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Jan 17, 2020

Canopy stalls launch of pot-infused drinks as growing pains persist

Canopy Growth delays launch of pot-infused beverages

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Canopy Growth Corp. said Friday the company plans to delay the launch of its cannabis-infused drinks as the pot giant takes more time to complete the build-out of its bottling facility for commercial production.

Canopy didn’t specify when it plans to make its various pot-infused beverages available for sale. It previously stated it would have its drinks on store shelves in early January. The company said in a statement Friday that it does not believe the delay will have a material impact on its revenue for its 2020 financial year, which ends in March, and will provide an update when it releases its third-quarter results on Feb. 14.

Canopy submitted its final documentation for its beverage facility to Health Canada last June and received its licence in late November.

The company was set to release 13 different drinks for the launch of so-called Cannabis 2.0 earlier this year with various concentrations of tetrahydrocannabinol, the impairing chemical compound derived from the cannabis plant, as well as cannabidiol, under its Tweed, Houseplant and Quatreau brands.

Canopy only had two chocolate items ready for sale when the newest generation of cannabis-infused products were legally available in Canada last month, with no beverages or vapes up for sale. Meanwhile, other companies such as Aurora Cannabis Inc. and Auxly Cannabis Inc. rolled out more than a dozen offerings.

Jefferies LLC analyst Owen Bennett said Canopy’s cannabis-infused beverages were supposed to be the company’s key differentiator, and that this delay is likely to further erode investor trust in the pot giant.

“[Friday’s] update will not help Canopy's cause,” Bennett said in a report. He noted the company had already cut its sales forecast, and added he doesn’t believe Canopy’s 40-per-cent gross margin target by year-end is achievable either.  

“Canopy has had seven weeks to work with THC in the brand new beverage facility to scale processes and IP it has developed in the R&D environment," said David Klein, chief executive officer of Canopy Growth, in a statement. "In order to deliver products that meet our customers’ high standards, we are electing to revise the launch date while we work through the final details."

RBC Capital Markets analyst Douglas Miehm said in a report to clients on Friday that “certain engineering issues” related to infusing the THC solution to a beverage resulted in quality shortfalls leading to the delay.

“While the release is somewhat surprising, we do reaffirm our confidence in the company's production capabilities and note that when it comes to beverages, Canopy remains ahead of the pack,” Miehm said. “In our view, the issues likely rest in translating the quality, taste, and consistency generated in a lab setting to large-scale commercial manufacturing.

With files from the Canadian Press

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new — and controversial — Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.