is positioning itself as a top-three player in the Canadian recreational cannabis space, but the CPG company is aiming to take the top-two position soon.
HEXO has maintained continuity with its leadership, with members of the team like General Counsel Roch Vaillancourt, and added new members.
Acquiring Zenabis will help HEXO move its way up toward the top-two position in the Canadian market.
The addition of Zenabis gives HEXO more market share, as well as more cultivation capacity with two indoor grow sites: one in New Brunswick and one in British Columbia.
Now, the company takes the approach of having a home to sell for every gram that it grows, according to St-Louis.
The company also has a genetics lab in Brantford, Ontario, which was a part of the Newstrike acquisition.
He pointed out that there are more than 500 licensed producers in Canada, but the top 10, including HEXO, account for approximately 90 percent market share.
Continued M&A could help the company to achieve its top-two position goal.
The company is already in discussions with potential partners that could insert cannabinoids into their products via Powered by Hexo technology.
HEXO will be opportunistic about large wholesale orders to other markets, but most of its energy is being focused on becoming a top-three products company in the U.S.
HEXO entered the beverage category six months behind other players, most notably Canopy Growth and Constellation Brands, according to St-Louis.
The beverage category has grown to approximately 2 to 6 percent of the total category in Canada, depending on if you look at sales dollars or unit sales, according to St-Louis.
The company’s beverages, made through its Molson Coors joint venture, will be a key part of its U.S.
It is in a strong capital position, and it recently paid off its short-term credit facilities to give itself additional flexibility.
With positive EBITDA, a strong balance sheet and positive earnings per share on the horizon, HEXO will likely have access to non-dilutive debt instruments.
St-Louis sees the company continuing to grow, although COVID-19 and the accompanying restrictions in Canada could mean some headwinds and fluctuation in sales.
Judging by its internal metrics, HEXO has the second-largest IP portfolio in the Canadian cannabis market, according to St-Louis.
The pandemic remains a challenge, and competition in the cannabis space is only increasing, but St-Louis remains optimistic about the opportunities ahead.