Good morning, everyone. Thank you for joining us to discuss Tilray Inc. Financial results for the 2021 fiscal year and Q4 ended May 31, 2021. Joining me on today's call are Ermin Simon, Chairman and Chief Executive Officer Carl Merten, Chief Financial Officer and Baron Narada, Chief Corporate Affairs Officer. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer session for analysts and investment firms conducted via audio and Spading Retail shareholders conducted through the SAY Technologies platform. Question submission and uploading through the SAY Technologies platform concluded yesterday, and the company will read aloud and answer the top questions. Ms. Narada, you may begin the conference.
Thank Thank you and good morning. By now, everyone should have access to the earnings release available on the Investors section of Tilray's website at tilray.com and filed with the Securities and Exchange Commission on Form 8 ks. On today's call, we will also refer to various non GAAP financial measures, which can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Today's earnings press release contains a reconciliation of each non GAAP financial measure to the most comparable measure prepared in accordance with GAAP.
Also, please remember that during this call, we may make forward looking statements. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect. Actual results could differ materially from those described in these forward looking statements. Please note the text in our earnings press release issued today for discussions on the risks and uncertainties associated with such forward looking statements. And now, I'd like to turn the call over to Tilray's Chairman and CEO, Irwin Simon.
Thank you very much, Barron, and good morning, everyone. We appreciate you joining us for our inaugural call as new Tilray. Today, we will reiterate and reaffirm the strategic and financial benefits of our recent business combination and acquisition, detail the business level strategies and roadmap to ensure we realize the vision of that combination, outline the progress we have made to date and of course discuss our fiscal Q4 2021 results, which consists of 13 weeks of pre merger Aphria and 4 weeks of post merger Legacy Tilray. The world's largest cannabis company. When we announced the new Tilray in December of last year, we were optimistic that the strategic operational market opportunities in front of us had potential to create the world's leading cannabis focused consumer branded company.
This was our bet, backed by strong trends towards cannabis legalization in our 3 key markets: Canada, International and the U. S. Our management team with a track record of building gaining value in the consumer packaged good wellness space, well defined organic acquisitive and partnerships based on growth strategy that together with full legalization in the U. S, we believe we will take us to a plan of $4,000,000,000 of revenue by 2024. I want to be clear at the outset, our conviction in both the opportunities just as importantly as our ability to execute on that opportunity has never been stronger.
The last 6 months have affirmed the sheer size of global opportunities ahead of us. Just as importantly, the effectiveness of a committed and passionate group of team members in building the leading consumer packaged goods business in the cannabis industry. Beyond what we have achieved over the last 6 months, our perseverance during COVID crisis itself lends further validation to the fact that this team knows how to pivot, execute and get results, consider at the highest level and we lost well over $100,000,000 in revenue as a result of retail store closures and COVID general impact and yet we immediately implemented cost saving measures ultimately helping us build EBITDA to more than $40,000,000 in 2021. We manage our facilities extremely well, helping ensure they remain open throughout the last 18 months. We acquired Sweetwater, announced the closure of the Tilray Aphria combination and made meaningful progress on the integration, as I will discuss in more detail.
We closed on a new bank financing of $100,000,000 term debt and $20,000,000 of credit and ended the fiscal year with more than $488,000,000 in cash and cash equivalents versus $360,000,000 last year. So throughout today's presentation, consider these achievements during fiscal 2021 a year of unprecedented change and disruption, highlight the strengths of our new leadership team and should instill confidence in the road ahead as we accelerate integration of Tilray and Aphria amid increasingly favorable market conditions. The thesis behind Tilray Aphria business combination and Sweetwater acquisition is that the combination of cannabis with a CPG and health and wellness company is a winner. Prior to Aphria and my team here with me today at Tilray, we built a great CPG business in natural organics, healthy foods, personal care products, beverage, alcohol and other industries, and the playbook here is essentially the same. It's all about building iconic sought after brands backed by product excellence and variety of educating consumers about our brands, our stringent quality standards and benefits of cannabis products to encourage trial, foster loyalty and having the scaled distribution necessary to get them into consumers' hands and grow market share.
To put it simply, Tilray is the only cannabis company with that scale and reach and resources to get it done. Our business planning and integration are built around 5 key competitive differentiators. The industry's broadest geographic footprint and operational scale, leadership positions in Canada with a complete portfolio of product offerings and carefully curated brands, tremendous international growth opportunities and a meaningful U. S. Consumer packaged goods platform to be immediately leveraged for cannabis products upon legalization and with both companies coming together substantial synergies.
Geographic footprint and operational scale. I'll start with item 1, geographic footprint and scale. This is clear and distinct competitive advantage as Tilray now possesses the geographic footprint and operational scale to merge as a consolidator in the cannabis market. This effort is backed by a strong flexible balance sheet, robust cash balances and access to capital. These attributes provide us with the ability to accelerate organic growth, build EBITDA and free cash flow and look at other and acquisitive opportunities that could ultimately complement our product line as legalization accelerates.
Regardless of the industry, but especially in a nascent rapidly growing industry like cannabis, these attributes should deliver long term sustainable value for shareholders, strengthening leadership position in Canada. In Canada, we plan to grow and strengthen our position as the number one Canadian LP in total sales on a consolidated basis. This is the foundation that will be so essential to getting us from our current combined retail market share in Canada of 16% to our goal of 30% share by fiscal year 2024. New products that are trusted by consumers that have real brand equity. In fact, putting the 2 complementary Portfolios of Aphria and Legacy Tilray together has enabled us to strengthen both brands.
