In a minute. Yeah, I think the clock is still. There it is. All right. I'm ready if you're ready. All right. Good morning, everybody. This is the consumer track. We're in the blue room, where we're about to hear from Cronos Group Chairman and CEO Mike Gorenstein. Mike, thank you for being here. Cronos is a leading cannabis LP, who in 2025 started putting its ample cash balance to work, and that came with results. Year-over-year, 2025 revenue was up 25%. Gross margin rate basically doubled year-over-year. So Mike, again, thank you for being here. Where I wanna get started is Canada. I wanna start in Canada, because for the longest time, supply and demand were imbalanced.
It seems like it's gotten better, but I wanna hear from your perspective maybe how supply and demand in Canada has evolved, how the relationship has evolved, and where you see it today, and where you see it going forward.
Yeah, thanks, and thanks for having me. It's a great question. I think that what you saw early days, you know, these cycles are starting to get smaller, but as soon as you have a real buildup of demand because of the access to capital in Canada, you had a lot of people overbuilding. A lot of people tried to get big before they got good. You know, just because you had numbers of supply, that doesn't necessarily mean that you had good supply and that supply would actually, you know, sell or consumers would want it. You know, you had a lot of shutdowns. You know, you had a lot of struggles there.
I think as things started rationalizing, you then had, you know, finally people had also built for Europe, and then you had Europe start to open. Now you have people that are able to ship product to Europe, and that caused more of a shortage in Canada because you simultaneously had supply come offline and you had additional demand. You know, I think that really did lead to a shortage. You've also had the CRA start to collect not a lot, but a little bit more, you know, which I think gives people some pause. Yeah, we feel like there hasn't been enough supply, but my assumption is always that, you know, we'll reach equilibrium and be prepared for supply to outstrip demand.
That's why it's so important for us to think about quality and efficiency. You know, I think you've seen in the past years, we, you know, we're pretty deliberate about how we expand and we have a place to put supply. For us right now, and for the last, I'd say two years, we've really been struggling to keep up with demand, so having GrowCo online is pretty important for us.
We'll definitely get to GrowCo, but I wanna spend a little time on Spinach. It's, I think, the number 2 vape brand in the country. It's SOURZ edibles have 20-ish% segment market share, and in flower, it's probably about the number 4 brand. Maybe how did you build a brand like Spinach in an industry and a market where building brand equity and brand loyalty is pretty hard?
Yeah. I think, you know, one of the things that makes it hard is if you as a company come out with, you know, double-digit number of brands and those brands don't have anything unique, it's just the same strains in each brand and you're finding ways to push product. We really thought of Spinach as what is the demand we have and how do we get supply to fill the demand? I think that approach was much different than others that were building out supply and saying, "What brands can sell our supply?" It's really starting with the consumer and working back from that. You know, it's not a coincidence that we, you know, primarily in Canada, almost all of our revenue is Spinach. I mean, certainly Lord Jones, it takes more time to build.
You know, that was the first thing, and then I think also starting with product. Building from product up, making sure we actually have something that's differentiated, something that has a better value proposition, and that's where you see SOURZ and now Puffers is the newest example. You know, that's what the strategy has always been is have products and those products will build the brand versus a brand sort of just attaching to, you know, me-too products.
You mentioned Puffers. Is that the innovation you're most excited about now? Is that the newest? Can you maybe talk to us about that, what that product is, what need state it's trying to fit?
Yeah. The success you've seen in vapes is really we've been, you know, in 510s, but we've taken a pretty long road for all-in-one, same as with SOURZ and edibles, where we didn't launch immediately, but we kept doing all the consumer work and the R&D to make sure we can hit a need. All-in-one's been a big category. It's been growing, and this is our entry into it. I think our long-awaited entry that, you know, probably a couple years coming. It's just. It's a differentiated device. It's, you know, the fact that we have a boost button that can give you know, a really large hit, or you can have something that's more normal and giving that toggle.
The way it feels in your hand, have you been able to, you know?
