Aurora Cannabis Inc. will double its premium products after reporting a loss of $ 11.9 million in its most recent quarter.
Miguel Martin, CEO of the Edmonton-based cannabis company, said Tuesday that the premium focus comes because the recreational marijuana market is “bottoming out” and is often “irrational.”
“We are not going to chase the rabbit hole with lower margins, particularly in the discount category,” he said in a call with investors.
“Right now, for those who are pursuing the discount business, I think a little more complicated path awaits them, but the premium business is rational.”
Aurora’s focus on its premium brands comes after the marijuana industry recently celebrated the third anniversary of the legalization of cannabis in Canada.
Much of those first three years have been spent by marijuana companies trying to better align product offerings with consumer demand so they can reach profitability more quickly.
While the more affordable products have proven popular, recent growth is emerging in the premium and artisan markets, often driving higher profits for cannabis companies.
A Nov. 4 report from Deloitte Canada, BDSA, and Hifyre found that artisanal flowers saw a 158 percent increase in sales in the past year, despite prices being 16 to 41 percent higher. than non-artisan offerings.
A 2021 survey by Drop Technologies Inc. also found that 86 percent of millennial and Gen Z respondents are likely or very likely to buy premium products, if they see enough value.
To attract them, Aurora will focus on its premium brands, including San Rafael and Whistler Cannabis Co.
Those brands helped drive a 29 percent increase in revenue from the fourth quarter for its premium and super premium dried flower products.
In addition to the premium products, the company will experiment with short-term and seasonal offerings such as mint-flavored Canna Cane Mints and a Daily Special vape cartridge called Cranberry Sauce, hitting shelves in time for the December holidays.
“So overall, there is a big focus on innovation,” Martin said, while explaining the new products.
“We benefit from both our recreational and medical businesses and see it as a key component of our premiumization strategy.”
That focus has come as Aurora continues a sweeping restructuring that has resulted in hundreds of layoffs and some facility closures in the past two years.
So far, the company has identified cash savings of $ 60 million to $ 80 million, but has only executed on $ 33 million in annualized execution rate cost savings to date.
Chief Financial Officer Glen Ibbott said on the same call as Martin that about 60 percent of the cash savings found during the business transformation program will be realized through cost of goods as the company moves toward strategies of lower production costs.
The remaining 40 percent will come from selling, general and administrative expenses starting next quarter, he said.
Finding those savings will be key because the company’s $ 11.9 million net loss in its first quarter comes after a series of big losses the company posted.
In the first quarter of the prior fiscal year, it reported a net loss of $ 101.4 million.
The company says its most recent loss amounted to six cents a share for the period ending Sept. 30, a drop from the loss of 85 cents a share in the first quarter of last year.
Aurora’s net income for the quarter was $ 60.1 million, down from $ 67.6 million in the same quarter last year.
Aurora was expected to report a loss of $ 49.6 million per diluted share on $ 60.6 million of revenue, according to financial data firm Refinitiv.
© 2021 The Canadian Press
Reference-globalnews.ca