Cronos Group Inc. (CRON) Earnings Call Transcript
September 24, 2026
Earnings Call Speaker Segments
[Audio Gap] Investor Day. Thank you all for coming. I'm going to read forward-looking statements. So before we kick off, this is -- you have to set through this. Thank you. [Audio Gap] These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. The cautionary statement regarding forward-looking information included with our Investor Day materials, together with the risk factors described in Cronos Group's public filings [Audio Gap]
We're about 3,500 employees to date. We market through every major retailer in the U.S. and Canada. So about 65% to 70% of our production here is sold to the U.S. We have a staff, like I said, 3,500 people, and it is mostly supported through the migrant program through Canada. I will say that Canada allows us to have the ability to bring in these migrant workers. I mean, without them, this industry does not exist. [indiscernible] aren't here at GrowCo. It is -- labor is one of the most difficult things right now.
Great. And Mike, just a quick background on you and how you landed at cannabis.
Mike Gorenstein, CEO. I started, it was 11 years ago, I think, 10 years ago. And yes, I started off, I was a corporate M&A lawyer mostly doing alcohol and healthcare. So back then, I think cannabis was like an interesting discussion you would hear in boardrooms, but not a reality I was obviously very interested in. I moved over to the buy side and really wanted to invest in cannabis, which is very difficult to do at the time for a number of reasons, but eventually found my way to Canada, thought there's a big opportunity to build a global platform, develop IP and really have kind of the everything you need from a portfolio perspective. So as other countries opened up, we can move into them. And I guess it took longer than we expect for the countries to open up and for Canada to open, but I think you'll see today it has opened, and we're starting to realize what that vision was.
So how does the partnership between Cronos and for yourself combo?
So back in 2017, I think that was right when Canada legalized. I guess you had -- I have numerous LPs coming to Kingsville and approaching us to grow cannabis, of course. There were a lot of greenhouses in the area. That must have been 15 to 20 facilities, smaller facilities. The thing that attracted me to the Cronos Group was most of the other LPs were all about getting to market as fast as they can. The 1 thing that I would say that we were like-minded with the Cronos Group is we wanted to co-build a purpose-built cannabis facility. And when you tour it, you'll understand why what the differences are. I'm sure you have gone through other facilities. So this is specifically and purposely built for cannabis. And that was just 1 of the things I did not want to retro in vegetable greenhouse because we knew it wasn't the right bus.
for me, 1 of the things I think about part of why it's like it's -- I think it's weird to have the name group, like why it is a Cronos Group. Part of the idea was such a big industry, there are so many different verticals, so many different skill sets. Finding the right people, bringing together a new group to be able to be best in class because if you try to be a master of everything you'll become like a master of nothing. So that was a big early thing. And then like an internal joke I used to always worry about like, all right, we have such a big market. What should I be scared of? And like well, what happens when the big ag guys come in? Like are we going to be better growers? Or like the big scare of what happens is like big alcohol or big tobacco comes in. And like my solution to it was like, well, why don't we just partner with whoever would want lease as a competitor. And like part of my purpose building another part to like, I were asking why didn't you want to rip out every other greenhouse growers saying they're going to take out cucumbers or tomato grow cannabis like, why don't you want to do it as well. We're profitable. Why would I do that? It seems like the right partner.
So I think there's a big debate in the industry on what type of environment is the best for growing. So indoor, low or high-tech greenhouses, outdoors gaining traction. What's your perspective, and how did we settle on a purpose-built greenhouse?
I would say that -- and no different than the vegetable industry, like you have field farming, you have greenhouse farming and you have indoor farming. In the vegetable business, indoor farming is not -- it's not profitable. We looked at every single -- indoor grow costs are just way too high. I think we've seen that railway between our facility in indoor facilities at Stayner. But field production is just -- it's 1 of those things like every 1 of our retailers is what can you grow in a greenhouse that's growing in the field. Like anything, can you grow bananas, can you grow pineapples? It is the cleanest product that you're going to get out there. I mean anything you go in the field has to have a pesticide spring. Like I said, it's just -- I believe the greenhouse the greenhouse we've built here, we a little bit different than our [ mine core ] greenhouses. We are chilling, we are dehumidifying, and that allows us to give us the quality that we're putting out right now at GrowCo.
Yes, I think people underestimate -- like there's cost is 1 thing. And people always -- like quality obviously matters, but there are other things they want underestimate predictability, year-round, knowing that you're able to produce, not worrying about having to have 1 giant crop and then storing it. Because obviously, quality will degrade over time. You have extra storage costs. You have to think about kind of what all the other parts in the value chain are. But I think there's always been a place for craft indoor. It's not the area where we necessarily play. So I wouldn't say that it's -- there's the right answer. There's -- for extracts, it can grow outdoors. And for like pure inputs, that can certainly be attractive, depending, of course, where you are. But from a flower perspective, especially when you're thinking of really tight standard and you're thinking of going overseas, you'll see when you go through there from a control perspective, environmentals, you take the flower and put it next to indoor and you look at the infrastructure, it's really not that different than indoor. It's just a cost advantage. And it's way more energy efficient. When you think about potential energy crisis that's looming, I think it's a much better place to be scalable.
So you mentioned you met with lots of different LPs. I know you've toured other competitor facilities. How would you compare GrowCo's facility and kind of the approach here to those other players?
Yes, I have toward other LPs. I've operated in some of these greenhouses. They're -- I say this because I'm sitting here of course, but you will not find a facility like this anywhere like this. Again, this is purposely built for cannabis. A lot of the other greenhouses are retro greenhouses. So it's a much different greenhouse. And again, when you tour the facility, you understand why.
I'm going to turn to talk about genetics and R&D. Obviously, [ losses ] going to really talk about that. But just at a high level, Mike, could you discuss Cronos' focus on genetic R&D on tissue culture and the vision for how this drives value for cultivation at GrowCo?
Yes, I think it's not that different than any other agricultural industry, if you look where you -- where value splits up, a huge part goes to genetics. And I think that it's really difficult to do all the things we're trying to do and also focus on being the likely. I feel like managing the labor in every place around the world, the big differentiator and consistency is genetics. I think that it's easy for people to see to grow and like to walk through here, it's obviously extremely impressive. But the part you don't see is the genetics, and the 2 have to fit together. Part of why the part works so well is focusing on genetics on 1 side and having a team that's just thinking about genetics. And the team is just thinking about growing and the data we're able to share back and forth. So you can think about how would this genetic perform in this environment. And I think that just growing and genetics about breeding, it's really not disservice. And I think that's where you start seeing yield gains over time. You start seeing -- from a quality perspective, if you look at what consumers want, it's -- people describe it as a commodity, but it's -- people are thinking different strains for a reason, you're different price points for a reason. And that's really that match between the genetics and how you're actually cultivated.
And what's kind of the approach here between genetics that optimize for [ bag ] appeal versus genetics that optimize [ regeared ] and cultivation efficiency at scale?
Yes, look, I think it's a balance. I think proposition for the consumer. And ultimately, the consumer isn't willing to pay for to provide value, then it's not something that makes [ percentage ] for us to produce for. So it's almost looking at [indiscernible] per plan terpene [indiscernible] as you can kind of assign numbers to it and understand that. And so there is a bit of a trade-off. If the yield, we could. But then the consumers want? Are you now looking at a different tier of pricing. The first and most important thing is if you have something that people want, or no matter how cheap it is, it doesn't go anywhere. We don't want ever product or a product that won't sell. So I think we start with quality and then yield comes after.
So I'm going to turn to cost and efficiency. Bert, could you discuss the most significant cost items involved in operating a scale cultivation facility and why this facility is well situated to compete globally?
Yes. So our #1 cost, of course, is labor, electricity and natural gas. So on the labor side, we are tracking employees. We are -- we've got a pre-bust system is where we track all of our employees, what their output is, plants deleafing. So we can go back to that. And we give our guys incentives. So piece rate is 1 of the best things for migrant workers. Like you give them the piece rate, and these guys are -- their performance just doubles instantly. Natural gas and electricity that we have probably the most LEDs I've seen in a greenhouse. We don't normally put this many LEDs in a [ wine crop greenhouse ], but we put the latest and greatest LEDs there for efficiencies, less heat or less temperatures on that crop. And then our heating costs. So we have a triple screen here, so energy efficient and just watching our environment is like very, very dialed in. Like our growers here are very dialed in. And just looking at efficiencies, again, with heating, CO2 dosing, everything.
And can you talk a little bit about just not the labor model as well as the automation that you've got?