Aphria has historically been strong in flower, pre rolls 2.0 products and began making inroads on vapes, while legacy Tilray has several high powered potency flower strains that fit nicely into our portfolio in addition to being stronger overall in edibles and beverages. Strategic partnerships with provincial boards and retail partners. We have strong relationship with the provincial boards across and retailer partners. We will continue to create merchandising and education platforms for butt tenders and consumers to drive brand loyalty to our portfolio. Both of these strategies will drive absolute growth in the Canadian market.
Additional store openings. To this point, there are currently over 2,000 stores in Canada. We believe growing the market demand could warrant as as many as 3,000 by the end of calendar year 2022. Of course, this retail performance will likely improve and commensurate with lifting the COVID restrictions, which have, of course, materially impacted retail efforts since the spring of 2020. Our Canadian business will benefit further from the fact that we're already the low cost producer with the state of art cultivation, processing, manufacturing facilities, but this did not happen by accident.
In fact, from the beginning, we were careful about how we created cost structures within the organization. And now we are accelerating our work on pulling additional costs out of the structure so that we can gain further efficiencies and increase our margins. While legacy Tilray was generally asset light, Aphria had invested heavily in brands with great brand equity. We view our ability to now leverage product capabilities and footprints with an asset light model as a strong combination. Based on OCS sales data, Tilray continues to be the number one market share in Ontario.
Further, the consolidation of Tilray also has the number one market share now in Quebec. Innovation will also be a hallmark across our brands and across all segments in Canada. From a cannabis 2.0 standpoint, this will be within concentrates, edibles and drinks. While for Canadian Medical, our focus is centered on the large and growing demand for new high quality cannabis products that promote health, wellness and well-being. For example, we recently launched Syndeos, which complements our existing medical brand portfolio of all medical Aphria, Broken Coast and Tilray products.
This new brand was developed to provide a broader spectrum of formats and unique can avoid ratios at a better price point. In addition, it allows medical patients a full comprehensive assortment of products, including flower, oils and pre rolls for their health, wellness regimen. We also introduced high potency medical topicals under the Aphria brand designated to target inflammatory joint disease by regulating tissue inflammation when applied topically to the skin. Also, we consolidate facilities within Canada and moved a lot of Tilray's production into our Leamington facility. We'll continue to focus on improving product potency and quality to meet the market demand.
As you know, Canada currently restricts how cannabis brands can be marketed to consumers. While product safety is certain to our paramount, it is also crucial to communicate and educate consumers about the products and benefits of cannabis. During the pandemic as people were not able to go into stores in Ontario and had to deal with in store capacity limits in Alberta and British Columbia, we kept our focus on driving brand awareness, work with the different control board and retailers to use social media and other and to help those that ordered online or picked up at curbside. And as noted a moment ago, until just recently in mid June, there were over 800 plus stores in Ontario alone that had never opened their doors to customers because of COVID or could only do curbside delivery. This has now begun to change and many stores have since opened across these provinces in June, although that of course did not help our May ending fiscal quarter sales.
And so for the past 6 months, when customers were looking for product, they were searching online. Most of the websites are organized by price. In other words, price mattered more than marketing. However, as consumers now can resume and interact with budtenders, When impulse purchase can occur inside the store, we're confident customers will shift away from price based cannabis purchases and brands will matter and more environmentally characterized by pent up demand. Finally, we intend to be effective innovative advertisers in the truest sense of that term, educating our consumers about the quality and safety of our products is essential and advertising is a critical medium in that effort.
We have therefore been working with the appropriate authorities to allow more effective forms of advertising similar to other regulated industries and we have a marketing strategy that is ready to go. Accelerating our international growth. Our international growth strategy leverages our 2 strong medical cannabis brands and our large distribution network in Germany and NDA European Union GMP supply chain. Again, these attributes are unique to Tilray, and taken together, they're expected to increase our access and availability to high quality consistent medical cannabis for all European patients. The European Union, where we already have a very meaningful presence represents a powerful growth market and could be a $1,000,000,000 business for us from a medical standpoint alone.
We'll also be ready for legalization from adult use when the time comes. Our presence in the EU allows us to grow our brands on a global basis with 600,000,000 people that is nearly twice the size of the U. S. With Germany possessing the greatest potential at twice the population of Canada. We already have a low cost production facility in Portugal that provides us with tariff free access to the EU.
We also have a state of the art EU GMP certified cultivation and production facility in Germany and a subsidiary in CC Pharma, which is a medical distribution business to 13,000 pharmacies. And while our fiscal Q4 results in Europe were negatively impacted by the lockdown in Germany, similar to Canada, it is now reopening and we're confident our business momentum will return. Among the many benefits of our business combination is the ability to have CC Pharma distribute our product drawn in Portugal to Germany and in doing so move up the value chain with the consumer as part of that transaction. To be clear, revenue synergies are not part of the overall $80,000,000 in synergies that we've already articulated. Those were only on the cost side.
This transaction is taking place and will positively impact the tail end of our fiscal Q1, but had no flow through in recent quarters. Another key factor in our plans for Europe is that The EU generally is more medically and pharmaceutically focused in Canada and the U. S, which results in nearly a 3 times difference in purchase reimbursement. And so we've expanded to those markets that are more focused on reimbursement and have reimbursement models. We think consumption increased on per capita basis as well.
Early this month, our wholly owned German subsidiary AphriaRx completed the 1st successful harvest of its EU GMP certified medical cannabis cultivated in Germany for distribution to German pharmacies. This represents an important milestone and granting access to high quality, trustworthy medical cannabis to patients and healthcare professionals in Germany. And despite the challenges of a global pandemic, we remain on track as the 1st licensed producer to cultivate medical cannabis in Germany. Moreover, we think that our ongoing domestic harvest and production will play an indispensable role in ensuring that patients' needs are met with products of the highest quality medical cannabis, while at the same time reducing dependence on imported supply. Other European markets where we are expanding our platform are Poland, Italy, the UK, France, in the Netherlands and Israel.
