EXCLUSIVE: Tilray CEO Irwin Simon On Why US Cannabis Rescheduling Won't Change A Billion-Dollar Play

In a fireside chat with senior analyst Pablo Zuanic on October 23, 2024, Tilray Brands TLRY CEO Irwin Simon shared insights into the company's growth strategies, highlighting profitability, U.S. market entry and the expansion of their cannabis and beverage businesses. Simon also addressed the recent quarterly performance and challenges the company faces in both domestic and international markets.

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Record Quarterly Performance With A Focus On Profitability

Tilray's first-quarter results for FY25 marked a record $200 million in revenue, up 13% year-over-year, with gross profit jumping 35%. While some investors expressed concerns about the decline in the cannabis segment, Simon reiterated Tilray's focus on profitable sales growth over chasing market share at unsustainable margins. "It's very easy for us to go out there and wholesale cannabis and not make any profit," Simon said, emphasizing the focus on premium branding, genetics and innovation.

Tilray also maintained a solid balance sheet, with nearly $250 million in cash and a debt-to-equity ratio of 1.75. Simon highlighted the profitability of Tilray's diversified portfolio, which spans cannabis, hemp food, beverages and pharmaceutical distribution. "Each of those businesses today are profitable," he pointed out.

Hemp-Infused Drinks: A New Frontier

Tilray's push into hemp-derived Delta-9 THC drinks forms a critical part of its U.S. strategy. Simon discussed the launch of brands like Happy Flower, 420 Fizz and Fizzy Jane, which will be available in 17 to 19 states. He underscored the growing demand for cannabis-infused beverages, particularly among younger consumers who are turning away from alcohol. "If I could sell THC-infused drinks legally in the U.S. today, I think it's a billion-dollar opportunity," Simon remarked.

Leveraging Tilray's established distribution network is key to its growth in this space. "We have 700 beer distributors, 10 manufacturing facilities and we're in over 17,000 accounts," Simon noted, adding that regulatory developments could further expand distribution opportunities.

Read Also: Female Cannabis Consumers Outspend Men: How Tilray And High Tide Are Responding

Craft Beer Strategy: Consolidating For Focused Growth

Since acquiring SweetWater Brewing in 2020, Tilray has significantly grown its craft beer portfolio, selling 15 million cases annually across 19 brands. SweetWater is now number one in Georgia, while Montauk dominates New York's metro area. However, Simon revealed a shift in strategy, focusing on core markets rather than spreading thinly across multiple states. "Montauk doesn't mean anything in Georgia," Simon explained, prioritizing growth in key regions where Tilray can build a stronger presence.

Navigating U.S. Cannabis Market Entry

Tilray remains cautious about directly entering the U.S. cannabis market, waiting for clearer regulatory frameworks. With a strong presence in the U.S. through its hemp food and beverage businesses, Simon said that Tilray is well-positioned for future legalization. "We know how to grow cannabis… and we have the balance sheet to fund it," he said, highlighting the company's experience in cultivation and product development from its operations in Canada.

Tilray’s Focus on Lifestyle Brands, Regardless Of U.S. Rescheduling

Simon noted that Tilray's success is not dependent on U.S. cannabis rescheduling. "If nothing happens – no rescheduling, no legalization – we already have a good-sized business in the U.S. in the consumer products space," he said. The company's portfolio, which includes non-alcoholic beverages, hemp food and beer, solidifies Tilray's position as a lifestyle brand. "We're a lifestyle business that brings people together, and we'll keep doing acquisitions and growing regardless of what happens with cannabis reform," Simon said, highlighting Tilray's long-term adaptability.

Read Also: Billion-Dollar Cannabis And Beverage Giant Brings Oktoberfest Vibes To Your Glass With New Craft Beers

Challenges And Opportunities In International Markets

Tilray continues to face challenges in international markets, particularly in Europe. Simon noted issues with lost distribution in Israel but expressed optimism about the growth potential in Germany and other countries as medical cannabis regulations become more liberal. Despite these hurdles, Tilray's 45% market share in Canada's cannabis drinks segment provides a solid foundation for international expansion.

Looking Ahead: Innovation And Diversification

Tilray's future growth will rely heavily on innovation and the ability to leverage its diversified business model. Simon pointed to non-alcoholic drinks and energy drinks, such as the Liquid Love brand, as examples of how Tilray is responding to shifting consumer preferences. He emphasized the importance of innovation and distribution synergies: "Beer distributors are the ones out there selling these products."

As Tilray navigates a dynamic regulatory landscape and evolving consumer demands, Simon remains confident in the company's long-term prospects. "We're just not going to throw good money after bad," he concluded, underscoring the importance of strategic growth and profitability.

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