Cronos Group Inc. (Cronos) operates as a global cannabinoid company.
The company is committed to building disruptive intellectual property by advancing cannabis research, technology and product development.
Strategy
Cronos seeks to create value for shareholders by focusing on four core strategic priorities, including growing a portfolio of iconic brands that responsibly elevate the consumer experience; developing a diversified global sales and distribution network; establishing an efficient g...
Cronos Group Inc. (Cronos) operates as a global cannabinoid company.
The company is committed to building disruptive intellectual property by advancing cannabis research, technology and product development.
Strategy
Cronos seeks to create value for shareholders by focusing on four core strategic priorities, including growing a portfolio of iconic brands that responsibly elevate the consumer experience; developing a diversified global sales and distribution network; establishing an efficient global supply chain; and creating and monetizing disruptive intellectual property.
Cronos is reporting through one consolidated segment, which includes operations in both Canada and Israel. In Canada, Cronos operates two wholly owned license holders under the Cannabis Act (Canada) (the Cannabis Act), Peace Naturals Project Inc. (Peace Naturals), which has production facilities near Stayner, Ontario, and Thanos Holdings Ltd., known as Cronos Fermentation (Cronos Fermentation), which has a production facility in Winnipeg, Manitoba. In November 2023, Cronos announced Peace Naturals had entered into an agreement for the sale and leaseback of the Peace Naturals Campus. In August 2023, Cronos announced the planned wind-down of Cronos Fermentation, and has listed the facility for sale. In Israel, the company operates under the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in the Israeli medical market.
Operations and Investments
Peace Naturals Campus / Cronos GrowCo
The production facilities at the Peace Naturals Campus and the production facilities of Cronos GrowCo are licensed by Health Canada under the Cannabis Act to engage in the cultivation, processing, distribution and sale of dried flower, cannabis seeds, cannabis plants, cannabis extracts, cannabis topicals and cannabis edibles, among other prescribed activities.
Cronos Fermentation
The production facility at Cronos Fermentation is licensed by Health Canada under the Cannabis Act to engage in the processing and distribution and sale of dried flower, cannabis seeds, and cannabis plants, among other prescribed activities, which includes the production of cultured cannabinoids. The facility also holds a license for Analytical Testing under the Cannabis Regulations. As noted above, in August 2023, Cronos announced the planned wind-down of Cronos Fermentation and has listed the facility for sale.
Israel
In Israel, the company operates under the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in the Israeli medical market.
Operations Outside of Canada and Israel
Cronos anticipates that it will continue expanding in the geographic markets outside of Canada and Israel in which the company participates and entering new geographic markets. By leveraging operational, manufacturing and regulatory expertise, quality standards and procedures and intellectual property, the company is well-positioned to effectively access these markets. Subject to applicable regulatory approvals, strategic international business opportunities pursued by the company could include:
Production, distribution, sales and marketing in jurisdictions that have passed legislation to legalize the production, distribution and possession of cannabis products at all relevant levels of government; and
The export of cannabis products to markets that permit the import of such products.
The company distributes PEACE NATURALS branded products along with other white-labeled cannabis products in the German medical market through its strategic partnership with Cansativa, a leading German cannabis company. In Australia, the company distributes cannabis products through a distribution relationship with Vitura (formerly known as Cronos Australia Limited).
The company seeks to conduct business only in jurisdictions where it is legal to do so and where such operations remain compliant with its listing obligations with the TSX and Nasdaq.
Joint Ventures/Strategic Investments
The company has established two strategic joint ventures in Canada and Israel. Additionally, the company holds approximately 9.6% of the issued capital of Vitura Health Limited (Vitura), which it accounts for as equity securities with a readily determinable fair value, and approximately 13.7% of the issued capital of NatuEra S.à.r.l. (Natuera), which it accounts for as equity securities without a readily determinable fair value, as of December 31, 2023.
Strategic Investment in PharmaCann, Inc. (PharmaCann)
As of December 31, 2023, the company's ownership percentage in PharmaCann on a fully diluted basis was approximately 5.9%.
Brand Portfolio
The company is committed to building a portfolio of iconic brands that responsibly elevate the consumer experience.
In Canada, the company sells a variety of cannabis products through wholesale channels under both its core adult-use brands, Spinach and Lord Jones, and under its core wellness platform, PEACE NATURALS. In addition, PEACE NATURALS cannabis products are available in the Israeli and German medical markets.
Core Adult-Use Brands
Spinach is a mainstream adult-use cannabis brand focused on friends, fun and legendary cannabis. The Spinach brand portfolio includes cannabinoid products in a wide range of formats including dried flower, pre-rolls, vaporizers and edibles.
