Cronos Group (CRON.TO)(CRON) has appointed a new chief executive officer, replacing Mike Gorenstein, who has led the Toronto-based cannabis company since 2016.
Cronos said Kurt Schmidt brings more than three decades of experience at major consumer packaged goods firms including Nestle (NSRGY), Gerber and Kraft Foods (KCH). The company said Gorenstein has been named executive chairman.
“Over the past year, I’ve led a search for an experienced consumer focused executive who shares the company’s values and can help take us to the next level,” Gorenstein said in a news release on Wednesday. “When I met Kurt, it was immediately clear that he is uniquely suited to drive the Company’s next phase of growth.”
The change follows Tuesday’s leadership announcement by Aurora Cannabis (ACB.TO)(ACB), and adds to a string of boardroom shuffles that have swept Canada’s cannabis industry.
Schmidt will take the lead at Cronos as the company attempts to turn the corner on several disappointing quarters marked by losses and writedowns.
Cronos reported a US$31.3 million loss and US$9.9 million in net sales in its latest financial results on Aug. 6. The company, which reports in U.S. dollars, blamed “unprecedented shifts in our industry and the global economy.” The quarter was also marked by a US$40 million impairment charge, which included US$35 million for the company’s U.S unit and US$5 million for its Lord Jones hemp-derived CBD brand.
In May, Cronos warned that it expected writedowns as the COVID-19 pandemic hit its U.S. CBD business, which relies heavily on a network of over 900 brick-and-mortar retail stores.
Cronos is among the handful of Canadian cannabis players to secure investment from a major company outside the sector. Cigarette giant Altria (MO) purchased a 45 per cent stake in the cannabis company for $2.4 billion in 2018.
While Gorenstein has often talked up M&A opportunities, the company has not made any major investments since acquiring the CBD firm Redwood Holdings Group for US$300 million in 2019. The company said it had $1.1 billion in cash as of June 30.
CIBC analyst John Zamparo recently said Cronos is his top pick among Canadian cannabis firms to capitalize on a major pot policy shift in the United States driven by the November presidential election.
“[Cronos Group is] best-positioned given [its] relatively low cash burn rate and relationships with U.S. cannabis retailers via connection to Gotham Green, [a] U.S.-based cannabis investment firm co-founded by CRON CEO Mike Gorenstein,” Zamparo wrote in July.
“Of course, we believe these stocks would see significant expansion during the run-up to legislation passing, similar to how Canada’s legalization played out.”