Well, when we started, we didn't know what automation put in. And I'm glad that we didn't go forward with the automation that was there because it would have been all the wrong automation. We are in it now since 2020, so 6 years growing. And we are just starting to implement that automation today. And like I said, I'm glad we didn't do it back then because it would have been all the wrong automation. And it's obviously mostly in packaging. We just bought -- we're doing for bagging and all of that, we put automation. But I will say, a little bit different than what I've seen in all the other grow ops is that -- I say this, I still say it today, we are large-scale growers here, but we are still large-scale craft growers. Like we do a lot of the -- like nobody was hang drying when we started, everybody is doing on the trades, trying to pump like the volume out of the dry rooms. And you'll see when we go through our dryer, very, very expensive and very sophisticated. Like we could dial down like almost everybody and get it to the right concentration or whatever we have to get. Like it's a science. And I always say this is that room, you can blow millions of dollars. Either you're drying too fast, drying too [indiscernible].
We obviously work all together, and I think that it's exciting that when we feel we need to expand, we have the ability to do it quickly, efficiently and consistently. And I think -- we haven't had Phase II up for that long, and it's fully integrated. I know everyone always talks about like the multiyear ramp-up, but team here has done an amazing job being able to do it. And that gives us confidence that whenever we need to scale, we can do it. And I think that as you see other geographies open, depending on what rules are, there's also other infrastructure, for some reason, we need different locations, really North America specifically, like we can do that together.
And maybe to follow up that, how about when evaluating opportunities that will emerge in the U.S., how crucial do you think this partnership is for that?
Yes. I think that it's really important, right, going, if you could talk about what the infrastructure is in the U.S., I think from -- a lot of the questions always around like what you go to the U.S. to an export to other markets. And you can talk about it not really like off the bat, you have a currency advantage, it's pretty nice. I think that there are -- some of the markets where traditionally people think would be better. You have to remember, humidity is extremely important. And so we're obviously very happy here from an export perspective. But when we think about the U.S., if it's not an open market, we're not bringing product down to near. There's absolutely opportunities. It's not like we probably telecom when we both talk about it, we extensively like planned and thought about how we do it, where we do it, what the time line is. You can add to that?
Yes. I mean, we've talked about the U.S. I've always asked plainly, when and if we're going, where are we going. The U.S. is difficult. We've grown there. We have facilities in the U.S. right now. Just right across water, it's about 55 kilometers in Sandusky, Ohio. And climate is very important when you're growing in a greenhouse structure. I'd rather be in a place where it gets to minus temperatures than being in a state where it's never freezes over. I mean, again, I said this earlier to -- I forgot who was talking to here. But the advantage we have here is nothing over winters. So we have a fresh start every single winter. Like in a few weeks, we had frost hit here, every pest outside dies. You start going to -- Sandusky, Ohio is not that bad, but California, because we've grown in California, it is difficult. And the pressure there with wind drops anyway, you have to spray pesticides. There's no way around it. So we have a clean start here probably. By the time December 1 hits, everything is dead outside. It is a clean start. We've operated in greenhouses in the U.S. One thing is -- I mean, I've always said this to Mike is we've operated in 1 of the largest greenhouse cannabis grower actually. And we split, we were doing the buying crops there, but I would definitely not retro greenhouse there. Like there's just nothing there that you would even consider. Like if we went to the U.S., it'd be a purpose built just like GrowCo.
Yes. And I think people don't feel -- like the real factor is going? What's the cost of energy, right? So whether that's gas or whether that's -- whether it's just -- what's -- what is it to set up to a substation, like what are the state regulations because that becomes pretty real. Access to water is something not everyone thinks about. But water is really, really important, what are the labor costs, access to labor. And then climate, you want a lot of sunlight. You do not want humidity. So the areas that maybe today are the big cultivation hubs in the U.S. really just because that's where the consumer market started. But you go to places like -- we never think of New Mexico, for example, right, or like maybe I'm biased because I was born in Ohio, but like I love the Ohio idea. But knowing there's infrastructure there, you already have some of the ag infrastructure. Similar to here, we benefit from having all the ag infrastructure and being able to add the cannabis peril, we would purpose bill. That's really -- you need to have a competitive advantage and purpose building is really going to give you that.
So I think we'll open the floor up for questions from the audience. We have about 10 minutes. I'm going to repeat your question back just for the webcast, but...
Mike, you said you -- the facility here is fully ramped. Does that fully ramped in terms of where you expected it to be at this point in the journey with Phase II? Or is there still more that could come on that you could do, just so we can better understand Fully rate relative to where you want it to be or where the end state ever markets to open up?
I think it was pretty clear.
Okay. Yes. I think -- yes, I think that from a planning perspective, we're fully planted. I think that there's still things in terms of automation, in terms of efficiencies that we'll get out of it. There's always going to be improvement in genetics. So you'll still see efficiency gains. But I think what we talked about is that it was relating to Q4, Q1 turn when we're planting, when we're making sure we can get everything in dryer and get everything packaged and get everything out in time. I think that's behind us, and we're fully to utilize, but you'll see increases. There's more we can go, but it's not like we have left just wide open waiting.
Given that you're fully utilized and we're starting to see it flow in the numbers the last couple of quarters, how quickly do you think about Phase III, Phase IV? I mean, like the first few phases has been a huge success. It's been a big differentiator. Like how do you think about that next 1 quickly do you move to it?
I mean, look, it's something that we -- I guess, we always think about what's the next phase, what's the timing and it's just making sure that everything aligns at all, like everything is sort of buttoned up before we do something. So we want to make sure that like we were to announce something or if we're expanding that we have everything ready to go, and we kind of we would talk about what the plans were sort of when we start nonadvanced.
So you're not planning an expansion at this moment, in other words?
We have not announced an expansion.
You talked a lot about the purpose built versus retro. Maybe just talk in layman terms, why you feel so strongly about that and maybe some of the tangible benefits that you to able to get from being purpose-built versus retro?
Yes. So again, we operate 800 acres in the buying crop industry. And a lot of these cannabis greenhouses are rental greenhouses. You'll see when we walk through it, we have dehumidification systems. We have chilling plants. We have concrete through the whole facility. There's no ground part, there's no poly film. Anywhere you have a poly film or a ground park like we do in buying crops, bugs hibernate need under there. And that's 1 thing that -- it's the first thing without even growing a campus plan, I said we have to bear the expense, we're going to put concrete. Nothing survives on concrete, of course, the bugs have nowhere to hide. And then the humidity thing is -- again, I didn't know anything of cannabis coming into it, but I knew humidity, bud rock was a huge from. So we put in the dehumidification. Those are all added costs, very expensive to do. But I think that our quality reflects it, for sure.
I mean, just being high level, right? If you were to go into a retrofit greenhouse and ask the grower like, hey, how do you benchmark your yield to performance versus that greenhouse. They would defensively say something along the lines of like, well, this wasn't purpose-built so you can't really compare. That's the best.
Sorry, just to both. With respect to purpose bolt and heal, how would you compare the yield investors the purpose folks, the side of water and also South at? Because that's obviously increasingly going to be a discussion. Where do you think it would rank in terms of your yield? Or could rank in terms of your loan more comfortable?
I think if we were growing purely for yield, then I think it would be #1. And just again, that's a decision of like -- a lot of that comes down. And there, to be fair, you also have to say the same genetics or different genetics because there's a bit of advantage for both. But if we were saying we want to grow purely for yield, I think it would be nearly impossible to beat us. And I also think -- in the U.S., there really aren't this type of scale, any purpose built facilities, right? So it's hard to say the U.S. is a comp. I mean, there's large ones in Canada. But yes, I don't think there's any 1 going to be the same level. At the cats, what again, where are you what are you going? Do you think like good, better, best, what are you growing for? We could have lower yields if we went for all for like sort of like the -- these strains. We went purely for yield and factor in potency. It's just trying to get that balance and what the right balance is for what fits the brands.
Two questions, specifically. If you do announce a Phase III, what's the time line after the announcement? Like how quickly would you be ramped or fully ramped? Is it in 6 months, is it 8 months, a year? Faster than Phase II. And a separate question. When you think about expansions, do you think you define your supply chain, like would you consider buying or building something indoor? Or indoor for you guys, it's off limits, you're not interested?
Yes. On the first one, I mean, really -- it also depends on the time of year. I don't think that it would be able on the same exact time line is Phase II, but a lot of that is like getting that we built before the winter and making sure it's probably you answered this a close.
Yes. I we know -- I mean, we know from building Phase I and II here right now, what to expect. I think we could we could probably build this facility in 12 months. And would we get into indoor, I don't think so.
Yes. I mean, look, we have we wouldn't need -- we want to do indoor. I don't think that there is a facility we would buy. We would need to get manufacturing space and convert. Basically, we already have a licensed facility that's large purpose bill and/or cultivations that we felt like there was ROI on converting that back, it would be expanding manufacturer space elsewhere and then growing that we already have existing. But it just doesn't feel like from -- like from today, that's where the focus would be. I think the indoor fits in the craft segment a lot more. So it would really be more about the brand that attached to it than us saying we're going to turn it on. And that just has been focused. It's really more building for cultivation. I think we're pretty happy with what we have. We haven't seen anything that we're like, oh, we need to go get that. It's always an option, like there's something could be built that we could change our mind later. But example, like the Netherlands, right, that wasn't about like we need cultivation capacity. If you need the -- if to enter the market, you need to have cultivation, that becomes a factor. But it wasn't like we need capacity, let's go buy the capacity as we like that it's a #1 market share. The -- we like the profile. We like the program, capacity came with it.