The Spinach brand also has two sub-brands, SOURZ by Spinach and Spinach FEELZ. SOURZ by Spinach is a line of multi-colored, multi-flavored edibles in a variety of cannabinoid ratios in a distinctive 'S' shaped gummy, featuring proprietary flavor masking technology. Spinach FEELZ prominently features rare cannabinoids in a range of product formats, designed to deliver unique and enhanced experiences made possible through proprietary blends of rare cannabinoids alongside common cannabinoids, like delta-9-tetrayhydrocannabinol (THC). Each product is formulated to help adult consumers, 'Feelz. The Way You Want.'
Lord Jones is a premium adult-use cannabis brand that goes above and beyond to unlock differentiated ways to experience cannabis. The Lord Jones brand portfolio includes cannabis products in the pre-roll, vaporizer and edible categories.
Core Wellness Brand
PEACE NATURALS is a global wellness platform committed to producing high-quality cannabis products. It is focused on building and shaping the global cannabis wellness market and promoting a holistic approach to wellness. The company distributes products under PEACE NATURALS for Canadian, Israeli and German medical markets.
Cronos Marketing Code
Global Sales and Distribution - Principal Markets
Cronos has developed a diversified global sales and distribution network. The company has built a distribution footprint in Canada through the adult-use and medical markets, as well as a distribution channel for the Israeli medical market.
Canadian Market and Distribution
Medical Market: Following the closure of the Medical Cannabis by Shoppers Drug Mart platform, the company's PEACE NATURALS medical cannabis products are sold in Canada through various third-party distributors.
Adult-Use: The company sells dried flower, pre-rolls, vaporizers and edibles through its core adult-use brands, Spinach and Lord Jones, to cannabis control authorities in all provinces of Canada and the Yukon territory, except Saskatchewan, where the company sells to private-sector retailers, subject to the relevant province's or territory's product or other restrictions and requirements. As the company's supply chain grows, the company continues to expand its portfolio of cannabis products for the existing markets in Canada.
Markets and Distribution Outside of Canada
Israel: Cronos Israel holds the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in Israel. Cronos Israel distributes PEACE NATURALS branded cannabis products to the Israeli medical market through pharmacies.
Europe: In September 2023, Cronos established a strategic partnership with Cansativa GmbH (Cansativa), a leading German cannabis company, to distribute PEACE NATURALS branded products along with other white-labeled cannabis products in the German medical market.
Australia: The company distributes cannabis products in Australia through a distribution relationship with Vitura (formerly known as Cronos Australia Limited).
The company continues to seek new international distribution channels in jurisdictions that have legalized the production, distribution and possession of cannabis products at all relevant levels of government.
Global Supply Chain
Cronos is focused on establishing an efficient global supply chain by seeking to develop industry-leading methodologies and best practices at Cronos Fermentation and the Peace Naturals Campus and leveraging this expertise to create beneficial production partnerships. The company plans to continue to develop a global supply chain, which will employ a combination of wholly-owned production facilities, third party suppliers and global production partnerships, all of which will support the manufacturing of cannabinoid-based consumer goods.
Canadian Supply Chain
Peace Naturals Campus: The Peace Naturals Campus is licensed for cannabis production and the manufacturing of certain cannabis products. The Peace Naturals Campus is engaged in processing, finishing, packaging and shipping activities, as well as R&D activities, including cannabinoid product formulation, product development, tissue culture and micro propagation. In the fourth quarter of 2023, Cronos announced that its wholly owned subsidiary entered into an agreement with Future Farmco, a vertical farming company, for the sale and leaseback of the Peace Naturals Campus, subject to the terms and conditions set forth therein. As described under 'Operations and Investments-Sale and Leaseback of the Peace Naturals Campus' above, the parties plan to enter into a lease agreement upon closing for portions of the Peace Naturals Campus.
Cronos GrowCo: The Cronos Growing Company Inc. (Cronos GrowCo) production facility is licensed for cannabis production and the manufacturing of certain cannabis products. Under its licenses, Cronos GrowCo is permitted to sell certain cannabis products to other license holders in the wholesale channel, as well as to provincial cannabis control authorities. Cronos GrowCo holds Global GAP and ICANN GAP certifications (equivalent to IMC-GAP) for the export of dried flower to Israel.
Cronos Fermentation: Cronos Fermentation is licensed for cannabis production and the manufacturing of certain cannabis products. In August 2023, Cronos announced the planned wind-down of Cronos Fermentation and has listed the facility for sale. Cronos Fermentation engaged in R&D to produce high-quality cultured cannabinoids at commercial scale.
