Sep 9, 2020
Cronos taps former Blue Buffalo, Nestle exec as new CEO
Cronos Group Inc. appointed Kurt Schmidt to be its new chief executive officer on Wednesday in a move the cannabis producer said will help usher in a new phase of growth for the Toronto-based company.
Schmidt, who has worked in the consumer packaged goods space for more than three decades at companies such as Blue Buffalo Company Ltd. and Nestlé S.A., replaces Mike Gorenstein, who will become Cronos' new executive chairman.
"Over the past year, I’ve led a search for an experienced consumer-focused executive who shares the company’s values and can help take us to the next level," Gorenstein said in a statement. "When I met Kurt, it was immediately clear that he is uniquely suited to drive the company’s next phase of growth and continue our commitment to lead the industry forward responsibly.”
Cronos' CEO transition is the second such industry announcement in recent days, following Aurora Cannabis Inc.'s decision to promote the company's U.S. head, Miguel Martin, to its top job.
Schmidt comes into the job following a steady string of quarterly losses and impairment charges, while the company's stock has been cut in half over the past year. Still, Cronos is sitting on about US$1.1 billion in cash, one of the biggest warchests in the cannabis industry, following its investment from cigarette maker Altria Group Inc. in Dec. 2018.
Gorenstein has frequently stated during quarterly analyst calls that he is earmarking the cash for potential M&A opportunities, but the company has yet to make any substantial investments since its purchase of CBD maker and distributor Redwood Holding Group LLC for US$300 million a year ago.
The company also had to restate the financial results for several of its quarters in fiscal 2019 following an internal investigation into how it calculates revenue from bulk resin and wholesale sales.
Cronos has an approximate 2.6-per-cent share of the Canadian recreational cannabis market as the company has opted to focus more on its dried flower and vape product offerings, according to Stifel analysts.
CIBC World Markets analyst John Zamparo said in a report last month that Cronos is likely biding their time in Canada until the U.S. presidential election this year, the results of which could lead to cannabis legalization at the federal level. That could see the company capitalize on a market where it could leverage its U.S. market knowledge, relationships with important retailers and brands under its Altria partnership, and relatively minimal cash burn, Zamparo said.
