How Canopy Growth Makes Money: Recreational and Medical Marijuana

Canopy Growth Corp. (NYSE: CGC; TSX: WEED) is a Canada-based holding company that produces, distributes, and sells a variety of cannabis and hemp-based products for medical and recreational use. Its products include dried flower, hemp, vape pens and cartridges, THC– and CBD-infused beverages, and edibles.

Founded in 2013, Canopy Growth faces competition from a large number of U.S. and primarily Canada-based cannabis companies, including Cronos Group Inc. (NASDAQ: CRON; TSX: CRON.TO), Aurora Cannabis Inc. (NYSE: ACB; TSX: ACB.TO), and OrganiGram Holdings Inc. (NASDAQ: OGI; TSX: OGI.TO).

Key Takeaways

  • Canopy Growth produces, distributes, and sells medical and recreational cannabis.
  • Recreational-use cannabis is the company’s biggest source of revenue.
  • Canopy Growth recently implemented significant operational changes, eliminating about 220 full-time positions.
  • The company opened 305 new retail stores in Canada during Q3 FY 2021.

Canopy Growth’s Financials

Canopy Growth prepares its financial statements in accordance with U.S. generally accepted accounting principles (GAAP). The financial data presented below is in Canadian dollars in accordance with the company’s financial statements.

Canopy Growth management has focused on a strategy of absorbing financial losses short term in order to dramatically expand its operations and sales in the emerging recreational and medical cannabis markets in the U.S, Canada, and globally.

The company posted a net loss of $829.3 million in Q3 of its 2021 fiscal year (FY), the three-month period that ended December 31, 2020. It was a significant deterioration from a net loss of $109.6 million during the year-ago quarter. However, net revenue in Q3 FY 2021 grew 23.2% to $152.5 million.

Canopy Growth’s Revenue Sources

Canopy Growth provides a breakdown of its net revenue into these five sources: Recreational: Business to Business; Recreational: Business to Consumer; Medical: Canadian; Medical: International; and Other. The recreational sources of revenue were new in FY 2019, during which cannabis was first legalized in Canada.

Recreational: Business to Business

Canopy Growth’s business-to-business wholesale model was developed in response to the legalization of recreational cannabis in Canada, as the existing medical cannabis market was largely based on a business-to-consumer model. The business-to-business wholesale model sells large quantities of cannabis to provincial and territorial agencies, which then distribute the product to physical and online retail stores.

The segment posted net revenue of $43.1 million in Q3 FY 2021, comprising more than 28% of total net revenue. The segment’s net revenue for the quarter rose 0.3% compared to the same three-month period a year ago, making it Canopy Growth’s slowest-growing source of revenue.

Recreational: Business to Consumer

Canopy Growth’s business-to-consumer model began with online medical sales directly to consumers. Following legalization, the company introduced physical retail stores, wherever permissible, for the recreational market, including for the Tweed and Tokyo Smoke brands.

Net revenue for the segment was $20.2 million in Q3 FY 2021, comprising about 13% of the total. Net revenue grew by 32.7% compared to the year-ago quarter, making it the second fastest-growing source of revenue.

Medical: Canadian

Canopy Growth’s medical division is operated by its Spectrum Therapeutics brand. It produces and distributes a wide variety of cannabis products aimed at helping customers with pain, mood, and sleep conditions. Canadian medical net revenue grew 3.8% in Q3 FY 2021 to $13.9 million, comprising more than 9% of Canopy Growth’s total net revenue.

Medical: International

The Spectrum Therapeutics brand sells products in a number of other countries besides Canada. International medical net revenue rose 15.0% in Q3 FY 2021 to $21.5 million, comprising about 14% of total net revenue.


Canopy Growth’s “Other” sources of revenue include: sales of vaporizer devices through its Storz & Bickel brand; sports nutrition beverages, mixes, proteins, gum, and mints by the BioSteel brand; and revenue from beauty, skincare, wellness, and sleep products sold by the This Works brand. Other net revenue grew 60.9% in Q3 FY 2021 to $53.7 million, making it the company’s fastest-growing source of revenue. These other sources of revenue comprise about 35% of total net revenue.

Canopy Growth’s Recent Developments

In December 2020, Canopy Growth announced a series of operational changes aimed at streamlining its Canadian operations and further improving its gross margins. The company ceased its operations in a number of locations across Canada and eliminated approximately 220 full-time positions. The company also sold production facilities in two separate locations in December 2020 and January 2021 for combined proceeds of $40.7 million.

In its Q3 FY 2021 earnings report released on February 9, 2021, Canopy Growth said that it opened 305 new retail stores across Canada.

On November 3, 2020, U.S. voters in New Jersey, Arizona, and Montana approved ballot measures to legalize recreational marijuana, and Mississippi voted to legalize medical marijuana use. South Dakota approved ballot measures to legalize both.

How Canopy Growth Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Canopy Growth and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Canopy Growth releases. It shows Canopy Growth does not disclose any data about the diversity of its board of directors, C-Suite, general management, and employees overall. It also shows Canopy Growth does not reveal the diversity of itself by race, gender, ability, veteran status, or LGBTQ+ identity.

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