How does the federal government's regulatory approach over the years shape today's cannabis industry?
I guess I'll give a positive and negative, so it's really balanced. The positive is that I think because there is a regulatory approach, and it was the first G7 country to legalize, that's allowed there to be a heavy amount of investment and cultivation. I think that the negative is that because of how restrictive it is and because of some of the rules around marketing or some of the tax issues, we have not reached the potential that it could be where some of that changed. So it's -- we like -- I'm very grateful we have what we have. But if you were designing it, there were a lot of improvements that could and I think should be made. It is frustrating that despite the amount of tax that's paid and I guess I've been going on the rent, but as you think about the contribution to GDP, the cannabis delivers to Canada. Especially now and everyone in the government is trying to find a way, like what can we do to become more independent to gain economic strength. This is a real industry and a real contributor that people should lead into and it's an industry, it's not the sort of like a side project or idea. And so there's a lot of opportunities. There's a lot of uncaptured market that could be gained just in Canada alone, but also exporting communicating with other governments and trying to partner to open up channels. So the good news is there's a ton of opportunity. But I think also an advantage has been because it's been tough, it's forced us to really, really develop. So a license to bring some stuff.
Okay, folks. We are going to thank Bert and Mike, and you can ask questions on the tour of them as well, and we're going to bring up Lasse for his presentation. So just going to pull one of these chairs, and Lasse, turn it over to you.
Okay. Welcome, everyone. We will be talking about how genetics actually result into measurable returns in this presentation. I will give a short overview, a little bit about what we do and some of the techniques that we are using, talking a little bit about our generic portfolio, then heading into some of the demonstrated results that we have had over the last years. I'm Dr. Lasse Schulz, I'm the Senior Director of Flower Product Development and Agronomics for the Cronos Group. I'm a scientist by training. Education in pathology and toxicology. And I'm running an R&D and horticultural team across 3 countries. We have 4 main labs situated in state across GrowCo that you've seen on the bottom here. It's a purpose-built cannabis greenhouse. Bert and Mike has been talking about the importance of having it actually purpose-built. And we are working very closely together with them. So all the plans that you are seeing actually in the greenhouse have gone through my lab. So why are genetics important? If we are looking at adjacent industries like the horticultural industry, into the agriculture industry, the producers that are most successful in these industries have access to latest and greatest generics. Yield is a very important factor in genetics. Every single gram that a genetic produces more at the scale as we are growing, makes a huge economic impact. Also potency and quality are very, very important. Especially potency after the price, the biggest sales factor. Flower is also an international market that the spearhead. These are mostly flower markets. And that's why we want to make sure that the flower has as the quality, the right potencies for these markets. If you have also better flower quality, it drives also derivative products at the same time. The genetics program, we incepted in 2018. We are a team of about 16 employees. And we are carrying the know-how and the knowledge of the agriculture and horticultural sector with cutting edge science and historically, that has been working very well. We are focusing on our operating program on yield, potency, the aroma composition to differentiate ourselves to our existing portfolio, but then also from our competition and also flower size and also disease resistance, which yields then also more genetics, the disease resistance have a higher chance of yielding more. Over the years, we have produced more than 150,000 seeds. We screen more than 6,000 different genotypes, and we have also developed internal capacity to produce a pretty small than 20,000 tissue culture planted every year. Let's go over the process. We have a very differentiated platform for genetic led growth. We have -- we are conducting classical breeding where you're conducting crosses on that yield and have better attributes. We are also chemically profiling all of our genetics and the resulting flower. And we are going to very deep analysis, looking to trade inheritance and the like. We're also running all of our flower through sensory panels. Very, very important. Now we always keep the end consumer in mind. It's great if you have higher yields. But if the end consumer don't like it, you're sitting on a lot of flower that you cannot sell. Tissue cultures are a very important platform technology for many, many different perspectives. As I mentioned, every single mine that the 1 senior facility has come on through a difficult process, which is very, very important for us. We are also working on agronomics. So when we are sending genetics to GrowCo, they have been very thoroughly tested also on the agronomic side, so we can provide the growers with the knowledge, how this genetic grows so that the time of adoption, the learning is much more shorter. And of course, we are working also with our molecular techniques. We are looking at the DNA level of our genetics, really understanding what is doing what, how genes are interacting with 1 another. This is more on the biotech side. But overall, we have a much more holistic overview of for our product development. We have platform technologies that create a lot of synergies, and we have also very deep expertise within the team. But in the end, what matters is that we have a consumer preferred product that really makes a difference in the market. This is how the process looks like. On the very left here, we have the discovery phase where we are conducting across and we are screening out hundreds and hundreds of different genotypes to identify a small subsection of that which have attributes that we are more interested in a higher yielding, there's half a good cannaboid profile that have other interesting characteristics that might be more consumer relevant. Then we are starting to validate them. This is usually when we're also scaling up the numbers of the plants to be more representative of a commercial application. Then in the third phase, we are challenging these genetics with heat, with tests. We have assays with some of the leading institutions in the country where we are really understanding how these genetics are reacting if they are exposed to different environments that while we are in a controlled greenhouse environment, there are still some exposure to the elements. Some of us, winter can be different. And we are testing it so that we have consistency throughout the year. Then in the fourth state, we are testing them for consumer acceptance. So we have nonconsumption sensory panels where trained panels are testing these genetics in a blind test. And we are also doing that in consumption panels as well in downtown Toronto, where we have consumption sensory facility. The end results are genetics that are distinguished that have proven themselves out throughout the season. It increases our confidence that these are still to be successful before we launch, and it also lowers our risk. Overall, just a sliver, less than 1% of all the genetics that we are testing are making it to the market. So it's very, very rigorous testing that we are undergoing. Once we have identified these genetics, we need to propagate them and send them to GrowCo. The current standard of propagation is depicted here when we have a genetic, taking [ CapEx ] from the genetics and then we are in growing commercial plans. And in the vegetative phase, we are taking a subsection of that, and we are continuing the cycle. This process is very prone to diseases and also genetic drift and requires a lot of space. What we are doing different, we are propagating completely from tissue culture. So what is tissue culture? Tissue culture is a technique, comes more from the biotech side where we are taking plant materials, and we are growing them in sterile environments. When we are doing that, we're also stripping out all the diseases, all the viruses or the thyroids and also a lot of that bio burden from the plants that are inherently accumulating in this cycle. And it creates a lot of benefits. We have an increased plant rigor. We have not seen on tests and also less labor, less pesticides that we need to apply. And it's also very hard to scale. And that creates that technological moat around our company that gives us also a competitive advantage. This is how it looks like in practice. This is part of a tissue culture lab in Stayner. And here is an example of a green crack that just hasn't propagated from a cutting. And this is propagated from tissue culture. They are the same age. So you can really see how much faster plants grow when they're going through the tissue culture process. Let's look at our genetics portfolio. So everything that we are doing, approaching the development of genetics from a scientific lens as well, while having a consumer in mind, we have situation in the markets that we operate in, where we are competing against hundreds and hundreds of different genetics around the world. Our genetics are consistently ranked very, very high in sales. On the top left, we have our Wedding Cake and GMO. They are for quite a while, #1 and #2 in the Israeli market. And also, our other genetics are faring very well in every market that we are entering. So let's talk a little bit about some of the results that we have had in the past years. We talked about how important yield is when you're growing at scale. On the left side, you are seeing the yield per plant that I indexed to 2022 and how we have improved yields over the years. It's a very, very important metric, an economic metric that cannot be overstated. On the right side, you're seeing the GrowCo per plant per year. So every year, we have increased the output of this facility, which has a significant economic impact. This graph shows the cannabinoid improvement over time. So every time when we're developing genetic, we are looking at yield, we are looking at cannabinoid content and other metrics as well. But cannabinoid content, given that it has such a big impact on sales, has a lot of our attention. We are breeding specifically for this trait, and we have been improving almost every year. Now we have a record cannabinoid content this year and much more to come in the future. So taking all that together, how does it actually look like in terms of net revenue for our company. We have had very good trajectory of flower products sold. This is the quarterly net revenue graph where we had a record quarter just in 2Q 2026 of USD 39.2 million. Our market position of our flower product is very strong as well. In Israel, we have 10 consecutive quarters of record -- quarterly net revenue and the #1 market share for quite some time. In Canada, we are [indiscernible] Spinach, #1 in 2024. Then we run into supply front that we could actually not produce as much as we wanted to. So we dropped a little bit in ranking, but we are slowly recovering, especially with Phase II being online now. On the international side, without Israel, we are also increasing our footprint. These are all flower markets or predominantly flower markets. In the first half of 2024, we had $1 million net revenue. And in this year, in the first half, we increased at 15x to $150 million in revenue. And with that, I'm at the end of my presentation and open the floor up to any questions you might have.