These countries and other parts of the continent are likely to see full legalization before the U. S. Finally, in South America, there'll be greater legalization from a medical standpoint. We already have a foothold in Colombia, where we see some opportunities. We've also shipped some CBD oils into China and should see opportunities eventually India, where THC is already used in a lot of different medicines.
Enhance U. S. Consumer packaged good presence and infrastructure. Here in the U. S, we have a strong consumer packaged good presence and infrastructure with 2 strategic pillars.
Sweetwater, the 11th largest craft brewer in the nation and leading lifestyle brand. With around 4,000 on premise and off premise points and the sales across 27 states and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. Today, they are $100,000,000 plus businesses and quite profitable with enormous potential for growth. In the event of U. S.
Federal legalization, and the acquisition, which received a high profile boost from Senator Schumer's recently proposed legislation, we can proceed within the next 24 months. Tilray will be ideally positioned to compete in the cannabis market by leveraging these strong brands and their distribution systems to parlay into THC drinks, CBD drinks, CBD foods and related adjacencies. With Sweetwater, we're expanding our product line of leading craft beers and other beverages to build greater brand awareness for our cannabis brands through cross collaboration and brand extension opportunities. We introduced Hazy, a juicy and refreshing IPA and Oasis, which is a vodka seltzer mix. Both are doing well already.
And just last month, Sweetwater partnered with Broken Coast to launch U. S. Distribution of Broken Coast BC Lager, which is also a milestone event as Tilray's 1st Canadian cannabis brand and introduction into the U. S. We intend to follow this up over time by introducing other great Canadian cannabis brands to the U.
S. And doing so will connect us with consumers and other mainstream brands in our portfolio. We're also currently working opportunities for Sweetwater with CBD tequila mixes, wine spitzer mixes, wine in the can, etcetera, while increasing Sweetwater's distribution in the near term to an additional 3 states. Let me also say that during the quarter itself, Sweetwater, like a lot of other craft breweries, had below plan on premise sales as many restaurants and bars were closed for operating full capacity. Although we did pick up a lot of retail business as consumers bought or expanded their line of products.
As business conditions have improved since the end of the quarter, on premise sales have rebounded and are up 40% year over year. Turning now to Manitoba Harvest. This is a great business and we're now fine tuning strategic planning and expanding opportunities, including looking at strategic partnership opportunities and acquisitions that complement our adjacencies to the cannabis world as we position ourselves for federal legalization. Substantial synergies. As we have said, we plan to deliver approximately $80,000,000 of annual pre tax cost synergies within 18 months of the business combination.
When we first announced the transaction, we said 24 months, but I've since moved that up. Key areas of opportunity are within cultivation, production, cannabis products purchasing, sales, marketing and corporate expenses. There's already been a lot of hard work done by our great team over several months, which will a lot more go towards achieving and getting the 2 entities fully integrated. So far, we have already achieved $35,000,000 in synergies. So we're a little bit ahead of our internal plan, but still moving things along so that we can continuously drive positive cash flow within the new Tilray.
Notably, as I said this before, the US80 $1,000,000 are cost synergies and do not reflect any possible revenue synergies that we know are also within our reach. In conclusion, I know that I've covered a lot of ground today, but hopefully have also expressed my enthusiasm and excitement for what lies ahead for the new Tilray. Carl will now review our financial results. But first, I want to remind and encourage our shareholders of record to read our proxy and vote online or by telephone on the authorized shares proposal and governance proposals. For all the reasons I've detailed this morning, we need your help to ensure Tilray grows and to ensure you are able to participate in our success in a meaningful constructive manner.
As a reminder, the first proposal would authorize additional shares of common stock so that we can move quickly to accelerate our growth through potential acquisition and financing opportunities. However, approval does not mean the authorized shares will be immediately issued, only that these shares would be available if needed in pursuit of these important corporate initiatives to drive shareholder value. And second, our other proposals are intended to expand the rights of our shareholders to take into consideration the views held by the investment community on important matters of governance. These proposals require shareholder approval on several amendments to our organizational documents. And beyond.
If you look at the financial results, please contact Mauro Sadali at 833-497 7,395 toll free in the U. S. And Canada or 203-658-9400. I know that I speak for our entire management team and our Board of Directors when I say that we are working every day to take full advantage of all the opportunities that we have at Tilray to enhance long term shareholder value and deep appreciation of your support. With that, I will now turn the call over to Carl.
Carl?
Thank you, Irwin. I would like to echo expressed my excitement for being a part of Tilray. We are poised to be a strong, diversified and profitable company and our early integration process reinforces our confidence that Tilray will create long term sustainable shareholder value for years to come. Before we begin, I need to point out some important accounting reminders. Our business combination was determined to be a reverse acquisition.
This means that while Tilray is considered to be the legal acquirer, Aphria is considered to be the accounting acquirer under U. S. GAAP standards. Our financial statements going forward will reflect this, which means that all prior quarter, year or periods are based on Aphria's prior financial results. These prior results and the 1st 3 quarters of fiscal 2021 were adjusted to follow U.
S. GAAP and are presented in U. S. Dollars. As a result, you cannot directly compare items from the prior periods to Aphria's historical financial statements.
To help understand our prior periods and to help analysts and investors forecast more accurately, today we published an appendix to our investor deck located on our website that contains an analyst primer. The primer breaks down Aphria's U. S. GAAP financial statements for 20202021 by quarter. Please note the primer has not been audited.