I haven't
... to grab one yet? Yeah, I think it's just a great feeling for consumers. We want it to be something that you could take everywhere with you. Fits neatly in your pocket. You know, the actual texture doesn't roll off of things. Just a number of kind of insights we had that we wanted to make sure we provided, and then still the same flavors that we have-
Mm-hmm
... you know, in the 510s that have made us really successful.
The other big kind of inflection that I mentioned in the intro was on the gross margin side. You know, it doubled basically year-over-year, but Q4 was a little bit lighter than, you know, the previous quarters in 2025. Maybe what was abnormal about the profitability in Q4, and where can it go back to going forward?
Yeah. Part of, you know, the phase II coming online for Cronos GrowCo, that's a 70% capacity ramp-up and, you know, in doing that, there's certainly challenges. You know, I would expect the full year for 2025 gross margin to be what it, you know, things look like going forward, you know, as Cronos stands today, excluding the Netherlands. But we had things like, despite the meter running the whole time, you know, we got a catch-up electricity bill.
Okay.
in January that was, "Hey, here's extra." It's a government, you know, utility. You can't really change that. Just what we had to do to get kinda overtime labor and bring people in when you have that 70% expansion producing, you know, more of Grade C than Grade A, so just in terms of like trim versus flower. I think just temporary ramp-up things that get smoothed out, and I think you'll see the facility dialed in pretty quickly.
Let's spend some time on GrowCo. You have some of the first grows that have come out of there. What are the early learnings from the expansion at GrowCo, and how long does it take for the new capacity to get to the standards of, call it, the legacy GrowCo capacity?
It's, you know, really not that long. I think, you know, we have the same facility. It's generally the same team, although you need, you know, certainly more people. A lot of it is scheduling. You know, you get into a cadence of how things move through, you know, from flower rooms to your dry rooms to bulk, how you fill orders, how you process it, and so just getting that scheduling down, making sure everyone's trained and dialed in. Overall, it's the same process. It's the same processing facility. We just expanded the glass part. I think it's, you know, pretty quick.
You talked a little bit ago about how demand had exceeded your supply availability of product. With this extra capacity coming on, what tough allocation decisions are removed? Like what kind of impediments to growth are now removed with this extra capacity?
Yeah. Frankly, I think it's Canada. You know, when you saw us go from number one flower brand and move down to number four, you also saw Israel grow. You saw other markets in Europe grow. We've definitely been you know, playing a game of trying to make sure we allocate and keep people happy but also try to build demand in new markets. Finally having that online, being able to, you know, fill channels is something that, you know, feels really good. Of course, the plan's always to have demand, you know, outstrip supply. We, you know, part of making sure that the brand's in a good place is not having to oversaturate markets.
you know, we'll keep working on, you know, on the marketing side and you know, looking at different ways of expanding. I think that was a really important step to get that out and take care of kinda our first and primary market.
GrowCo's kind of one aspect of this, kind of I want to call it new phase of Cronos where you're putting more capital to work. You did some M&A. You made an investment in Canada's largest cannabis retailer. What convinced you maybe after years of not much cash leaving Cronos to start putting capital behind ideas? Like I assume you had ideas the whole time. What convinced you that now's the time, we need to start acting on some of these ideas?
Yeah, look, I think it's you know, a couple things. One, as I mentioned before, for us a lot of the focus was let's you know, like early R&D was really important, making sure that we dialed in operationally. It's a lot easier, and this is very different than a lot of what happened in Canada, but it's easier to get really good at what you're doing and then expand than to expand and then try and dial it in later. You know, as the efficiency's there, we then feel more comfortable to grow. Maybe one of the bigger things is that you don't have a flood of capital coming in the industry anymore. I think that's led to you know, some of the asks of external and the third parties coming down.
We see more value where we've never really been a look-at-relative-value type of company. Like, if it doesn't pencil, if I can't see that it's a better return than treasuries, then you know, we're not doing it. I've been told that's harsh by people. It's one of the first questions I ask whenever you know, I have a conversation with someone is like, "Can I do better by you know, whatever it is you're suggesting than treasuries?