Onto genetics. Do you work with what I call a mature terminology, pure like -- like a land rate? You go back to that to get -- because genetics now are -- there are a lot of takes like all over the place. And what the other tens -- maybe. So how do you do your initial trading?
So we have like a very, very large portfolio of different genetics. What we are having in the market are genetics that have gone through a very, very rigorous selection, but that does not mean that we don't have land races and other genetics with very important consumer trades in our portfolio that we cannot then cross into our elite lines. So we are very aware of genetics that we have very important traits like disease resistance that we can always bring in to our commercial lines when we need to.
So you crush something, then you get 1,000 different plants?
If the crosscurrents are statically very diverse, we call tepozygosity, then the progeny of it will be very diverse as well. This is why we are needing to conduct these heavy selections.
Okay. So yes, there's -- material is less diverse in itself?
That's correct, yes. So we can see that on a DNA level, how genetically diverse they actually are. And that results then also in a more or less diverse generation after that when we conduct a cross.
Question. So back to the genetic breeding and treatment pathways. Apologies if I missed the 1 slide, but how long does the process take? And how many times have repeated?
So the process repeats itself constantly. As we get better genetics that we have been also pushing to the market, we are usually where we have already conducted many crosses business genetic before we came to market. This process takes anywhere between 1 to 2 years at least. That's a very long process, but we also want to have the assurance that we have not gone through that very rigorous testing, have grown the plant throughout the seasons as well so that we are lowering the risk before we are moving into market.
Yes. I think even over control of greenhouses, you're still going to have variations between the different seasons. So understanding how that works before you fully scale up, a lot of it is -- we were starting today, it wouldn't be 1 or 2 years, but I think from a 4-year lead time of all the foundational work, reading, you kind of have some predictability of what different strains are when you cross them and then maybe talk about phenotyping that's probably relevant for that, too.
Yes. It's important in red that we have a long pipeline in place. So the phenotyping part also across the season is a very important part, like the validation part is probably the part that takes the longest. But again, we don't want to skip that. If you are developing genetics that suddenly identify that consumers actually don't like, but we have already scaled it up and put everything into the pipeline to commercialize it, we are getting in trouble. So we want to make sure that we lower the risk as much as possible and that we have all the consumer attributes consistent throughout the growing season so that the consumer are getting always the same product. Whether it hasn't grown in summer or in the winter, is asked to be always the exact same.
Yes. One of the things that is helpful here also in the context of how Canada demand works because you don't have -- like for most of the markets, and the ability to just kind of when you want to launch something launch it, you have the listing date, so you can only launch something twice a year. You have to really plan to make sure it's going to be successful and make sure that you can kind of fill whatever that quantity is. And switching genetics can be an issue. So a lot of what you haven't seen us launch, and it's like, well, do we want to take something that performs in the low-end market off the market? And do we have enough capacity to sort of switch? So it's -- it does make it so when we launch a new genetic because of just the Canadian model, you're going pretty big, and you want to make sure it's success when you launch.
I think in Canada, we've seen that the consumer starts to graduate away from flower into other products. Are you finding that consumers in Europe have different preferences relative to the North American cannabis consumer? And then, would you be trying other genetics in Europe given that sort of launch cycle time line restrictions you have here?
I think the -- honestly, the biggest -- and I would -- from a preference perspective, that would include Israel with Europe. I think the biggest difference is when you think about pre-rolls versus flower and you see that trend in North America, there is -- consumers just prefer relative to the U.S., mixing cannabis and tobacco, which is why I think flowers will likely have a longer share. And that's not something that you really see as much here. And maybe it was like price compression that will change, but it's just the way the product is used. Or even cigarettes overall versus people rolling their own, it's just more a part of the culture there. I think another thing is what's going to happen with the medical market, it's harder to do pre-rolls. So if you're looking at a mature adult-use market, I think the biggest difference will be pre-roll share because of that. And then sometimes you can see things like it's not just consuming preference, how does tax policy effects? I know it's going exactly the question, but if you think about like California versus Canada or like general in the U.S. It's not necessarily a different consumer preference. If you pricing for an infused preroll versus call it base like just a pure flower pre-roll, because of the way excise tax works, it's going to make it actually more expensive on a organic basis for an infused pre-roll, which would make the value prop to the consumer relative to other markets be higher for base flower. And that's where the difference if you go to California, like almost everything has been used pre-roll. And so it's not necessarily consumer preference, but if you were to then discount infuse pre-rolls here, you probably see a huge shift on a relative basis. So a lot of that just comes down to regulatory structure. And I think the biggest difference is how people mix cannabis and tobacco in Europe.
The consumers are also different in the different jurisdictions that we are operating in. So the Israeli consumer is a little bit more at its cost sophisticated. They are looking at different aroma profiles much more than they would be in Canada, for example. And we're also tailoring our genetics for these markets and also for the going within these environments as well.
I know it's a very simplistic question, but I think -- we hear several large Canadian please talk about the genetics program. And so that for me as a layman, it's hard to differentiate, right? It sounds like it's something that you have to have. So it is valuable, but is it so unique? I'm sure there is something unique here. But can you explain that? Because sometimes on the surface, I don't want to -- again, I don't want to generalize, but it's like many people who got their genetic. And so again, outside, how do we achieve? And then the second part of your question, is there a market for genetics. I may have to also supply people. Do you buy the mic from others? Or is it all proprietized and all listing?
If you answer the first part of your question, yes, I mean, life sometimes talking about like a genetics program. But if you are like really looking at what that actually means, most licensed producers are buying seeds from someone and the Germany in the end looking whether there is something good coming out of it, but they don't have the scientific lens. They don't have also that long foresight to build an actual program. What I've shown you here is this has been years and years in the making. This is not something that you can just start from scratch, you need significant resources and also the expertise to pull something like that off. In the industry right now, there's not even a handful of groups that I can name that get you close to what we do.
I think there's -- I mean there's obviously things that we do to differentiate. The tough thing about IP and R&D is like giving the details kind of works against you. But I think anyone who talk to who tell you that they're like great at cultivation, it's hard to show you genetics outside of results, right? And so you can just see the end market performance overall how we do. And at this point, if we had unlimited capacity, I think you'd see us have a way different numbers than in markets. We never have a problem with selling the product. It will be easy to me tell you we think we have like the best greenhouse to be able to see it. And it's -- it can some ways be subjective. If there was an easy way to explain it. But it comes down in a mix of yield quality. And it's ultimately, if you think the results we've had on a comparative basis has been successful, and that's due to a mix of the genetic program and cultivation. And if we are less successful, that's a mix of genetic cultivation.
Yes. In terms of the second part of the question, do you buy anything from outside? Do you supply third parties are still on and used in term?
I would say more than 99% of all the genetics that we have are internal. Leases is not -- that we are not testing external genetics, every good genetics program, if you look at adjacent industries. We want also to have external germplasm coming into the program so that we are not getting genetically also bottomed. That's always like a big danger in like every genetics program. If you release that you are bottlenecking yourself. So we have the interest to have also external genetics coming in.
I'll answer the third party. On sales, that's something that -- there's a few things that we won't have in place before it makes sense. I think in Canada, it's like because on the cultivation side, it's consolidated enough, and there's like 3 years rights are complicated. And then you you do get into a question of are you gaining more than you're losing by basically increasing someone else's yield so much of their quality, and does that affect you? So it's probably more of a -- when other markets or bigger markets open up, and it's likely more with -- not to jump ahead or give more details of reading, I think you talk for like stable being important. But it's likely something where you're doing more on seed sales than it would be in tissue culture where you need to be able to kind of directly serve, but that's likely in future markets. Or something that's a contract or we're able to control the distribution of our own genetics because it's just kind of key to the brand.
So when you're operating in a pen of tile larger players, do you want to share to a -- is that what that tell us?
Today, yes. And I think that it's -- depending on market structure, that can change. But I think today, it hasn't made sense for us. The revenue from selling genetics versus sort of what the trade-offs are, it doesn't really feel like it's there, but it is a tool to use for potential contract growth in other markets to be able to -- but like today, you'll see that we're pretty happy with the arrangement we have for cultivation. But it is look, Netherlands acquisition or it's a closed market for us, they want to take the genetics, send them over and then actually have the same genetics being grown there. We can transfer that advantage for this idea for less products. So it makes us -- it's part is almost like a reverse. It's -- you go and you buy something, and then, all right, we can bring our genetics the same way we can bring our edibles when you bring our base generic.
