The cannabis industry might be closing out a year full of massive cuts, but Aurora Cannabis Inc.’s chief executive says there is still plenty of money to be made in the pot business.
“We’re going to have to get through the right-sizing of these companies and that kind of transition,” Miguel Martin said in an interview.
“But no one should look at the overall economics of the cannabis business and think that it’s not healthy or think that there’s not great opportunities, for companies that are run well, to be successful.”
Martin’s remarks come as he nears three months in Aurora’s top job.
He took over the Edmonton-based company from interim chief executive Michael Singer in September, just as Aurora was bracing itself to record up to $1.8 billion worth of goodwill impairment charges.
By then, the company had spent much of 2020 restructuring by cutting hundreds of workers, closing facilities and saying goodbye to Terry Booth, its former chief executive who had been with Aurora since 2013.
Martin managed to nab his job after running Aurora’s U.S. cannabidiol company Reliva and becoming chief commercial offer for its parent company in the summer.
Now, he says the cannabis industry is going through a reckoning.
“You have to separate what people thought the business was going to be with what it really is,” he said.
Looking back at least a year and a half ago, he said most cannabis companies had “irrationally exuberant expectations.”
They wanted to build as much production capacity as possible, so that they could create any amount and quality of cannabis to be sold in Canada and around the world.
“There really was no wrong the company could do — and what people learned pretty quickly was that that wasn’t the case,” he said.
So companies, including rivals Canopy Growth Corp., began to cut.
They talked about streamlining their businesses, minimizing the illicit market and pushing vapes and edibles.
Earlier this week, some used a different approach: a merger.
Nanaimo-based Tilray Inc. and Leamington, Ont.-based Aphria Inc. announced Wednesday they would unite under the Tilray name, become the biggest cannabis company in Canada by revenue and target the U.S. and European markets.
Over the summer, Aurora was rumoured to be Aphria’s suitor.
“I don’t think we’ve missed out on anything and their situation doesn’t change the competitive environment for us,” Martin said.
“Whether this is going to create a wave of consolidation, we’ll see.”
As for the U.S. ambitions some companies are developing, Martin said everybody’s focused on what opportunities could arise.
In November, Arizona, New Jersey, South Dakota, Mississippi and Montana voted in favour of legalizing recreational or medical cannabis through U.S. election ballot questions.
Incoming president Joe Biden and vice-president Kamala Harris have also committed to decriminalizing pot and expunging criminal records related to its possession.
There’s also hope around the Safe Banking Act, a Democratic bill with some Republican support that would allow financial institutions to work with cannabis companies without retribution.
Many believe these promises could pave the way for a more national legalization movement, but questions remain around the timeline.
“It’s hard to predict when, but the movement is afoot,” said Martin.
“I think if you look back, compared to other regulated categories, we are moving quite quickly.”
For now, Martin will focus on retail and analytics.
He is pleased that the number of cannabis stores is skyrocketing.
Ontario alone has at least 280 shops and is poised to add dozens more in the coming months.
He is also glad that retailers are advancing data systems because he said the analytics most consumer package goods companies have on consumers, buying patterns and trends are much more robust than what the cannabis industry has.
“That’s really helpful to us as we put ourselves in position to be able to make the right decisions long-term,” he said.
“I’m excited about it.”