Well, interest rates going up help the treasury yield, right?
Right. Yeah, like maybe that's a factor. I also think that, you know, you see markets start to mature. I look at a market and, you always have to forecast some, you know, price compression. You know, there's different market structures, but eventually they start moving towards a pretty similar equilibrium. Understanding that and modeling it, we can be patient and wait till things, you know, move there and, then I think, you know, we're able to find a place where we'll win based off of being able to optimize, bringing our portfolio of IP and brands over. Modeling something on, you know, crazy margins doesn't work out.
You put more capital to work. You still have a cash balance I think over CAD 800 million. What does it take and maybe is it a change in U.S. legislative outlook, but what does it take for you to put even more cash to work?
Look, we look at a lot of opportunities all the time. There's on-strategy opportunities that are accretive. You know, there's nothing stopping us from, you know, from doing them. Obviously, the U.S. is still the biggest, you know, biggest opportunity long term. I've gotten to the point where I don't really like to bet on regulatory change, so it's sort of when it happens, you know. Yeah, I think you're seeing growth in Europe. I think you're seeing things move. People probably never would've thought Netherlands would've been, you know, the, a big opportunity, but I'm really excited about that market. I think regulation's moving. I think that, you know, supply-demand rationalizing and markets maturing really is what's key.
We'll get to the Netherlands. What is your expectation for the U.S., right? Like, you know, people, the executive order happened in 2025. There was some very encouraging language within that executive order suggesting a quick timeline. We haven't seen much since. What's your expectation for the U.S.? Is it a 2026 rescheduling year?
You know, it's really difficult to predict, and I've always tried to stay away from.
Well, that's why I'm trying.
I try to stay away from predicting. What I will say is I think that you've got more volatility in this administration as far as of what potential outcomes or actions there are, and I think that's a good thing.
Mm-hmm.
Because if we're following a normal political process given, you know, where things stand, it's tougher to get things through and, you know, reality is we could wake up any day and it could be done, and you could see almost any outcome. I think that we need that. We need some type of, you know, high variance. I'm more optimistic than, you know, I have been in past years, but I'm also part of that is it's really, really difficult to predict, and so it's making sure that we're positioned the right way, making sure that we're ready to take advantage of it. You know, we have the benefit of a really great partner that, you know, we have infrastructure in the U.S. that we could immediately leverage. You know, I think people don't talk about hemp enough.
I think that how hemp gets regulated, you know, there's gonna be some potential horse trading around that. You know, how will that affect rescheduling or eventually descheduling is really important to watch. I do still think it makes sense to have a harmonized framework, but, you know, I think there's other priorities at the moment.
Okay. Yes. Another one of the other investments you made that I referenced was into High Tide, Canada's largest cannabis retailer. For years, you know, or years ago in Canada, some of the LPs did pursue like a partially owned retail model where they owned some stores. You did not.
Mm-hmm.
Nine months ago, you made that investment. Why nine months ago do you say, "I want exposure to the retail tier," when for so long you hadn't had that exposure?
Yeah, I mean, I think first, and there's a few different reasons for it. You know, first, I think it's a great company. I think it's a, you know, a great investment. You know, more than anything, it's actually that same philosophy carried over. It's that we wanted to preserve the independence of retailers and the independence of, you know, suppliers.
Mm-hmm.
This is making sure that the, you know, the leader in retail in Canada could stay independent and, you know, I think that it's an investment sort of in a model that we're winning in, and making sure that, you know, the brands are ultimately what, you know, consumers are choosing and not, you know, choosing because of different ownership structures and so that's really what drove the decision from a high level perspective.
Got it. Now let's go to international. There's been a lot of excitement for Germany. There's a lot of investment in Germany. You're a part of it, but maybe it's not, maybe it hasn't been like as large of a focus for you as it has been for some others. What would it take for you to get more excited about Germany and to make a bigger kind of investment into the country?
Yeah. First, we're very excited about Germany long term.
Mm-hmm.