What happened in the beginning of the industry. You had to go by genetic temper?
Now actually -- having -- fun story. So PEACE NATURALS is the first commercial license issued under MMPR. This is me going back a long time, but it was 1 of the reasons it was such a sought-after license. And initially, the whole program was set up, and I think there was about 3,000 applicants, something like that. And I think it was maybe first, 8, the stock are 8 or is a big bottle can license. And what the rule was it was like if you want you're applying for a license and you're in the illicit market and you want to be able to get have genetics and things are open, you need to send it to 1 of the LPs. The original owner of PEACE NATURALS I think was viewed as very trusted.
On the grade side of things?
He was very trusted by the legacy market. And so a lot of genetics were sent there, but at a certain point, like all those seeds in the seed bank, if you didn't get a license, you just abandoned it, gave up and a lot of people...
Compared -- what's different?
Everything. It's very different. Said, we were like -- we were growing in a -- when I started, we were going a 100-year old horse barns. And they are of us living in a house and [ Saga ], and we had like matcher spread everywhere and whiteboards. And we had like a -- there was 1 time when we were working on -- I'm trying to -- we had the first GMP inspection. There was -- were like. I think we're done. They really close, and a raccoon busted through the walls. A lot has changed.
Can you talk about the growing experience?
Okay. But back to end up happening was we ended up basically getting 20,000 seeds into a seed bank as a head start because people didn't get the licenses. It was really hard to get a license early. You'd have public companies that were valued at over $100 million with no license and a trade based off of like, oh, we're getting close Friday. Health care on my maybe announce when they get a license. And they can gain $10 million, $20 million in market cap. It was really hard to get a little now. It's like you have a license, like sorry, that you just got it.
Still the big building hares still there. It's not as much now. Is it is like it 20% of the market?
It depends kind of who you ask. I mean we don't really focus that much on what the known like it's a competitor.
Buy back here growers to.
Yes, it's probably different like I think that for us, we have -- part of why we aren't like the value like the cheapest tiers going to be hard to be cost competitive, but for us, it's focusing on innovation. And there are products that you're not getting in there, but I think it's -- like I would maybe focus on it more if we were -- we have all this capacity we can't sell were having problems. But I think if you focus on a consumer and you understand they have options, whether it's the -- whether it's from someone growing in their backyard, whether it's something growing down the street or someone in another province. There's always a new multiple options that we just focus on getting the best possible experience. And that we -- they don't have the taxes or labor laws. We have the ability to do R&D and be out in the open and not worry about getting shut down. So there's pros and cons, and I think it's worked out well for us. It obviously could be -- it could be a more favorable overall market. But that's -- it's better for us to just focus on how we give them the best possible product.
I think that's a great -- maybe a great -- so sorry, I don't want to take you off if you have a question.
Sorry. I was just going to ask, what's the lifetime or the accretion you in the market in terms of how long you generate sales versus some of your most successful?
Climate...
I mean I don't think we're at that point at this.
Yes. We've been -- I mean, there are sometimes smaller strains like for other markets. I think it's like there's a strain that may not work in Canada, it may work in another market. Although I do -- I mean I probably repeat this, my favorite genetic ever that's what I've learned like GMO for his and it's been -- Wedding Cake is so strong in Israel. The top ones are pretty sticky. I think the ones that aren't as popular first, we were launching if we have a portfolio of 30 genetics, that's where you see people that are saying like new news is all the matters, keep launching, keep launching, keep launching. But if you take a pretty focused approach, you find some people like, people are pretty loyal to it.
That's a great segue to talk about brands and our [Audio Gap]
I get to hear about these projects every week and every day. And it's just wild to me because we amount of time I've been doing this, and we've been doing this just it's exciting because for so long, we've been at it, there's still so much opportunity to online really renovating a year. So I'm Jeff Jacobson, I'm the Chief Growth Officer at Cronos Group. I have been doing this for quite a while. I started in the legal cannabis industry in 2012, and I was 1 of the cofounders of PEACE NATURALS. So the site that is not the GrowCo site of about 3, 4 hours from here. And we were rolled up into Cronos Group at about 2016. I oversee our sales, marketing and operations by business unit, really covers everywhere except for Israel, that includes all of our brands and our operations outside of GrowCo. Our brands, our operations and all of our sales for Canada, for Europe or Australia. So everywhere that we're doing business, again, with the exception of Israel, where I have a counterpart market. My team works in tremendous partnership with the team at GrowCo here. So all planning together, looking at all of the global demand and how we can work together to ensure that we meet that demand. And then what you're not going to see today is that all the product that comes out of here in a [ balkstate ] goes to our other factory that I will perceive where we're doing manufacturing. And manufacturing is into the vapes, the edibles, the pre-rolls. And it's a centralized hub for more finished goods distribution, both for the domestic market and the international market. So you've got to see the a bit of insight into the really far upstream. And I know everybody is really excited. I'm excited for you to go and see how all of that comes to life. So you take all of this knowledge, experience and time and you try to cram it into a few slides. So I'll do the same, so you can get out there. But between the incredible work that Lasse's team does and the experience, just the general expertise, the execution of GrowCo, I get to benefit from that by bringing all of those great things to life in the markets that we're in, in different products. So I'm going to go over our -- like a high level of our brand strategy. I'm going to talk to you about how we think about insights and our audiences of interest. And then I will give you a couple of case studies on more of our recent successes. So I'll start with our brand portfolio. We've seen a few different approaches to brand building, and I'm going to specifically focus on the Canadian market because that's where we are today. Thanks for coming here. [Audio Gap] one another, really going after multiple or oftentimes overlapping audiences of interest, trying to see in real time how consumers do not just react to those brands, but ultimately, what you end up seeing is that when you do that, it's always the 80/20 rule. You'll have a brand or 2 that are driving most of your volume and the rest of it is something that you're just keeping alive. We did not take that approach. You hear a lot of people say purpose and focus, and I believe that is 1 of our biggest differentiators from our competitive set really in everything that we do. I believe and we believe in a philosophy of hero brands. And so what I mean by that as we spend, and I'll talk a lot about it, a tremendous amount of time trying to understand who the audience is. If my job and my team's job is to bring great products to market, I need to know my audience is, I need to know what that audience believes great products to be. So we talk about brand positioning on this slide. And everything here, like I said is very purposeful. Mainstream to me is really about the audience of interest. And in this context, it's the largest audience, be it that kind of mainstream. And I'll talk about what that means to me, but the largest opportunity. So you'll see a couple of brands there, and then I'll speak to how we supplement that and look at that additional, call it, incremental opportunities, trying our best to limit cannibalization. So I think that's the key for me. So Spinach is our mainstream brand in the adult-use markets you hear about today. That is our hero brand within an adult use. So it's in Canada only today. We're #2 overall, and I'll show you some of those stats later in terms of retail sales. So there's a point in time when we were #1. I believe, I'd like to believe that we will get back there. But we're #2 today. But within that, we're #1 in multiple categories. So this brand is really about great products targeted to this large -- the largest size of price or largest opportunity at fair pricing, right? But it is a consistently good product at a great price. Lord Jones is a brand that we use to complement that, and we do this in Lord Jones in Canada as well as Israel, where we see that there are consumers or audiences who are looking for an elevated product with elevated input and elevated experiences. That doesn't always mean that it's priced dramatically higher or anything like that would in premium, but we're putting more elevated inputs into these products, different forms of extraction, things like that, that go into the blends and the formulations. Mainstream for PEACE NATURALS, this is our medical proposition. So we tried really hard not to cross or blur the lines between the markets we're in. We're in medical markets, we're in out markets. PEACE NATURALS was the first medical brand in Canada. So that -- I call it the PEACE NATURALS site. That was the name on the license. Today, it's a brand for us. But that was Canada's very first medical brand when the legislation changed in 2013. So it has a nice heritage story when we take it to other parts of the world. But that brand for us in those medical markets we treat similarly in terms of positioning to how we think about Spinach when you look at the largest opportunity in terms of audience of interest, and we try to target everything we do in that brand to the audience. LIT is a brand that today, you'll see only sell flower in Israel, Germany is also in the U.K. And for there, we know that there's an audience of interest that wants a more affordable product maybe with a bit of compromise on quality or size or things like that. Typically for us, we -- because of the expertise here and the consistency we output, we're able to deliver a great quality product, but we know there's this audience that wants something more affordable. So you're going to hear me talk a lot about insights. I sometimes joke, but in a very positive meaning a way that we have a complementary business that is consumer research and insights. I believe this is 1 of the biggest differentiators for our company. I've been doing this a long time. I know all or most of our competitors. We put a tremendous amount of focus and resourcing into understanding our audiences. And then we think about them, again specifically Canadian brands and positioning how we understand those audiences and how our brands make sense to those audiences. So when recreational started in 2018 or don't you started, we had an internal insights team and it's spread across my organization and marketing as well as our R&D and product development teams. We also worked with some leading external market research groups. This is early on. And we really wanted to understand who the audiences are. Everybody loves music, but people like different types of music. So we developed