We remind investors that our Q4 fiscal year ended May 31, 2021 results presented today consist of 3 months 12 months respectively of Aphria's operating results, as well as 1 month in both reporting periods of Tilray's operating results. Throughout our call today, we will reference our audited results and we will also reference our adjusted financial results. Please refer to our press release for a reconciliation of our reported financial results under GAAP to the non GAAP financial measures identified during our call. Specific to Q4, Tilray accomplished a tremendous amount despite the COVID related headwinds impacting the top line. While we worked hard to maintain our brand strength across adult use and medical and net revenue would certainly have been higher if not for lockdowns in Europe and Canada, our team took proactive and aggressive steps to optimize performance.
In fact, our ability to drive significant cost savings by aligning production cost with demand in a dynamic operating environment, managing G and A and the benefits realized from implementing meaningful changes that Aphria pre merger as well as in minimizing costs at Tilray during the initial 4 week period resulted in another quarter of increased adjusted EBITDA, our 9th consecutive quarter of positive adjusted EBITDA. We believe this represents truly differentiated performance within our peer set. During the quarter, net income rose to $33,600,000 versus a net loss of $84,300,000 in the prior year. More importantly, I am extremely pleased to report that for the quarter we generated positive free cash flow of $3,300,000 achieving a major milestone in building the company and delivering on our comments to do so by year end 2021. We view generating a steady stream of free cash flow as another important of our business.
And having already demonstrated our ability to consistently realize positive adjusted EBITDA, the logical next step in showcasing sustainable profitability at Tilray is sustained periods of free cash flow generation. One of the key benefits of our business combination was the $80,000,000 of anticipated synergies. Months of planning before the closing and 10 weeks after closing, we are making great progress on integration. This progress includes meaningful, lasting efficiencies in business processes and operating initiatives, IT infrastructure, compliance costs, attrition and headcount and facility closures, including most notably the closure of the Inniskillen growing facility effective September 30. But the most Important question is our progress against the $80,000,000 goal.
In this respect, I am pleased to report that we are ahead of our anticipated pace and took the actions necessary to achieve $35,000,000 of the $80,000,000 in synergies. Although cash savings in Q4 were closer to $7,000,000 Now let's discuss Q4 in greater detail. Germany ended a hard lockdown and we were challenged to source sufficient medical supply products from lower cost countries to sell through our German distribution channels. I want to be clear that the orders and the demand were there. We simply could not source supply due to COVID restrictions.
Another headwind in our Q4 performance for Europe was that medical patients who might otherwise load up on supply in advance of summer vacations and generate our traditional strong Q4 demand did not do so this year. As a result of these conditions, net distribution revenue was $66,800,000 for the quarter compared to $74,000,000 in the Q4 of the prior year. During our Q4, Canada continued to struggle with high infection and low vaccine rates, which led to restrictive lockdowns in Ontario, Alberta and British Columbia for virtually the entire quarter. Net revenue from our cannabis business in the 4th quarter was $53,700,000 compared to $39,600,000 in period of the prior year. Net revenues at Sweetwater continued to improve, but remain below pre COVID levels at $15,900,000 and net revenues from our wellness business, Manitoba Harvest, were 5 point $8,000,000 in essentially 1 month of activity.
All of this led to net revenue increasing 25.3 percent to $142,200,000 in Q4 over the prior year period. The average gross selling price of adult use cannabis decreased to $2.98 per gram in Q4 compared to $3.90 per gram in Q4 of the prior year as a result of increased competition and price being only way to differentiate during COVID lockdowns, a temptation we did not indulge during the period. The average gross selling price of medical cannabis, exclusive of wholesale, decreased to $4.54 per gram in Q4 compared to $4.95 in Q4 of the prior year as a result of specific pricing programs offered to assist patients who have been negatively impacted by the pandemic along with other promotional programs. Our cash cost to produce per gram decreased to $0.72 per gram at our Leamington facilities. This was due to improved yield, potency and cost control efforts that began in January and that continued to benefit us.
Adjusted cannabis gross profit increased to $23,900,000 in Q4 compared to $18,900,000 in the prior year. Although adjusted cannabis gross margin fell to 44.5% from 47.7%. The decrease in margins was a result of price compression during the COVID-nineteen lockdowns, despite our determined efforts to lower our cost of sales. Not included in our calculation of adjusted cannabis gross profit was a provision of $19,900,000 on the combined cannabis inventory of Aphria and Tilray. As part of the business combination, we performed a detailed review of inventory levels, identifying some inventory categories where combined entity had excessive inventory levels, creating the provision.
These efforts included proactively adjusting our cost structure to offset the impact of the decrease in demand, including temporary 4 day work weeks at our Canadian cannabis facilities, better managed headcount and reduced planned operating spending. Cannabis contributed $6,400,000 to our adjusted EBITDA in Q4, up from $3,800,000 last year. Adjusted distribution gross profit decreased to $6,400,000 in Q4 from $8,900,000 in the prior year, while adjusted distribution gross margin declined to 9.5 from 12.1%, all as a result of the impacts of COVID-nineteen on CC Pharma sales mix. Distribution contributed $900,000 to our adjusted EBITDA in Q4, down from $1,400,000 last year. Adjusted beverage alcohol gross profit was $10,600,000 in Q4 and there was no comparable in the prior year as the acquisition was completed last November.
