Aurora Cannabis Inc. (ACB.TO) isnt planning to invest heavily in cannabis-infused beverages amid concerns about demand for the product, company executives said on Wednesday.
During a conference call with analysts, the Canadian cannabis producers executives downplayed the companys efforts in investing in the pot drinks space as they anticipate low market share when the sale of such products becomes legal in Canada later this year.
Weve made a rational decision to focus priorities in areas that we know have strong demand based on a model weve seen in legal U.S. states, said Cam Battley, chief corporate officer at Aurora Cannabis, during the call. He noted that the company may change course if the industry is able to improve marketing efforts and if consumer tastes change.
BNN Bloomberg reported in September that Aurora and The Coca-Cola Co. were in serious talks to develop cannabis beverages, specifically those infused with cannabidiol, commonly referred to as CBD, the non-impairment compound found in marijuana plants. Since then, Coca-Cola has backed away from developing cannabis beverages, although the company says it continues to monitor the legal pot market.
Recent industry statistics show the market for cannabis-infused beverages remains fairly small, accounting for less than 0.5 per cent of sales in the U.S. legal pot market, according to BDS Analytics. However, the category could be worth as much as US$600 million in the U.S. by 2022, according to recent figures from Canaccord Genuity Group Inc.
Auroras Chief Executive Officer Terry Booth added Wednesday that there isnt much of a proven market in the cannabis-beverage space and that any development from the company in the so-called concentrates sector would be focused on edibles and vape pens.
While Aurora may not be preparing to release a cannabis-infused drink, other Canadian pot players are investing heavily into the space. Canopy Growth Corp., the worlds biggest pot company, plans to release a line of several pot drinks when theyll be legally available in Canada this October. Meanwhile, Molson Coors Brewing Co. has a joint venture with Hexo Corp., and Tilray Inc. plans to invest $100 million alongside Anheuser-Busch InBev, the worlds largest brewer, for its own pot drink partnership.
The Edmonton-based company credited higher production and sales for a $158-million loss on net revenue of $65 million, compared with a loss of $238 million on revenue of $54 million in the prior quarter.
Analysts had expected a net loss of $52.6 million on net revenue of $77 million in the quarter ended March 31, according to Thomson Reuters Eikon.
Aurora says it nearly doubled production to 15,590 kilograms, with the majority of the volume harvested in the last half of the quarter.
It says Canadian consumer revenue rose 37 per cent to $29.6 million, exceeding medical revenue of $29.1 million, which was up 12 per cent.
The cost per gram of dried product fell to $1.42 from $1.92 but the average net selling price was also down, to $6.40 from $6.80.
“We achieved solid revenue growth and strong operating results in a quarter proven challenging across the industry. We are laser focused on building a long-term sustainable business,” said CEO Terry Booth in a release.