Cronos Group Inc. announces its 2023 third quarter business results.
“By most financial metrics, Q3 2023 was one of the best quarters in Cronos history,” said Mike Gorenstein, Chairman, President and CEO, Cronos. “We achieved our highest net revenue for continuing operations on record at $24.8 million, up 22% year-over-year. The top-line was propelled by 40% growth year-over-year in Canada, driven by strength in pre-rolls, flower and edibles. This robust success in Canada was driven primarily by innovations in our Spinach® brand, and with the Lord Jones® brand now also on the market, we are excited about having a broader portfolio of unique and differentiated products to address consumer needs.”
“Our re-launch in Germany with the Peace Naturals® medical cannabis brand is an exciting step for Cronos to move beyond its existing markets. And just last month, we signed an agreement to ship to Australia. Opening new avenues for growth with operational discipline is our primary focus. Beyond top-line growth initiatives, our teams have done a great job reducing costs across the Company and improving the gross margin profile of the business, which yielded significant improvements in cash flow.”
Third Quarter 2023
- Net revenue of $24.8 million in Q3 2023 increased by $4.4 million from Q3 2022. The increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market. These results were partially offset by an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue, and lower cannabis flower sales in Israel driven by pricing pressure due to competition, the slowdown in patient permit authorizations, and geopolitical unrest. Furthermore, the weakened Canadian dollar and New Israeli Shekel against the U.S. dollar during the period adversely impacted results.
- Gross profit of $4.0 million in Q3 2023 increased by $0.8 million from Q3 2022. The increase was primarily due to higher cannabis flower and extract sales in the Canadian adult-use market and lower biomass costs, partially offset by lower cannabis flower sales in Israel, and the inventory write-down recognized as a result of the decision to wind down operations at our Winnipeg, Manitoba facility (“Cronos Fermentation”). Adjusting for the inventory write-down of $0.7 million, gross margin would have been approximately 19%.
- Adjusted EBITDA of $(15.2) million in Q3 2023 improved by $3.3 million from Q3 2022. The improvement year-over-year was primarily driven by a decrease in general and administrative expenses as part of the broader organizational cost reduction efforts.
Brand and Product Portfolio
The Spinach® brand continued to hold its number one market share position in the edibles category in Canada in Q3 2023, with an approximate 17.9% market share across the SOURZ by Spinach® and Spinach FEELZ™ sub-brands, according to Hifyre. In August, we launched our highly anticipated THCV edible, the Spinach FEELZ™ Full Tilt THC+THCV. This THCV edible is designed to provide a boosted and elevated high and we are excited to have it as part of our number one ranked edible portfolio.
In October 2023, our Spinach® brand won “Best Pre-Roll” at the Grow Up Awards for its Spinach® Fully Charged Atomic GMO infused pre-rolls. The annual Grow Up Awards celebrate excellence in the cannabis industry, recognizing outstanding achievements and innovation in a variety of cannabis-related categories. In Q3 2023, Spinach® pre-rolls rose to the number seven ranking in the category, according to Hifyre. Cronos launched several new offerings to bolster the Spinach® pre-roll portfolio in the first nine months of the year, and we are excited about the progress we have experienced in market. Winning in the pre-roll category is a top priority, and we will continue to flex our robust product development capabilities to formulate differentiated products with flavors and rare cannabinoids to win with consumers.
Cronos’ strong breeding program and portfolio of genetics continued to drive growth, propelling the Spinach® brand to become the number two flower brand in Canada, with a 5.8% market share in Q3 2023, according to Hifyre. We have three SKUs in the top-15 for market share, led by our GMO Cookies genetic across various pack sizes. We carried the Q3 strength into October, and as of the end of October Spinach® is the number one flower brand in Canada, according to Hifyre.
The Spinach® brand was ranked the number five vape brand in September 2023, holding a 6.4% market share, which is up from Q2 2023 where it had a 4.5% market share, according to Hifyre. Spinach® is the number one rare cannabinoid vape brand, with our SKUs that feature cannabinol (CBN), cannabigerol (CBG), and cannabichromene (CBC), holding three spots in the top five market share among rare cannabinoid vapes. In October, we launched our highly anticipated THCV vape, the Spinach FEELZ™ Full Tilt THC+THCV. Our new launches in 2023 helped propel Spinach to achieve the number three brand rank in the vape category in October, according to Hifyre.
In November 2023, we launched our award-winning cannabis brand Lord Jones® in Canada. Lord Jones® will build on its legacy of delivering premium quality cannabis products by returning to its roots with bold THC-focused innovations. The first product line to launch are Lord Jones® Hash Fusions pre-rolls. These infused pre-rolls have been designed with an optimized ratio of ice water hash-to-flower, meticulously researched and sensory-tested to drive a smoother consumption experience and preserve the flowers’ terpene-rich, bold flavors.
Later this month, we’ll also launch a Lord Jones® live resin vape, which will feature sought-after cultivars that deliver a flavorful full spectrum live resin experience. And in early 2024, we plan to launch our next ground-breaking edible innovation, this time in the chocolate category. The Lord Jones® Chocolate Fusions edibles, which were researched and developed over multiple years, will feature artisanal chocolate and high-quality ingredients in three flavors – cookies and cream, dazzle-berry pop, and salted caramel crunch.
In Israel, Cronos launched four new flower offerings under the Peace Naturals® brand, Sticky Ape, Raphael Gems, Purple Punch and Tangerine Twist. Driven by our best-in-class genetics program and high-quality cultivation capabilities, we are able to meet market demands as consumers continue to look for strain variety.
About Cronos
Cronos is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio. Cronos’ diverse international brand portfolio includes Spinach®, PEACE NATURALS® and Lord Jones®. For more information about Cronos and its brands, please visit: thecronosgroup.com.