Notably, adjusted beverage alcohol gross margin was a healthy 66.5%, far outpacing our other segments and a sequential improvement from the 2 previous quarters under our ownership. The Sweetwater team clearly did a great job controlling costs despite softer off premise sales due to COVID restrictions. Beverage alcohol contributed $6,500,000 to our adjusted EBITDA in Q4 and adjusted EBITDA margin of over 40%, essentially on par with cannabis contribution, but with only about a 5th of the net revenue. Obviously, we remain very bullish on Sweetwater, both from a standpoint of expanding its top line through new products and greater distribution, but also because of the high margin nature of this business and what it could contribute to our overall profitability over time. Adjusted wellness gross profit was 1,600,000 and adjusted gross margin was 26.9 percent for which there were no comparables last year.
G and A costs increased to $32,800,000 in Q4 or 23.1 percent of net revenue, compared to $24,900,000 or 21.9 percent in the prior year, which did not include the acquisitions of Sweetwater and Tilray. The increase was a result of headcount increases and increases in our insurance costs. Transaction costs totaled $33,300,000 and were related to out of pocket fees to consummate the business combination, including legal, banking and other advisory fees, along with severance payments associated with the business combination. For the quarter, we reported a net income of $33,600,000 or $0.18 per share, compared to a net loss of $84,300,000 or $0.39 per share last year. In Q4, our ability to generate net income was related to recognizing $121,500,000 in net non operating income.
This was due to an unrealized gain on our convertible debentures, driven primarily by the change in our share price and the change in the trading price of the convertible debentures. Turning to cash flow and liquidity. As I mentioned earlier, we generated $33,300,000 in free cash flow during Q4, representing a $6,700,000 positive swing from Q3, all despite the intensity of COVID restrictions in our markets. This was a major achievement for us and something we have talked about in the past as being one of our highest priorities, demonstrating profitability through key metrics such as adjusted EBITDA and free cash flow. In fact, after having generated positive adjusted EBITDA for more than 2 years now, we view achieving free cash flow on a consistent basis as our next priority.
Our ability to do so beginning in Q4 was because of substantial increase in operating cash flow to $8,300,000 from $700,000 coupled with limited CapEx of just under $5,000,000 which was just above our $4,100,000 expenditure in Q3. We are also proud of our industry leading balance sheet, including a strong cash position. As of May 31, 2021, we had cash of $488,500,000 to both support our existing working capital requirements, including COVID-nineteen related financial impacts and our near term business plans. Briefly moving to full fiscal 2021 results, this was clearly a transformational year of progress for us and one that enabled us to position Tilray as a leading cannabis brand. Net revenue was $513,100,000 an increase of 27% from the 405 $300,000 in 2020.
Cannabis revenue grew 55%. Distribution revenue was flat, while we benefited from contributions from both beverage alcohol and wellness totaling $34,400,000 that were not in our 2020 results. Turning to profitability, we significantly increased our adjusted EBITDA to $40,800,000 compared to $5,800,000 in 2020, reflecting an improvement of $35,000,000 or 603%. With our focus on the future and what we can control, we are executing on our highest return priorities, including business integration and accelerating our global growth strategy across 5 key competitive differentiators as Irwin articulated. We are also relentlessly focused on managing our costs in order to maintain our healthy financial condition.
Our success will be measured through the scale, expertise and capabilities we will leverage to drive market share, achieve industry leading profitable growth and build sustainable long term shareholder value. As we move ahead, we believe our strong cash position and balance sheet flexibility provide us with the means to transform the industry through our highly scalable operational footprint, a curated portfolio of diverse medical and adult use brands and products and multi continent distribution network. Finally, and while we are not in a position to issue any formal guidance, I would like to mention that the recent floods in Germany directly affected CC Pharma. Fortunately, all our employees are safe. However, business operations were shut down for 3 days.
We estimate this will create a negative impact of 2.5 to $4,000,000 in Q1 2022 net revenues along with a minor margin impact related to the cleanup. We maintain insurance coverage to cover these, but do not expect insurance proceeds to be received during the quarter. With the recent lifting of lockdown rescinded, we not only look forward to increased interactions with our families and friends, we look forward to the changing purchasing patterns and demand for cannabis in our biggest market. This concludes our prepared remarks. Before moving to analyst questions, Irwin and I will answer a few questions from our retail shareholders from the SAVE platform.
Thank you. Let's begin the questions from the SAVE platform. First question is the following. There is a great limit to the amount of cannabis Tilray can grow and sell in Germany. Will there be permits issued to Tilray for continued growth and production?
Hi, good morning. It's Erwin. It's absolutely yes and it's limited to our facility. And with that, with our current tenders that we have, and the ability to fill them, There's lots of opportunities for us in Germany and I think there will be additional tenders and additional production that will come our way. Listen, the big fish in Germany also is distributing cannabis to those 13,000 drugstores, which will go through CC Pharma.
The other big fish in Germany is we hope with the Green Party that they push through legalization and it happens within the next which happens within the 18 months in reference to Germany.
Thank you. Question on Sweetwater. Will Sweetwater THC drinks be soon available in Canada? And are there plans to expand Sweetwater to California?
So number 1, there will be THC drinks available in Canada as part of the Tilray acquisition, a canning facility and a netable Facility became available to us in London, Ontario, a very facility. So there will be THC drinks in Canada available. Right now, I don't know the brand is going to be under, but Sweetwater as a brand Alcohol is available today in Canada, it is our intention to expand it into the Canadian market. And secondly, Recently, we completed in Fort Collins, Colorado, buying a facility called Red Truck and that facility will start producing Sweetwater products and the intention is to expand into the Western states.
Thank you. Next question. With the pending federal legalization in the U. S, How will Tilray benefit from this? Specifically, how will this affect the value of the company and benefit the shareholders?
