Cannabis

Tilray bets big on craft beer as it searches for profitability

US cannabis rescheduling would not affect Tilray, but it helps the industry: Tilray Brands CEO Irwin Simon, chair and CEO of Tilray Brands, discusses his company's Q1 losses alongside record revenue, and also addresses the short report issued against the company by Kerrisdale Capital.

Tilray Brands is banking on its diversification away from cannabis and into craft beer as the company edges closer to profitability.

On Wednesday, the cannabis company reported revenue losses of US$55.9 million as net revenue climbed by more than $23 million compared to a year ago. The results had Tilray trading 2.59 per cent lower as of early afternoon Wednesday.

“There’s a lot going on within Tilray, and I step back and say: ‘I’m not sure what investors are missing,’” Irwin Simon, chair and chief executive officer with Tilray Brands, told BNN Bloomberg Wednesday.

“Cannabis has really only been legal for five years in Canada and we’re getting some good traction in Canada.”

Matt Bottomley, director of equity research at Canaccord Genuity, said he believes Tilray is performing well in the Canadian cannabis sector.

“If you look at what the company did in each of its divisions, I think, certainly in the Canadian market, it’s doing well in what is a bad situation with respect to some of the headwinds,” he told BNN Bloomberg.

CRAFT BEER BET

In the last quarter, Tilray purchased eight craft beer brands from Anheuser-Busch, making it the fifth-largest player in the U.S. craft beer market.

For Irwin, the bet on craft beer is a way for the company to expand beyond the cannabis industry.

“We really put together a great business where we’re not dependant on cannabis legalization and we as a company today have a great diversification out there,” he said.

Bottomley said the shift to craft beer makes sense for a company like Tilray.

“It’s very difficult to make ends meet,” he said. “This is why a company like Tilray is looking at investments and opportunities that might have parallels to the cannabis industry, and use it as a vehicle or a platform should there be catalysts on the federal front.”

U.S. CANNABIS RESTRICTIONS

A pair of developments in the U.S., namely a cannabis banking bill and a recommendation from the Drug Enforcement Agency to reschedule cannabis as a Schedule I drug, are expected to benefit the industry, but Simon said Tilray won’t see those benefits right away, as gray areas remain for cannabis’ outlook in the U.s.

“Ultimately, it clears up a lot of confusion and is great for the industry, and with that there could be an opportunity one day for us as we grow cannabis in Canada and ship it into the U.S.,” he said.

“There’s got to be some clarity on legalization and what could happen in the U.S. and if medical cannabis could legalize, that would be great.”

It’s because of this that Tilray remains Canada’s most shorted stock. Kerrisdale Capital has suggested the company is over-relying on its stock issuance to fund its acquisition of Double Diamond Distillery and Hexo, while a cannabis rescheduling would only benefit its competitors.

“We split profits with (Hexo) and they decided to take their profits in equity instead of cash, which I think is pretty good,” Simon said in response.

With files from The Canadian Press