a questionnaire, and we've spent a ton of time in stores running focus groups. The questionnaire covered things like lifestyle, current cannabis consumption patterns, habits, products people like. And what we realized in doing that is that you start to really see a pattern, and you could see the different consumers fit with into different segments of the market. And so this is 1 view of how we think about who our different audiences could be. So for example, status some on withdrawal of them, but status seeking news, you can see -- and then -- and we also take all of that data and the results and the question here is we get extrapolated out to what we that would be our largest cans a percent of the market. Status seating news, young, affluent, like to go house, that's definitely a core brand based on its positioning, its visual identity. You have other groups like ethical home bodies who are an older demographic who consume at home. You think about extrovert achievers who don't necessarily love going on all the time and doing that. So we are trying to understand exactly where our audience is, what percent of the market, we believe those audiences make up. And then when I talked earlier about our brand positioning and trying not to -- trying to position the identity of the brands, but as well the portfolios within those brands within [indiscernible]. So I'll give you a very high level and this will build into sort of where we play in the different category the market. So this is the total market in Canada just in terms of percent retail sales and what categories are making up the overall market in Canada. Flower historically was the largest category in the market. I think as affordability came to pre-rolls, convenience and innovation came into pre-rolls, we started to see that shift maybe 1, 2 years ago to now the point where pre-rolls overall is a bigger 1 in terms of retail sales. But regardless, pre rolls and flower input made up a significant portion of the market. Next, edibles. Concentrates continue to be really small in Canada. Things like shatters, waxes, like true to form concentrates and others will be tinctures, accessories and things like that. So for us, when we're thinking about positioning our brands with the greatest -- with the audiences of interest to where we want to be successful when we see the opportunity, we do the same thing with the categories. So talking about our specific performance, we've really focused on those largest opportunities. Flower is foundational for us. We've been doing it the longest. Obviously, we hit our stride between Lasse's organization and our partnership with GrowCo to get to the success that we have had. We were #1 for quite a while in flower. But as mentioned, we ran into supply constraints. We are continuing to see our share climb back up. And we're #4, #3 now. And I think we'll continue to see that if we -- as we continue to ramp. Edibles was the first area of focus for us when we talk about innovation. We have a baseline of products in every category, but then we want to spend the time. You'll see at the top line of our real mantra is we want to be better. We don't need to be first. So creating a baseline done presence in stores and we're on shelves, that was like how do we really lean into categories. The government took those out, and we went right back up. So we've really been in this kind of leadership position in the edibles category with SOURZ by Spinach since its inception. From edibles, we then focus on our vape business, the introduction of things like liquid diamonds, new hardware, hardware performance. We'll talk a bit about that. The introduction of PUFFERZ, that's the other case that I'll get into is 1 of our more recent successes. But with the innovation and renovation we've done in vapes, we've achieved the #1 share position in that category. And pre-rolls, so start flower foundation, plus work on edibles where we knew we could truly innovate and differentiate the formulation than to vapes and now on to pre-rolls. So our trend in the pre-roll category continues to grow as we renovate our existing products, sort of applying the same playbook that I'll get into and how we think about bringing great products to life. So flowing right into that. There's a couple of things that we think about in our development journey. So the first is understanding what that audience of interest is. Once we have -- once we believe that we have a handle on that and we have a brand portfolio that positions within that, we want to understand what drives purchase intent. So we spend a ton of time in stores at retail, talking with not just customers but actual consumers on their shopping journey from the point of entry to a store, all the way to the point of purchase, listening, asking questions and trying to understand what they're buying and why. And what we will be doing that, and this may not be that much of a surprise. But this is sort of the pyramid of the purchase intent. So people are looking for cost-effective products. And I want to say I don't believe that, that always means it's the lowest price. I don't think that that's what we're saying. I think that it's affordability at the tier of quality that the consumer is looking to purchase effect is incredibly important is -- I'm looking for a sort of effect and I feel it, I think, is critical to the decision. Always flavor. So you can say flavor, aroma for strains, always flavor. It comes up in every discussion we have with every customer, with every consumer. So it's a key point of interest for us in consideration and development. And quality, right? Consistently, like people fly something they like, they want to get it all the time. To me, if I go back to that #1 item, that's the intersection of these 3. If you can figure out the harmony between these 3 tiers, that's where people are looking to say, okay, well, you've covered me in this area. I just want to pay a fair price for that product. So say it's not always kind of get the lowest-priced product. It's a combination of these things and where they intersect. So once we feel that we have a handle on the purchase intent, now we go to the next layer, which is, all right, what's the development journey for our product. So similar to last slides, I'm going to try and take a tremendous amount of time and knowledge and work and cram it into this 1 slide. But hopefully, you could appreciate there is a ton of detail and granularity that goes into every single element of what's on the screen. But generally speaking, our approach to bringing new innovation to the market starts always with exploratory research. So again, I'll get into some examples. If we think about SOURZ by Spinach, we have, as I mentioned, a sensory space in downtown Toronto. It's just a space that we use in the city center where we can bring in consumers constantly. I would say that there isn't a week that goes by that we don't have some level of research being conducted in these sensory spaces. It is just, again, such an area of focus and differentiation for us. So for something like edibles or vapes or even flower, we'll start by bringing in every product we can get our hands on in the general market. So we think about edibles, we were bringing in competitor products. For gummies, we're bringing in confection, general confection non-cannabis products, and we are bringing in rounds and rounds of focus groups to try to see what people gravitate towards and asking a lot of questions, what drives your interest in that specific item. And we learned things like shape and color and I'll get into how that led to our SOURZ product. But we are trying to identify just in the early stage what people are gravitating towards. We learned -- and really, these buckets will apply upstream or things here. But again, flavor texture. So we started to ask questions in the exploratory, which flavors -- we can see which flavors people are gravitating towards things like Berry. People seem to really love no matter what category you're in. So we started to map out all the different flavors that people were talking about. And then we started to identify, based on the number of individuals like a certain profile of flavor these sort of primary flavors and then secondary and tertiary flavors. So what we have is what we call a turf analysis that lays out a mapping sort of desired flavors across different categories of product. And then we could position the secondary and tertiary where we believe it's incremental. So what's your baseline flavor lined up for that category, and then where do you think you can find incrementality. And so that's where the exploratory research will lead us into delivering on that consumer need. Then from there, we'll get into things like concept testing. So think about edibles again. We learned, like I said, color, shape, size were really important to people. So then we started the prototype. And we started to bring different shapes, different molds for our edibles. We looked at different colors, vibrant, less vibrants. Whatever it was, and we brought those out and we started to get results from consumers again, just looking at what they gravitate towards. And then once we believe we have a concept that wins, then we're going into quite literally a simulated shelf shop. So we're actually setting up our space to look like a store. Things are unmarked, unbranded and we have people come in and we again, I'll keep saying it, but where they gravitate to in those -- in that environment. And then from there, are we market ready. So when we deploy this pathway for our products, it is pretty well the same amount of the category with some nuances, but we're leaning in to understand the flavors and textures. We're leaning into the visual appeal. Same thing hardware, what people like, colored shapes. And then performance is incredibly important, like I said, effects. Is the product stable? Is it -- what's the manufacturabilities? Can you automate it? So this is not necessarily something novel, but I think it's unique to our company. And I think that we spend a tremendous amount of time compared to our peer groups doing this type of work. And I think that, that leads to a lot of our successes. So I'll get into 2 case studies for you. SOURZ by Spinach probably are 1 of our greatest successes to date. I'm sure we'll have many, many more. But through all of that journey of developments, it let us this product. We learned that unique shapes were incredibly appealing to people. So then we -- after exploration, what kind of shapes can we do. We landed on our S with an embossed inner, and people really loved it. We knew color was critically important. We also identified that nobody in the market was doing this dual color, dual flavor concept. So that allowed us to really lean into the insight and deliver it twice. So we were able to come up with not just -- you need colors on each side of the gummy, but also unique flavors. So we hit those 2 attributes with this product. And then flavor masking was incredibly important in the edibles category. And for this audience of interest is mainstream audience, people that don't want to taste cannabis. The way that we do that is not 1 magic ingredient. It is really a combination of multiple approaches. So we're leaning into to try to complement certain flavors that are natural in the cannabis extract and then marrying that with how we can mask and cover the things that we find are not desirable. So it's not 1 ingredient or 1 process that does the masking, it's a combination of things that we've developed, including how we do our sugar on the outside. So we learned that, that is very important. So again, when you -- almost through everything here, but when you take that development pathway in that journey to really understand your audience and what they're looking for, it led us to SOURZ by Spinach. And then how do we bring that concept to life. This is again something that's reasonably consistent