It's, you know, it's probably gonna be one of the most important, you know, if not the most important market in, you know, in Europe. This just comes down to regulatory certainty, I think, is a major one. You know, seeing what happens with telemedicine, what happens with delivery, having that, you know, that certainty would go a long way. We're in a phase now. We're still building demand, getting our brand out there. You know, we're seeing good growth, but without that, you know, certainty on what potential changes to the model there are, it's, you know, really hard for us to invest.
Mm-hmm.
We're still growing, you know, in the meantime. You know, I think that, and I think also again, like some of these other markets we talked about, you're seeing price discovery change a little bit. You know, we wanna be able to know kind of where prices go to, what supply levels are. You know, if there's that much uncertainty, we're happy to supply and, you know, partner with others, and if, you know, we have certainty and we see something that's, you know, attractive-
Mm-hmm
It's something that we're not afraid to move when, you know, when the opportunity is right.
Does the relationship with High Tide give you kind of a more asset light access to Germany at some point? I mean, they can be kind of maybe a conduit between Canada and Germany. Is that something you plan to use for German exposure?
Yeah, I think, look, I think it's a great relationship to have and something that certainly can be helpful. We also have other relationships. We've been in-
Mm-hmm.
You know, we've been in Germany, you know, before the deal, so we're focused on whatever the best way to get brands to patients are, whether that's, you know, through High Tide, through Cansativa, through another partner, you know, we look at all options.
On Israel, it's a country where you're already quite large. It's been growing. Has the recent conflict with Iran disrupted anything in Israel? More importantly, over time, where do you see Cronos and Israel going in terms of size and profitability?
Yeah, Israel's been a great market for us. You know, as a wholesale brand supplier, we're pretty clear number one share now, roughly 23%. I think it's got potential to be a great market for a lot of different reasons. You do not have a strong illicit market. In fact, the illicit market is essentially purchasing from the legal market. You've got high usage. You know, it's a pretty high GDP country, but it's unfortunately been a tough few years. I think that we're built to withstand sort of adversity, which is why you've seen us kind of grow and be really successful the last few years.
That's certainly held back some of the reform people have expected, some of you know we wanted to change. I think it's a market that's really important to have boots on the ground. It's the time you spend in the market's really important. You know, we've kind of adjusted to the way life is, right? You know, you're in meetings and you're used to there's a siren goes off. You have you know within 8.5 minutes if your phone gets the alert, we've got onsite bomb shelter. Everyone gets to the bomb shelter, and then the meeting continues. We've been fortunate that we haven't had any damage to the facilities. Our people are safe. We've learned how to deal with people going into the reserves. We've learned how to you know deal with shelter in place.
We're still an essential business, so you know, there's all types of different contingencies we plan for, but Israel's still moving, and I think when things are over, there's potential upside. You know, when you look at what the actual patient counts are for population, you compare it to other medical markets, you can see it pretty easily 2 or 3x-ing from here. It's similar to the U.S., it's just when that becomes the priority. There's just really pressing security concerns that I think are front of mind right now.
Okay. You brought up the Netherlands earlier. You recently announced the acquisition of CanAdelaar there. It makes you a prominent Dutch player right off the bat. I guess let's start with what got you excited about the Netherlands, but also in the context of that market, as I understand it, is still an experiment market and it has an expiration date. How did you get comfortable with those assumptions and those criteria when deciding to enter?
Yeah. I mean, it would sound almost the opposite of what I was saying about certainty given that. I look at it as you've got now 50 years of this history of having a tolerated market. You know, for those of you who aren't familiar, in the Netherlands, the retailers or coffee shops are essentially allowed to supply product to, you know, to consumers. You know, the growers that actually sell into the coffee shops are completely illegal. You know, you can get arrested for going and selling to one of those retailers, and it's not the most logical. I think the Netherlands is approaching this as like, we wanna have safer, you know, transparent supply chain. We wanna get rid of crime.
