Canopy Growth Corporation has announced plans to divest its retail business across Canada, which includes stores operating under the Tweed and Tokyo Smoke retail banners.
The announcement reinforces the company's focus on advancing its path to profitability as a brand-focused cannabis and consumer packaged goods (CPG) company.
Canopy Growth has reached an agreement with OEG Retail Cannabis, an existing Canopy Growth licensee partner that currently owns and operates the company's franchised Tokyo Smoke stores in Ontario. As part of this agreement, OEGRC will acquire 23 Tokyo Smoke and Tweed store locations across Manitoba, Saskatchewan, and Newfoundland and Labrador.
The Tokyo Smoke brand will be transferred to OEGRC and any purchased stores currently branded as Tweed will be rebranded.
Canopy Growth has also reached an agreement with 420 Investments Ltd. in which 420 has agreed to acquire the ownership of five retail locations in Alberta. Following the close of the 420 Transaction, these stores will be rebranded under 420's retail banner. Closing of the OEGRC transaction and the 420 transaction is subject to regulatory approvals and other customary closing conditions.
All in-store team members working in the locations being acquired will see their employment continue with OEGRC and 420 pending completion of these transactions.
"We are taking the next critical step in advancing Canopy as a leading premium brand-focused CPG cannabis company while furthering the company's strategy of investing in product innovation and distribution to drive revenue growth in the Canadian recreational market,'' said David Klein, CEO, Canopy Growth. "By realizing these agreements with organizations that possess proven cannabis retail expertise, we are providing continuity for consumers and team members. Through the best-in-class retail leadership that OEGRC and420 have demonstrated, they will continue to serve Canadian consumers with the high-quality in-store experiences that are essential for success in a new industry.''
Operational savings realized through these transactions are expected to result in Canopy's projected selling, general, and administrative cost savings being closer to the high end of the annualized target range expected as part of the cost reduction actions announced on April 26.
In addition to the foregoing divestitures, the master license agreement between Canopy Growth and Alimentation Couche-Tard Inc., with respect to the use of the Tweed brand for brick-and-mortar retail stores operating in Ontario, has also been terminated.
Canopy Growth will continue to own and operate the Tweed brand, including a portfolio of flower, pre-rolled, and ready-to-enjoy options.