Good question. Listen, I've talked about in my script today a $4,000,000,000 plan to get Tilray II and sales by the end of 2024. A big part of that is legalization. If you come back and look at Tilray, Number 1, we look to grow through adult use, medical, new products, cannabis 2.0, which is edibles and drinks in the Canadian market. Number 2, we talked about growing to $1,000,000,000 of sales in Europe through medical cannabis and through our CC Pharma and potentially other acquisitions.
Legalization happening in the U. S, which is the biggest market, which today is probably between CBD and THC is close to a $50,000,000,000 market is the biggest opportunity for us. And what Tilray will be pursuing is opportunity and options with MSOs that we'll be able to either integrate them into our business, merge or acquire once legalization does happen in the U. S.
Thank you. Operator, please open
the lines for analyst questions.
Thank you. I'll now open the lines for the analyst questions. We ask that you please limit yourself to one question. Our first question comes from the line of Owen Bennett with Jefferies. Please proceed with your question.
Good morning, gents. Hope you're well.
Good morning.
Yes, question for me is Slightly following up on the last question we just had then. So obviously got the votes for more shares tomorrow. I think it would be fair to assume this could be used to acquire more assets in the U. S. And with the potential change Within the next 12 months, that means you could enter the U.
S. THC market. I wanted to know how you're thinking about U. S. Assets from here.
Is it additional for the consumer goods assets like you did with Sweetwater or would focus now beyond doing something around securing optionality on U. S. THC assets and like we've seen a couple of your peers do? Thank you.
So Owen, as I said before, I put out there an aggressive stance for Tilray by the end of 2024 to be a $4,000,000,000 company. A good part of that is acquiring in the consumer area to enhance our Manitoba Harvest business in the food area where we would be able to add CBD or THC or our hemp business. And along with our Sweetwater business, we would like to acquire additional businesses in the alcohol area or the beverage business would complement Sweetwater. And we see those businesses today growing to a $200,000,000 business and we'd like to see about $500,000,000 in sales in the consumer packaged goods business, whether it's conventional products, whether it's CBD products, whether it's hemp products or THC products were permissible and legalization happens. In regards to the U.
S. Market, what we're looking for is to be able to have $1,000,000,000 to $1,500,000,000 in sales and that would come from companies where we have optionality and invest in those companies with the attention once legalization does happen that we'd be able to acquire 100% of those companies.
Okay, awesome. Thank you very much, sir.
Thank you.
Thank you. Our next question comes from the line of Vivien Azer with Cowen. Please proceed with your questions.
Hi. Good morning, Vivien.
Good morning. I wanted to touch on your market share aspiration for 2024, which is close to a doubling from where you are today. Just in terms of kind of what underpins the logic behind the 30% because certainly you have competitors that have similar aspirations for market share leadership. So market share gains are not a foregone conclusion. So from a marketplace standpoint, it seems like you're expecting better mix shift as the category reopens in terms of in person sales.
Like How much are you expecting in terms of better pricing and better mix to drive those market share gains? Thanks.
So Vivien, today we're at about a 16% market share. And with that, if you step back for a second and It's aspirational, looking to basically double our market share. The Canadian market has been almost closed for 7 months. There's numerous stores that have been built that have never been opened in Ontario. And we're only in the 3rd year of building legalized building the awareness of legalization.
So for us to grow our share, we have to drive and build awareness to the benefits of cannabis for adult use. We have to improve Consumer's perception and purchasing of medical cannabis in Canada. We need to get to those 3,000 stores or a little less that are proposed to open. We have to bring in more users that understand the benefits of cannabis. And a big part of that also is us growing our beverage business and our edible business and a lot of innovation.
And the thing is I come back with Tilray and someone said to me this morning, If you're the top, what does that mean? We have to remain nimble and flexible and entrepreneurial, if not, a lot of the little guys will nibble at us. The other thing that's got to happen in Canada, there's got to be change in regards to way you can market to consumers, educate consumers on the quality assurance of the products and the safety of the products. And that's what Canada got to do. And I think with that, we can grow to a 30 plus market share in that marketplace.
Thank you. Our next question comes from the line of Andrew Carter with Stifel. Please proceed with your question.
Hey, thank you. Good morning. I know that you guys aren't going to give any formal guidance today, but I just wondered directionally how you're thinking of this next quarter with the reopening, stronger on premise sales for Sweetwater, appreciate the headwind. And then within that, kind
of what Steve, you mentioned
a lot about the sustainability of free cash flow. So as we think about that, the $5,000,000 in CapEx, is that a good number for the quarter? Is that a good number going forward? Or is that step up higher? And then second, kind of big one is, do you expect a better balance on in terms of your cultivation in terms of that working capital drag?
Thanks.
Carl, you want to take that?
Sure. So just Andrew, with respect to free cash flow and CapEx, I would say for the next a few quarters, the $5,000,000 is probably the high watermark. Most of our large or not most All of our large capital projects have finished across the world. We have some investing to do a little bit on some lighting projects in Leamington to improve lighting and there will eventually be a decision on additional extraction capacity in Portugal, but those are not large products. As it relates to inventory levels, obviously, We inherited some inventory as part of the transaction with Tilray.
We're closing down those the Inniskillen facility moving that production to Leamington where we think we'll have a little bit better control on that. So we should see our some of these those inventory levels start to draw down as stores reopen. In terms of the demand portion of the question and what the end of Q1 will look like. We're not really going to give any guidance, but I think I've said this before. You're seeing an increase in demand at storefronts.