amount of the category for us. We really work with our customers in terms of how can we reach that audience. We do -- the majority of our work is done in store. That's where the purchase decisions make, plus regulations don't allow us to do anything we may traditionally do in out-of-home marketing. But at the end of the day, that store experience is the blood tender. These are the interactions that drive the sale. So we want to understand the path to purchase, like I said, from the moment they walk in the door to the point of sale, the actual transaction. We want to make sure that we're present along the way. So it's a combination of in-store displays, education with bond tenders, critical. We do a lot of it, tender events and things like that, plus in-store. We are to store takeovers. We're actually demoing. For SOURZ, we had squishy versions, but not actual edible that people could touch and feel and put in their hand and that led them to the counter to purchase. And then we do a little bit of out of the store work, which is mostly on social media and digital. Since the launch of SOURZ, I mentioned, I think we're just incredibly proud of the successes that we had that we've been able to maintain. You can see that since launch in 2021, it very quickly climbed to be the leading edible. So we're #1 in this category for 8 consecutive quarters, as I mentioned, we hold over 20% market share. We have a number of SKUs in top 15, even in the top 10. So we're just incredibly proud of this product line. Now we continue to innovate within it, multi-packs, larger pack sizes are coming to the Canadian market. So that's something that we are -- that we're in and that we're continuing to develop. And we're also continuously developing new flavors and doing limited time offer programs to see if there are new flavors that people like they may perform better than other flavors. So constantly iterating and innovating with the category even this leadership position. So the next 1 that I'll touch on is PUFFERZ. This is our newest success. This was our first entry into the all-in-one category in Canada or subcategory. Originally, there wasn't much interest in the all-in-one with our provincial customers in Canada because -- and in their defense, there wasn't that much brand equity established at that point. Are people really going to buy into things like pods and things like all in one? The [ 510 ] cartridges have always been a baseline because people can buy multiple cartridges with 1 battery and switch them around. But a couple of years ago, the interest started to grow into getting into disposables and a couple of competitors enter. So for us, we wanted to take that same playbook and apply it to the main category. So we're going right back to that exploratory research. We bought every device when we got our hands on of what was currently in the market, reached out to vendors overseas. We brought hundreds of devices into rooms, and we had multiple rounds of people doing the same thing, right? Gravitating towards. You have stick style, Tom style, you have all kinds of form factors, all kinds of features like screens now. You can play games on these devices. And it's like what really is -- what are people really looking for. And we learned a lot, right? And so 1 of the things that came out of that for us was obviously, rounds of concepts and prototyping, but we were looking at everything from the curvature, the feel in your hands, the sharpness of edges, like every detail to the millimeter of the size of this device was considered. So it's completely custom, including things like the size of the window, and then getting into features, again, okay? I think a lot of that stuff is very given people what people really want is they just want to understand the battery life. There's oftentimes where if a cartridge is left sitting, you need to warm it up a little bit. So we introduced what we call a preheat or a boost feature that people can click on the side, and that will do a warm-up of the distillate, the extract inside. So we really leaned into that same pathway of development and implants to our PUFFERZ guys. So what you have is, again, amazing flavors we've used our turf analysis to determine which flavors to go to market with. And we have a lineup of flavors to come behind it. We introduced liquid diamonds into our formulation that is incredibly important in driving velocity for us. The puffer panel, which is a satisfying sensory kind of aspect of the device. I mean, you'll have some samples in your bag there, but you'll see the way it feels in your hand at other sites where we're doing what we call puff testing, we're putting devices on machines, we're replicating human consumption. We're trying to make sure that it doesn't club, that it doesn't earn all the way through after only 10 pulls on the device. But we want to know that this device will perform over time, right, and meet up to consumer expectations. And then with that, we bring the product to life in the very same way. So we had a ton of in-store displays and assets, a ton of education with stores and customers. With provincial boards as well, a lot of activations where we were letting consumers hold the devices, and then just layering on some of our digital and paid social. But again, I mean, this kind of culmination of all of these efforts. This product gets introduced and almost immediately new client to the region where we are over $20 million in retail sales, over 10% share of adjusted disposables category in multiple SKUs in the top 20 for all at once as well. So we feel very strongly that we have this development journey and pathway that helps really drive and lead to our success. I love this slide personally, and I think it speaks a lot to what I opened with around brand strategy. When you look at the competitive set, you can see that house of brands approach that I'm talking about. And then you can clearly see that there are only a handful of us, I mean, really, really us when you look at, again, you may have a few less buckets or boxes within the core. But for us, we're really to stand out where that approach to focusing on audience, not trying to do everything all at once, not needing to be first, but trying to be better has really resulted in Cronos being really the only LP that has a winning brand that's in every category. Not many other LPs can say to any of their brands, be it that we're #1 edible, #1 in vapes, top 3 in flower. Yes, it's just -- it's remarkable and I think it is a test to that strategy that we deployed. We are currently the #2 brand in Spinach by retail share, but growing at a faster rate at least last 4 weeks over last year's same period, growing at a faster rate than the #1. We've been in that spot before. So my goal is to get us back there. And then this slide always is something that I track very closely. I want to know that the output of all this resourcing and all this investment and all of this work, am I growing faster than the market. And what you can see based on the last 4-week period versus the same period a year ago, that in every category or major category that made up that pie, Cronos continues to grow at a rate faster than the category itself. And this is something that my team and I are incredibly proud of and we can't do without the efforts of everything that happens at the site that you're going to get to see shortly and everything that happens from our R&D base. So with that, I think we can open up to Q&A. And then get to.
Is it hard to volunteer for those research?
There's a sign-up sheet outside. I would say that it was difficult when we were trying to do it at that. There's some efficiency that could be in the. It's a bit too rural. So I'll tell you the answer -- the short answer is no, not now a really fun here. I get some of the comments. Yes. Please.
Rolls up until the right, obviously, was a good thing in this business. Separate ample distal #7 remains a drag, tracking very well. Is there a path to that being some of them you have in other categories, the top 3 products? Are there structural barriers there in terms of certain brands and certain players that just are and will continue to pre-rolls? Or is that something which is a credible part or whether it's top 5 or top 3, but maybe do you want to answer it?
You jump in about. Look, I certainly like to believe that we're going to make this thing a top 3 brand, if not a #1 brand when we can get there. But for us, it's really about just now that's our area of focus. We were at a baseline offering. Wasn't anything special, but we were in it. So we had some loyalty from some smaller segment of consumer group, but we chose to focus on edibles first and then vapes and now we're on to pre-roll. So what you're seeing that up into the right in our current performance is just that we started really leaning into it and playing it on this development pathway of a journey I mean about 1.5 years ago maybe. So the renovations we've done, we took existing products, we improved them. We improved the flavors and the roles of the inputs based on the work that Lasse last at the GrowCo team here. That certainly enables that category for us to have differentiation and strong consumer appeal. We have leaned into digital deal on those products. I think it's important if you look at what's in the market, you have really short pre-rolls, you have long pre-rolls. We focused on how do you do it consistently at scale. So I think for me, it's I don't believe that there's any 1 in any category today that we cannot achieve a greater position or greater market share for ourselves. I don't see anybody that has that strong of a foothold on the category. I think this is just us now putting our focus to it. And you're along to see that in the results as I think you are.
Yes.One thing also I should the way we think about it, it's probably different in a lot of years. It's not like you can have a -- obviously, he wants to have the biggest market share, but sometimes I put like restrictions on which is like we are not going to operate in an unsustainable way, to say like, hey, we have #1 market share. Like it doesn't -- that's not what the goal is. It's how do you have a better product, right value proposition to be sustainable. And then I think that what naturally happens is we try to pass product. And the best offer consumer, you end up being #1, but we want to do it by, okay, we're going to -- we're going to just do this and hope someone buys us like that was a build model that a lot of companies did just doesn't work long term. I think a lot of the work that we do when you talk about genetics, right, it's pretty foundational. So there's been a lot of steps you're seeing incremental before like -- you'll see a big commercial launch. And also please how much biomass do you have, right? Like that's been a bit of a sort of constraint on it. But no, I think it's an area that we have a lot of focus on. There's probably like 3 parts that really matter for it. One is obviously what's your input like base flower, the minerals for infusions and other things, and I think we understand. And the third is what's the actual methodology technique in understanding, is there a cloud wastepaper filter. And we -- there's other partners that turns where we have that like a good expertise and we can capital need stuff. So yes, a lot of the areas to pull from in the group, but the great thing about the genetics program unique insight it all sort of adds value to the platform kind of past.
For the breakdown of the consumer to now, I think those 2 that were head consumer is down up to about 28%. So you think about the 80-20, have you looked at those 2 heavy consumer demographic and seeing how much they're making up maybe in consumption or sales? And then second part to that question would be, what level of brand loyalty you're seeing post heavy consumer demographics? And is it greater than maybe the other ones? And how you look to address target?
