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Cronos Group's CEO shares insights and future outlook amid challenges

Cultivated Interview Series: Cronos Group CEO Mike Gorenstein

Canadian cannabis firm Cronos Group dealt with numerous challenges last year and in the past quarter, CEO Mike Gorenstein told me in an interview last week following the company’s earnings release.

But that hasn’t dimmed what he says are exciting times ahead for both Cronos Group and the cannabis industry more generally. 

A challenging quarter

The company posted $23.9 million in revenue for the fourth quarter, up from $22 million last year. Still, that came in below Wall Street’s consensus estimates, which expected $25 million.

And, shocks from the Israel-Hamas war — Cronos is heavily involved in the country’s medical cannabis industry — made for a “very, very tough few months” for the company, Gorenstein said. 

Gorenstein highlighted strong edibles sales in the company’s core markets in Canada, as well as in medical markets in Europe and the aforementioned Israel.

“Knowing that we have products that can work in other markets is so core to our strategy to get the payback on the R&D investments we're doing,” he said. “Seeing that start to pay off is really big.” 

He added that Cronos’s cash stores are what gives him confidence in the company. 

“You hear a lot about cash and how important that is for industry sustainability,” he said, noting that the company has no debt, and had a $20 million increase quarter-over-quarter.

Canada’s cannabis rules

Turning to Canada, Gorenstein said the federal government’s long-awaited review of the cannabis tax code is much needed — specifically, reforming excise taxes.

“It would be huge for us, and huge for the industry and just really helpful to stay competitive with the illicit market,” he said. He also added that getting rid of physical tax stamps, which are onerous and expensive, is much-needed.

Gorenstein said that the Canadian Revenue Agency’s announcement last month that it would have wholesalers garnish payments to cannabis companies is a positive step. 

“If you don’t draw some type of line that you have to pay taxes, people are going to stop paying taxes,” he said. 

Looking ahead to Germany and other international markets

Germany’s new cannabis legalization bill is set to go into effect on April 1. But as we’ve written in our daily newsletter, Germany is charting a different path than Canada by barring commercial sales. 

“I don’t really look at it, honestly, as legalization,” Gorenstein said. “It feels more like lessening the penalties of the illicit market. The big positive is removing the narcotic status of cannabis.”

Cronos Group sells its medical brand, Peace Naturals, to Germany’s medical market. Gorenstein says he thinks Germany’s new stance will drive a ton of growth in the country’s medical market — and perhaps Europe’s medical market more broadly.