The way they've approached it makes it clear that their objective really is eliminating all the kinda criminal organizations around it. I love the idea of having licenses that can actually start in these different municipalities. It would be really difficult to imagine saying, "Okay, now..." I don't see them getting rid of the 50 years of history of retailing it, and it'd be really tough to be like, "Yeah, after these 4 or 5 years, we've decided everyone's gonna go get product illegally again." That's like. It's just very, very unlikely to me. The question is sort of where does it evolve? How does it expand? Does it extend?
You know, I love the approach that This is the only market I've seen where the, you know, maybe medically in Israel, but the legal market has an advantage over the illicit market, and that's very rare to see in any market. You know, I like that. I think structurally, CanAdelaar has an advantage being the only commercial greenhouse in the program. You know, that gave certainty, and we modeled it out. Even if the program's not extended, we still would recover our, you know, our principal. I think that was a pretty key thing for us.
What can you build on? You know, they've been operating there for a little while. What can you build on that they've already done, either, you know, revenue opportunities or cost synergies that you can bring with your infrastructure? What can you build on that they've already put in place to take it to kind of a next more exciting level?
Yeah. We definitely don't look at this as a cost synergy acquisition. I think of it as a pretty valuable platform for us. You know, we've, for years we've been doing a lot of R&D, whether it's genetic breeding, developing, you know, the number one edible with SOURZ. We're really excited about Puffers. You know, we've just got a portfolio of IP, and they're a much younger company, even though they're, you know, very profitable and, you know, very, very large as the market share leader. Being able to tech transfer that over, you know, that's the whole model of borderless products for us. Having another platform, we can take what we have and, you know, and put it into the Netherlands, that's where we see the opportunity.
You know, they still haven't launched vapes, you know, in any meaningful way, so being able to get, you know, get brands over there and do that, being able to get SOURZ in market, that I think is where, you know, we can do it. When you think about brand leverage in Europe, you know, the Netherlands is really like kinda like the core of where cannabis culture came from. I remember 15, 20 years ago, I went there and I was like, "Wow, I wonder. That'd be really cool to be in, you know, imagine if weed was legal one day.
Hopeful. Yeah.
You know? I will say I think that the market hasn't really changed in 20, 30 years. I mean, maybe 50, I don't know, 'cause I haven't been there that long ago. You know, you've seen a lot of shifts in terms of product quality, innovation in North America, and you just haven't really seen that in the market there because you haven't had legal investment and you know, haven't had you know, really long-term views on products and brands.
I think we touched probably on five countries as we kinda went through. We did Canada, U.S., Netherlands, Germany, Israel, five. Outside of those five, what countries have you most excited? We'll kinda wrap up because we're getting a little tight on time.
Oh, it's a bunch. I'd say, you know, markets where you're seeing growth, you know, and seeing potential. Again, everything, you know, often depends on regulatory change. Obviously we're always optimistic or hopeful of things moving in the U.S., but I think U.K. and Switzerland are two markets that, you know, you're seeing progress forward. You know, potentially, you know, Italy at some point. You know, we're monitoring. I think that it tends to, as you get progress in one country, it tends to help the neighboring countries. You've got a little corridor there.
Yes
That's really starting to move.
It's a good start. All right. For the last one, what aspects of the cannabis industry and Cronos in particular do you think maybe are not appropriately appreciated?
Yeah, I think, you know, a lot of times, I mean, this is a really basic one, but with us there's a general perception, you know, of like a market cap versus enterprise value, and most people generally assume that your enterprise value is higher than your market cap. That has not been the case with us. I still get a lot of questions about our debt, which we don't have. We have a growing profitable business. It's growing pretty fast and profitability is increasing. You know, we have a lot of opportunities, you know, to grow organically, you know, with M&A and, you know, active buyback.
I think we're, you know, we're really excited and understand that the industry isn't necessarily as, I guess, fairly looked at by investors as it used to be-
Yeah
... I think not all companies are the same. You know, I think we've shown we're pretty disciplined and opportunistic and can operate the company.
Good. I think that's a perfect spot to stop. Mike, thank you for joining us. It was wonderful.
Thanks.
Yeah, it's awesome.