I think there's a delay that happens at store level to ordering inventory, to making sure that they remain in lockdowns. If you are here in Canada, there's a
lot of people who have
been burned by, okay, the lockdown is over, the lockdown is back on again. So there's going to be a little bit of time to make sure that that process is moving forward and I think that will lead to a little bit of a delay in ordering increased ordering patterns. And then that same piece will play out at the provincial boards. There'll be the couple of week delay as orders start increasing from the retail side before they start placing additional orders with LPs. And so towards the end of that of our quarter is when we see the demand increasing from the seen from the
Board. And
Andrew, in regards to guidance, I think it's important to get all the retail Stores open, all the stores that have been built open, get all the distribution facilities, get the piped up demand run through the system. And then we got a better handle on what consumption really looks like, what ordering and all our new products and be able to give some guidance after that.
Thanks. I'll pass it on. Thank you.
Thank you. Our next question comes from the line of John Zamparo with CIBC. Please proceed with your question.
Thank you. Good morning. I wanted to ask about the prior question on the U. S. So Erwin, when you say you're looking for optionality deals in the U.
S, just want are essentially what amounts to costless exercises on warrants for meaningful stakes. So Is that what you're looking for? And if so, is it fair to assume you're looking for cannabis brands rather than vertically integrated operators, whether it's MSOs or single state operators?
So John, you broke up just as you're going to ask me that pertinent question, but I think I know what you're asking me. In the U. S, There's 2 paths I'm going down. Number 1 is looking in the consumer products area in alcohol and food that today our products that are sold in the marketplace that ultimately be converted to THC and CBD products once legalization does happen. And that would become part of our Sweetwater and our Manitoba Harvest business.
Alongside of that would be to be looking at optionality and investments in MSOs. That makes sense that would strategically align with Tilray and look to acquire or merge with them 100% once legalization did happen. So there's 2 paths in regards to investments in the U. S.
Understood. Appreciate the color. Thank you.
Thank you very
much. Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.
Good morning and thanks for taking my question. So, Oren, you referenced in your comments that I think some of the challenges just on the pricing front that you guys are seeing in the market. I'm just curious as you look at the competitive backdrop out there, what are you seeing out there right now and how you guys think about just some of the pricing pressures going forward?
So Rupesh, good morning. Listen, I think what happened out there as a lot of products rather bought online and products were Walk up at retail stores. You didn't have your butt tenders able to tell about the qualities of the products, the attributes of the products. So a lot of consumers were just buying products on price. And that's The bad news, the good news is, I think a lot of these products they bought on price, they saw that they were not or learned that they were not good products, not quality products And learn from that.
As I said before, price is key. We are a low cost producer. On the other hand, consumers like brands and when you're buying a good tequila, a good vodka, A good alcohol, a good wine, you want a good quality product and that is not going to be any different in the cannabis space. And one thing that I can reassure you with our over 12 brands. Quality products is something that we're going to come out with.
Potency is important. Our different strains are important and our different brands. And listen, pricing is important, but we're not going to be out there as the lowest price product line. And I think building consumer awareness around quality is going to be something very important for us. But I think a big part of it was, It was before bought by on price.
It was not bought on brands. It was not bought on education and consumers tried them and We're not happy with the results.
Great. Thank you.
Thank you.
Thank you. Our next question comes from the line of Tamy Chen with BMO Capital Markets. Please proceed with your questions.
Thanks. Good morning. Erwin, I just wanted to ask, with respect to your U. S. Strategy, the two approaches that you talked about.
I'm just wondering, it's a very complex strategy where you're looking for several things, CBD, hemp, more alcohol, more food businesses and then THC on top of that. So if First part of the question is why pursue both of these routes? It seems to add a lot more to your plate and a lot more complexities. And 2 is when you talk about that second pass on investments and possibly acquiring MSOs, why do you believe that MSOs or even single state operators would be interested in an investment or possibly acquisition by Tilray? Thanks.
So number 1, again, strategically, We do have an alcohol business today. We think alcohol is growing in the 3% to 5%. And we think, number 1, It's a great category. We think we can bring a lot of new products to it like we've done so far with Sweetwater, and we'll Continue to do that as we introduce our tequila in the cans, our wines in the cans, our Riff products, which are vodka seltzers in the can and gain distribution. We have the infrastructure there to do that.
And that's no different than Manitoba Harvest. We want these businesses to be bigger businesses. And ultimately with the adjacent to cannabis is something that will be important to us. It's not where our consumer packaged goods business is going in the food and drink business. It's important there adjacencies to of cannabis business or CBD.
And in prior life, we've built consumer packaged goods business. As I said before, we want to be the largest cannabis company in the world. In regards to what they would want to Partner with us. Listen, we are one of the largest cannabis companies today in the world. We have a big business in Canada In the adult use, the medical use in regards to cannabis 2.0 and drinks and gummies and edibles, we have a major business in Europe in the medical business.
And as you look at some of these MSOs where they're yes doing business in the U. S. Is they look to have that partner that has capital. We have close to $500,000,000 of cash on our balance sheet. We have great liquidity within our stock.
We have a lot a very experienced management team and we have a good history of We had to grow great cannabis with great strengths. So I'm not sure why they would not want to partner with us if it made sense economically for both sets of shareholders.
Thank you. Our next question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.
Hi, good morning and thank you for the question. So, Oren, you mentioned about your Fresh aspirations in Canada, it's good to 3%. But I also want to talk about in terms of the legal market versus the illicit market and maybe some of your goals there. Right now, Ontario estimates about 50% of sales still going to the illicit market. Pricing, at least on the flower Our size seems to be below the illicit market stores have certainly improved a lot within Canada even though you're still looking for it to get to 3,000 and maybe we'll see more of an impact from the great amount of stores in the back half of the year as lockdowns kind of ease.
But I'd love to give you a perspective in terms of what else you think would be needed in terms of from the legal category to better compete with the illicit market, whether it be product formats, more quantity for beverages, more milligrams for edibles or what you believe will be needed in order to gain more of that market share over the illicit market? Thanks.
