After we have seen former MedMen CEO Adam Bierman, and then High Tide CEO Raj Grover, now it’s the turn of Aphria’s CFO Carl Merton to hold an AMA on Reddit. This is a popular format on the social media platform, which recently has been all over the news because of the GameStop stocks ‘case’, that also other cannabis executives have taken advantage of in the past. AMA is an acronym and stands for Ask Me Anything: in this section, the public can directly ask questions to a person that is involved at the matter at hand. An AMA with Aphria is bound to be interesting, considering the recent merger with Tilray, that created another Goliath in the cannabis industry. It is no wonder that a lot of the questions revolved around the merger.
One user asked “When you shut down part of Aphria1 to grow clones for PIV and Diamond you provided a $/gram drag. What level of efficiency do you expect if Aphria supplies cultivation for Tilray sales? And can you express it in $/gram or % of GM?” To which Mr. Merton replied that they are still working through the level of efficiency. “As part of the transaction, we will be restarting some of the grow at Aphria One,” he said. “How much will depend on how quickly the transition plan moves and how quickly we can grow demand for Tilray’s brands.”
Another user asked Mr. Merton about the company’s old investments in Latin America and the Caribbean. Back in July, the company reported $47.9 million in impairment charges with regards to the international operations. After that, they halted the building of a Colombia-based cultivation facility. “Regarding the LATAM investment, I think objectively we can agree that it did not turn out as well as anticipated. Has the management team had any 'lesson learned' session on past investments that did not span out?” the user asked.
After Mr. Merton pointed out how the management team has taken every opportunity to learn, he remarked that in 2018, when those investments were made, the company had a different business strategy. “For us and many of our competitors, 2018 was about international expansion, it was about preparing for legalization in countries without a history of legal cannabis,” he said. “There were risks associated with legalization as well as the expectation that cash burns would be incurred prior to realizing on those investments. This is what many investors expected and demanded.” Things are working differently nowadays, he says. “We are looking for investments that have both significant topline growth and profitability trajectories, synergistic benefits with our brands, create (or enhance) distribution systems or allow us to leverage our existing footprint.”