monday reported fiscal second-quarter earnings before interest, taxes, depreciation, and amortization of $13.8 million, topping the average analyst estimate of $11.3 million. Tilray said it was able to maintain profitability in the period ended Nov. 30 thanks to demand for its cannabis brands and consumer franchises like SweetWater craft beer and Manitoba Harvest hemp products.
Tilray seeks to further capitalize on its brand strength by launching a new parent name, Tilray Brands Inc. The name change reflects an “evolution from a Canadian LP to a global consumer packaged goods company powerhouse with a market leading portfolio of cannabis and lifestyle CPG brands,” the company said.
The pivot to a brand focus comes at a time when the cannabis industry has grown immensely but there are still few recognizable product names, either in Canada or the U.S. Competitor Canopy Growth Corp. said on a recent earnings call that consumer preferences in Canada’s cannabis market are shifting rapidly and it has struggled to keep up. On the flip side, Tilray said its brand strength and adept pricing and marketing have allowed it to maintain share.
“We do not believe this is a sustainable environment. Only the strong will survive,” said Blair MacNeil, president of Tilray Canada, on a conference call Monday. He said the company plans to focus on more aggressive marketing strategy and its new product pipeline to overcome competitive pressures.
MacNeil said that inventory levels at a lot of Canadian firms are too high, and prices have come down sharply as a result. While competitors have recently lowered prices by around 23%, Tilray has only lowered its prices by about 2%, leaving it with more flexibility than other companies, he said.
“The market is getting very diluted,” he said, noting that 157 brands were introduced in the last year.
Tilray also leads in Germany in medical cannabis extracts and dried flower combined, the company said. Tilray sees Germany poised to legalize recreational use and expects other European countries will follow.
The shares rose 16% at 11:30 a.m. in New York, paring earlier gains of as much as 22%. The stock had slumped to start the year and is now up about 6% so far in 2022. Short interest in Tilray is 11% of available shares, down from about 24% a year ago, according to data from financial analytics firm S3 Partners.
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