Third-party Supply and Manufacturing Agreements: In the ordinary course of its business, the company enters into spot market purchase agreements and supply agreements with suppliers of dried flower and other cannabis products. The company's supply agreements, for the most part, do not obligate us to purchase minimum quantities of products and generally contain provisions permitting cancellation of orders or termination on notice. The company also enters into contract manufacturing agreements with other license holders for certain manufacturing and processing services related to its products.
Supply Chain Outside of Canada
Cronos Israel: Cronos Israel holds the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production, distribution, and marketing of dried flower, pre-rolls and oils in Israel. Cronos Israel distributes PEACE NATURALS branded cannabis products to the Israeli medical market.
Major Customers
Major customers are customers for which sales equaled or exceeded 10% of the company's consolidated net revenues for the year. The company had three major customers, Ontario Cannabis Retail Corporation, Alberta Gaming, Liquor and Cannabis Commission, and BC Liquor Distribution Branch, which accounted for approximately 34%, 21%, and 11%, respectively, of the company's consolidated net revenues, before excises taxes, for the year ended December 31, 2023.
Government Contracts
In Canada, the company sells cannabis products to cannabis control authorities in all provinces of Canada and the Yukon territory, except for Saskatchewan (where it sells to private-sector retailers), where each such cannabis control authority is the sole wholesale distributor and in certain provinces, the sole retailer, of cannabis products. The company sells these products to the various cannabis control authorities under supply agreements that are subject to terms that allow for renegotiation of sale prices and termination at the election of the applicable cannabis control authority.
Research and Development Activities and Intellectual Property
Ginkgo
The collaboration and license agreement between Ginkgo and the Company (the Ginkgo Collaboration Agreement) enabled the company to produce certain cultured cannabinoids at commercial scale at a fraction of the cost compared to traditional cultivation practices. The Ginkgo Collaboration Agreement was amended in June 2021 to enable accelerated commercialization of such cultured cannabinoids, ultimately resulting in the company's launching of its first cultured cannabinoid product containing cannabigerol (CBG) in the second half of 2021.
The Ginkgo Strategic Partnership enabled Cronos to produce large volumes of these cultured cannabinoids from custom yeast strains by leveraging the fermentation infrastructure at Cronos Fermentation. However, in August 2023, Cronos announced the planned wind-down of the Cronos Fermentation facility and has listed the facility for sale. As a result, the company is no longer operating facilities that leverage the patented intellectual property under the Ginkgo Strategic Partnership, although Cronos may leverage this intellectual property, either through production at the Peace Naturals Campus or through a contract manufacturer, and Cronos continues to utilize these cultured cannabinoids in the company's products sold in Canada.
Ginkgo has filed certain patent applications pertaining to biosynthesis of cannabinoids to protect the intellectual property developed as part of the research progressing under the Ginkgo Strategic Partnership. Under the partnership, Cronos is the exclusive licensee of the intellectual property covered by the patent applications for the target cannabinoids.
The company intends to distribute the target cannabinoids globally, where permitted by applicable law, and have received confirmation from Health Canada that this method of production is permitted under the Cannabis Act.
Cronos Fermentation
Cronos Fermentation is a fermentation and manufacturing facility in Winnipeg, Manitoba. The facility provided the fermentation and manufacturing capabilities the company used to capitalize on the Ginkgo Strategic Partnership, by enabling it to produce the target cannabinoids contemplated under the Ginkgo Collaboration Agreement at commercial scale with high quality and high purity. In August 2023, Cronos announced the planned wind-down of the Cronos Fermentation facility and has listed the facility for sale.
Intellectual Property
In addition, the company has sought trademark protection in many jurisdictions, including Canada, Australia, the U.S., China, Israel and Europe. In the U.S., registered federal trademark protection is only available for goods and services that can be lawfully used in interstate commerce; the U.S. Patent and Trademark Office (PTO) is not approving any trademark applications for U.S. Schedule I cannabis, or certain goods containing U.S. hemp-derived CBD (such as dietary supplements and food) until the U.S. Food and Drug Administration (FDA) provides clearer guidance on the regulation of such products.
Discontinued Operations
In the second quarter of 2023, Cronos exited its U.S. hemp-derived cannabinoid product operations.
Research and Development
For the year ended December 31, 2023, the company reported research and development expenses of $5.8 million.
Regulation
The company is subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and, in accordance with the Exchange Act, it also files reports with and furnish other information to the U.S. Securities and Exchange Commission (SEC).
Cronos Israel Licenses
Cronos Israel maintains the following certificates and corresponding permits: full Good Agricultural Practices (GAP) certification, including a permit to cultivate at the full capacity of the greenhouse; and GMP and Good Distribution Practices (GDP) certificates and permits to produce and distribute dried flower, cannabis oils and pre-rolls.
History
Cronos Group Inc. was founded in 2012.
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