Cronos Group announced their Q2 financial results on Tuesday, citing a 428 percent increase in revenue over last year and a 20 percent increase in sales over the last quarter. Cannabis oils gained the biggest gains, increasing up to 40 percent from Q1. Cronos currently has $118 million in total liquidity, which, according to a statement gives them “significant runway to execute their strategic priorities.”
Cronos’ Four Core Strategic Priorities
Cronos CEO Mike Gorenstein disclosed their strategic priorities during the company’s investor conference call on Tuesday morning. The four core strategies cover capacity, distribution, intellectual property, and branding.
“Capacity is necessary to get us where we’re going,” Mike Gorenstein clarified on the call, “but it’s not our endgame.”
Rather, the forward-looking statements are focused on creating what Gorenstein calls a “diversified global sales distribution network” that extends beyond Canada and into international markets for both recreational and medical marijuana. It will involve further scalability of their cultivation and production processes.
In line with this strategy, Cronos calls their new Peace Naturals Greenhouse an innovation hub focused on research and development, with the long-term goal of seeing themselves become a cannabinoid platform company. Right now, Peace Naturals is acting as the blueprint facility for the efficient processes Cronos ultimately wants to scale and develop for their global networks.
“The Peace Naturals Greenhouse is...used for developing best practices and is engineered to replicate different growing environments and climates around the world,” Cronos Group CFO William Hilson explained during his half of the conference call.
By establishing best practices and perfecting these processes with their existing facilities, Cronos Group aims to build a brand that will be easily recognized and trusted by recreational consumers across the globe. CEO Mike Gorenstein knows that October marks the start of legal cannabis sales in Canada, but, according to him the future depends on the international markets. During the conference call, Gorenstein shared the company’s Canadian strategy and how it plays into Cronos’ plan for a global cannabis network.
Cronos Group Canadian Strategy
Cronos Group announced their new recreational brand COVE along with their Q2 earnings. According to a statement, Cronos is taking a more “thoughtful approach” to the recreational market. The company is preparing for an expected cannabis supply shortage and focused on building a brand per their strategic priorities.
“We’ve held off on launching our recreational brands because we want to make sure that the buzz generated by our activation strategies doesn’t wear off,” Gorenstein explained. “Rather, that it leads directly to purchasing opportunities for our consumers.”
Gorenstein promised investors on the conference call that more information about their new recreational brand will be released in the coming months as Canadian legalization is streamlined throughout the country.
Local distribution goals depend greatly on Cronos’ partnership with MedMen Inc. The two will be opening dispensaries in strategic locations throughout Ontario, British Columbia, and Alberta. When asked how many stores Cronos plans to open, Gorenstein made it clear that grand openings depend on quality and legal transparency. Opening dispensaries are contingent on Canada’s recreational cannabis licensing system, and Cronos Group will be playing it by the books.
“We’d rather have five to ten premium locations...rather than opening fifty,” Gorenstein said on Tuesday regarding the company’s new recreational dispensaries.
In preparation for the new recreational cannabis market in Canada, Cronos Group is building up their medical marijuana market. Their statement highlights key partnerships from the second quarter, including the new Cronos Growing Company, Inc. Cronos will be building a new 85,000 square foot cultivation facility under this new branding, which will eventually be used to supply both recreational cannabis and medical marijuana consumers.
Finally, one of the more important notes discussed during Cronos Groups’ investor call was their new supply agreement with Cura Cannabis Solutions, a cannabis oil supplier. While CEO Mike Gorenstein was tight-lipped on the conference call regarding how much marijuana Cronos supplies to various entities, the agreement with Cura is not so secretive. According to the statement, Cura agreed to purchase 20,000 kilograms of cannabis yearly from Cronos as part of a part of a five year take-or-pay supply agreement. The deal is set to begin when Cura receives its production and sales licenses from Health Canada. Cura plans to acquire an extraction license in the future and is building what the company calls a state-of-the-art facility on a parcel of land owned by Cronos in Okanagan Valley, British Columbia..
*Editors Note: An earlier version of this article incorrectly mentioned that Cura plans to secure a cultivation license and grow their own cannabis. The company plans to acquire an extraction license with Cronos as their growers.