So number 1, as I've said before and I say it again, brand equity, brand equity, brand equity. You got to go out there and build your brands. You got to go out there and get consumers to trust your brands that go through the quality assurance and the regulatory That products go through and you know what you're getting in regards to a potency type of potency product in regards to If a product has any type of additives, if a product It's sprayed with pesticides or how it's grown, etcetera. So that's important to educate consumers on the product safety, the product quality, the product attributes. Number 2, what's really important is this year is pricing.
And I agree price is important. And but When you pay the price, you know you're going to be happy and satisfied with what you're getting in the product. Number 3 is distribution and making sure we can sell our products across all the Canadian provinces and have a strong presence in each of the provinces. Number 4 is innovation and that is key. Listen, if you come back and look at it, we sell close to $100,000,000 of vapes today and 2 years ago, vapes were not around in regards to pre rolls and the different technology in pre rolls today, in regards to our different hashes and waxes and oils and innovation is going to be key.
So it's not we're just growing flower and putting flower out there. We're putting multiple new products, multiple innovation. And the big expansion for us today is also in the drinks and edible area where we had very limited business today and now that we have a facility, we have the opportunity to grow that business.
Hello.
Your next question please.
I am so sorry about that technical difficulties. Our Question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.
Thank you. Good morning.
You've some of the attractive assets that came with the Tilray deal and obviously the Portugal facility is a big one of those. You did also, inherit, it's a business that its prior auditor cited material weaknesses in internal controls. Can you just help us understand how you're addressing that and how hard it is to fix?
So Erwin, if you're okay, I can take that. Michael, there were, I believe it was 3 material weaknesses that have been identified by the prior management team with the prior processes that existed. At Till. We have been working on those items since even during the integration period sorry, more than just the integration period and even during the pre closing period to help strengthen those controls. Those same processes are obviously we have similar processes at Aphria, and we have been able to design controls around it that did not result in a finding of a material weakness.
And so we believe by integrating their processes into ours and taking best practices moving forward, that that material weakness, will be fully remediated within the next year. So before we report our next review.
Okay. Thank you. Our next question comes from the line with Heather Balsky of Bank of America. Please proceed with your question.
Hi, thank you for taking my question. So first, There as we're seeing Canada open up to some degree, can you walk us through June July and sort of What was open and any sort of signs that you're seeing or hearing of improvement? And just as a follow-up to that, there's we've seen consumers across the board, not just in cannabis, shift to shopping more online with all these lockdowns. And curious how you're thinking about consumer habits going forward and confidence that you have that the consumer hasn't or a portion of the consumer hasn't permanently shifted to buying online? Thanks.
So Heather, good morning. And number 1 in the Canadian market and Carl jump in here anytime, because you're in Toronto. But what we're seeing is a lot of piped up demand and a lot of getting back to business and stores opening. As you heard me say, there was close to 600 stores where licenses were granted that did not open during the pandemic and did not want to open that are going to start to open now, which will give Consumers opportunities to win and buy products. And what consumers want to see is all the new products that have come out and get back to buy in at their local retail stores.
In regards to buy in online, I think if anything, the reverse has happened where consumers, they want to get into stores, want to get educated about the new and want to go back to shopping at retail. And I'm seeing that in the supermarket industry and other retail stores. And I think that is something we'll see in Canada right now because there's going to be a lot of new stores that are opening up. And With that, I hope to see a lot of buying from that piped up demand. A lot of our new products will be introduced into the stores.
And the big thing is what we have to do is educate consumers again about our products because It's almost been a year that we have not been able to really talk to them, show them and let them try our products and let them purchase our products.
Great. Thank you very much.
And we plan to spend a lot more in marketing dollars in regards to social media and getting out on these products. And that's what's important to get out there and spend. And as I say, the Canadian market is limited what you can do in advertising, but we are going to be aggressive.
Thank you. There are no further questions at this time. I would like to hand the call back over to management for any closing comments.
Thank you very much, operator, and thank you very much everybody for getting on the call today. I got to tell you in 2021, it's been a tough year. If you step back and look, Canada was closed pretty well since November. Europe was closed as well. And with that, we were able to do 2 major acquisitions, 1 in October in acquiring Sweetwater and then announcing in December on the Tilray and closing on both of these deals.
We put in place a very strong management team. I really like to thank my management team because of the successes happened because of the management team and the great people I work with I also want to thank our Board of Directors for their support during this pandemic and getting these things done. You heard me talk about how already we've put in place a lot of cost savings, close to $35,000,000 between putting both businesses together. We originally said we do this in 24 months. We've moved it up to 18 months.
In regards to the Q4, still with Canada close, We grew our business 55% in cannabis, net income of $33,000,000 We're cash flow positive. We're sitting with $485,000,000 in the bank. One of the questions asked to me, what do we bring to the In regards to why an MSO would want to partner with us, let me tell you something, Canada has been a tough market for us. We've learned a lot. We've learned how to grow.
We've learned how to produce products. We've learned how to innovate and taking a lot of those learnings from Canada and Europe into the U. S. Will be very helpful for any MSO that partners with us. I Appreciate the support from our shareholders and sticking with us.
I know times and I get the notes from our retail shareholders, which I really appreciate them and it's important for us to communicate. It's very important today if you are a shareholder that you get out and vote. As I've said, when we close this deal, we are left with no shares We'll to go out there and do any of these acquisitions and to invest in the future of our business. With that, enjoy the rest of your Thank you again and I look forward to speaking to you in the future. Have a great day.
Thank you. That does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a great day.