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This Works doesn’t work for Canopy any more, sells to UK company for a loss

Media Partners, Stratcann

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In an effort to become more “asset-light”, Canopy says it has sold off its ownership in a skincare and wellness brand for a fraction of what it paid just a few years ago.

Canopy announced that it had completed the divestiture of its This Works skincare and wellness brand to Inspirit Capital, a London-based investment firm, early morning on Monday, December 18.

“We are resolutely focused on achieving North American cannabis market leadership, and this completed sale represents a further step to enable this through the transformation of Canopy Growth into a simplified, asset-light, cannabis-focused business,” said Canopy CEO David Klein in a press release on Monday.

“In addition to realizing the proceeds from this sale which will further strengthen our financial position, we’re pleased to have found a buyer that is committed to the continued development of the This Works brand.”

Canopy made headlines in 2019 when they initially purchased This Works for $73.8 million. At the time, the cannabis company said the deal was a “key aspect of a multi-faceted hemp and CBD strategy” that “currently includes thousands of acres of hemp production across several continents, hundreds of millions of dollars of capital investment into hemp-derived CBD production and processing, rapid expansion across the European Union and other key regions, and the introduction of new CBD-infused products and brands to the global beauty, wellness, and sleep solution space.”

Since that time, Canopy has significantly scaled back its approach to the cannabis market, seeking to focus on a handful of higher-end cannabis products rather than dominating in every possible category. 

This Works is Headquartered in London, England, and offers a range of skincare and sleep solution products.

Earlier this year, Canopy announced that it would sell its flagship facility in a former Hershey factory in Smiths Falls, Ontario, back to Hershey Canada for $53 million. Canopy, then known as Tweed Marijuana, acquired the former chocolate factory in 2013 for $7 million.

A facility that Canopy built in PEI sat idle for years, unused as of a year ago. Canopy’s own documents show that in 2018, the company committed to paying more than $24 million over five years to a numbered company that owns the land. On January 5, 2023, in an email to CBC News, Canopy confirmed it continues to lease the land but said it wasn’t ready to discuss next steps.

Canopy recently announced a deal for share consolidation in an effort to ensure it maintains a listing on the TSX and NASDAQ.

According to the company’s recent financial reports, the gross margin for Canopy’s This Works segment was $2.9 million in the first quarter of fiscal 2024, compared to $2.6 million in the first quarter of fiscal 2023. The gross margin percentage was 48% of net revenue in the first quarter of fiscal 2024, consistent with 48% in the first quarter of fiscal 2023.

Revenue from This Works was $6 million in the first quarter of fiscal 2024, as compared to $5.5 million in the first quarter of fiscal 2023. 

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