Yes, sure. So the 2 that are the largest in that slide in the way we break down the data is the status seeking news and the tune-out [ tokers ], and that's who we sort of position as this mainstream bucket. These are sort of -- these are consumers who like I said before, want great products at fair prices. And we absolutely -- we refresh this data quite often, maybe not annually, but every couple of years. We go back out to see if this -- and we've also seen people adopt this model, even some of the provincial boards have something similar now in the way that they do their consumer segmentation. But we absolutely see that those groups continue to purchase greater volumes in the market, and that's why we identify that as our size of price opportunity for this brand is why we deploy that hero strategy specifically to those segments.
And I think it also helps us when we think about again the way to build it doesn't mean we're like we want to have a small number of brands forever as how do those brands fit together to make sure you really build out and focus on the brand before you look at another area. And so being able to have segmentation said, all right, we're not currently addressing -- when I was member curse homebody have like tested that way, like all 3 months. I think I want to test again. Before you go to your other segments, we really want to finish building the brand everywhere started and then keep innovating. It just goes back to you probably imagine, I say no a lot. That's why I say so half of my job in it sounds really interesting, but not now. We need to -- we keep winning here, keep winning here. And then when we go and add something, make sure that it's incremental that can as.
So it wouldn't be an Investor Day without some financial slides. So I was [indiscernible]. I need my co-host. And he needs coffee. Okay.
How is this in the fun section?
Now that you're back, it's going to be more fun. All right. I'm just going to level set and then I'll turn the mic to Mike. Okay. So very simplified, looking at our revenue trajectory. So last quarter, we had record revenue across Canada, Israel and our international markets. So up 58% year-over-year, and that's following 2025, where for the year, we were up 25% and 2024, where we were up 35%. So pretty tough comps. Our gross profit and gross margin trajectory. You'll see, again, we had a record gross margin, gross profit last quarter. And look, this is a big driver of our overall success between GrowCo consolidation, international markets and getting into product categories with higher margins like vapes, like the PUFFERZ. You're seeing kind of all the success pitch. Trend going in the opposite direction or OpEx. So we continue to be very disciplined on OpEx over the years. And now we're really focused like we know we need to grow our revenue on the OpEx, on the stable OpEx base. And all of that culminates into our EBITDA and cash flow generation. So since 1Q 2025, we have had positive adjusted EBITDA that's 6 straight quarters in a row of profitability. The growth is accelerating, not plateauing.
What is that?
EBITDA? Earnings before interest, taxes, depreciation amortization.
Net figure to that. Sorry.
Right. Okay. So while interest income, which isn't which is adjusted -- which isn't included in adjusted EBITDA as a tailwind to free cash flow, I would say even adjusting for this, our conversion of adjusted EBITDA to free cash flow is best-in-class, and Mike is going to talk about that in some of our other slides. And I think finally, like our $827 million of cash on the balance sheet, 0 debt, and that's all here to kind of fund growth, fund M&A, buybacks, all of that without dilution or leverage risk.
All right. So this is, I guess, for everyone -- everyone has a livestream, the long/short guide I just is in the background this will be like the slide pay attention to. Yes. So look, I think a big thing here that's important is how are we growing organically. That's kind of like the measure. And while there's M&A can be important, once you -- once you own something, are you growing that as well and what value you're getting out of it. So just because of how competitive Canada is and it's a relatively mature market, you do hear people often ask like what do you do outside of Canada because there's no growth in Canada. I mean for us, we feel like organically, there is growth. I think that's a really, really important metric for us. So we do have kind of blinded peers. But overall, I don't think anyone is really coming effective a declining share count that we aren't, increasing enterprise value by adding debt, that's a big thing for us. It's really like staying disciplined and being able to overall grow and grow on a per share basis. So you can see kind of against peers on the gross profit basis, we are doing extremely well and over 9x higher. And on a 3-year basis, that's certainly been accelerating with buybacks. I think that's extremely important. All right. Yes. Same thing here is not surprising gross profits growing. We're keeping our expenses stable that overall, EBITDA is growing on a per share basis as well. So I think while -- despite time when I'm always skeptical about adjusted EBITDA, this is a really good way to kind of look at it and see overall what that growth is. And we feel like a lot of the M&A in the space has not been accretive. And when we look at opportunities, and I think the analysts here every install the questions a while is like, what do you think are you going to buy? And we just look, can we do better organically or acquiring something. And to date, a lot of that especially in Canada has been organic. So here. All right. The reason I'm kept to go about adjusted EBITDA, it's great with that for the question about it. A lot of times to compete this. What really matters is are you actually turning that EBITDA or adjusted EBITDA into money. And if you take out the interest income because obviously, that's things like not only what we should be evaluated on, it's sort of nice to have. Still, what are we doing in terms of converting adjusted EBITDA into free cash flow is really important. So we aren't using these heavy adjustments. We are actually generating cash flow. It helps us be able to buy back shares and be able to invest in growth and continue looking for accretive opportunities. So I think this slide is really important because when people are comparing us to other companies, it can be difficult to just say, okay, here's the headline adjusted EBITDA number, but it really is not all created equal. There are a lot of things do and understand why or adjust that in other places. But we try to be as conservative in. And really the intent of the idea of smoothing it out, I think that's what's originally meant to private equity leverage, what leverage can tolerate. So that's something I think we're pretty confident that we aren't trying to do that. And I think with that, Rob, we can start questions into it.
Time check.
I do Mike, you called out your performance and growth in Canada relative to your peers. A lot of that is obviously recouping of the share loss in flower when you we're capacity constrained. If we were to normalize for you being back to where you were in flower with some of the growth initiatives you called out, do you think you can will still be growing faster than the market?
Yes. I think -- I mean, if you look at vapes, edibles we, depending on what you're looking at, like growing or maintaining share. And then pre-rolls is a big focus, a huge opportunity. So I think absolutely, and that's things specific to Canada. And then what we didn't show, Israel, but Europe, we also have a lot of growth ahead of us. So yes, I think obviously, that can make it dramatic, and it can lead to a little bit of a step change in growth, right. Like the flower for Canada, it doesn't mean overall the company has grown, but flower is dropping in Canada of servicing other markets, and you can have a pause where we need to go get more capacity. You need to find out the way to get more flower. And then once we have it, we'll see a big acceleration of growth again. So it might not be as smooth, but I think that the opportunity is still there.
Are you thinking about capital allocation in terms of the share buyback, organic growth and the M&A opportunities?
I would say it's really about like opportunistic, right? One doesn't -- we're in a very fortunate position. One isn't stopping us from doing the other. So if there is something that is an accretive that we're doing. So that -- it's a big function. And then on share buybacks, is -- volume is -- we're kind of restricted in how much we can do, but we still prioritize that.
Just an overall picture, I noticed some of the peers seem to be moving quite well, not all. But there's like 2, 3 big companies that are doing pretty well. I think you're 1 of them.
Fair to say, yes.
This facility is not EU GMP, certified quite yet, right? But can you give a time line or any gut guidance?
There's a European group that could answer that, but I don't want to put a time line on for them that where we've had planned delays. But I think that it's not something that we expect is going to affect the business or opportunities. I think it's something that's coming that we're working on, but I don't have the exact -- I think we've learned from the Netherlands that trying to like give contract or something else, then that would be related, but it's -- we just try and focus on, we think, long term where the business is. And I think those businesses short term certainly can be really profitable. But I think long term, it's probably not still going to be a major business. And so it's really just what will help us develop our brands, help us do well in a 5-, 10-year period. Israel and other ones wouldn't just be the facility. It could have that optionality. But yes, when we're thinking about third party, it's really more about how does it help our own sales versus a service provider does.
What would you say is the major risk to our growth to gate term?
Regulation always is. You never know which -- where things go, what opens, what doesn't, what can close. That's certainly -- that's the 1 that's always the answer like, but what is the -- is change outside of our own operations and we can control the regulatory. Yes, that's probably the number one, I give you like a laundry list of like 20 things that we worry about, but that's probably the driver. I think we're pretty resilient from a macro perspective. I know we get that a lot about -- the last few years, you've had a weakened consumer, you had a lot of competitiveness. And I think that category, if you're offering the right value proposition, that's something you can overcome. And so we've been pretty pleased with being able to navigate that. And so does the macro rest feel if you think of the pressure point for us.
I don't think I'll advance your thank here, but no about setting. Do you want to make any comments on [indiscernible] Cronos?
There -- I don't really know it. Like the -- I wish them both -- I hope they both get whatever they want out of it. I do want to take a side.
[indiscernible].
Never. Those Renaissance fairs, I think I did 1 when now is younger or that the balloon on your head with sword, and that was probably -- probably more of the most knighting I think I'll be doing for a while.
Okay. On that note, why don't we take a bathroom break, and then we're going to split up into 2 groups of 11, 12 for the door.
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