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Planned divestiture of Canadian cannabis business to cut costs and realign focus on increasing value of consumer products business
LAVAL, QC, June 8, 2022 /PRNewswire/ - Neptune Wellness Solutions Inc. ("Neptune" or the "Company") (NASDAQ:NEPT) (TSX:NEPT), a diversified and fully integrated health and wellness company focused on plant-based, sustainable and purpose-driven lifestyle brands, today announced the launch of a new Consumer Packaged Goods (CPG) focused strategic plan to reduce costs, improve the Company's path to profitability and enhance current shareholder value.
This plan builds on the Company's initial strategic review that took place in fall of 2021 and focuses on two primary actions: (1) planned accelerated divestiture of the Canadian cannabis business and (2) a realignment of focus and operational resources toward increasing the value of Neptune's consumer products business, which the Company believes is showing greater potential. These actions are also intended to preserve resources towards meeting its funding requirements in the near-term while driving long-term profitability and growth.
Intended divestiture of cannabis business and reduction of workforce
The intended divestiture of the cannabis business would include the sale of the Mood Ring™ and PanHash™ brands, along with the Company's Sherbrooke, Quebec facility, in one or more transactions. The value of the facility was recently appraised at $21 million CAD by a third-party appraisal company. Neptune has retained Stifel GMP to support the divestiture efforts, with a focus on maximizing the value to Neptune shareholders.
In order to accelerate its cost savings, the Company will focus on winding up its cannabis operations pending a transaction.
This planned action is intended to provide significant cost savings and help maximize operational efficiencies, resulting in a 50% reduction in workforce, over 30% reduction of total payroll costs and an estimated annual cost savings of $5.8 million CAD. In addition, the Company expects to see additional cost savings from corresponding reductions in corporate overhead costs and professional fees.
Finally, the exit of the Canadian cannabis business may impact the amount and structure of financing the company is currently seeking. It is expected to reduce the amount of financing the Company seeks, given a lower anticipated expense structure, along with anticipated cash inflows from the planned divestiture. Additionally, the divestiture is expected to facilitate working with a broader set of financing sources – including traditional banks and financial institutions that have policies restricting dealing with businesses exposed to regulated cannabis operations.
"This is the final stage of our transition to a pure play, purpose driven consumer packaged goods Company. This strategic divestiture greatly simplifies our overall structure, enabling us to hyper-focus on those areas of the business we believe are best positioned for profitability and growth," said Michael Cammarata, President and CEO of Neptune. "Of course, the most difficult part of the Company and Board making this decision is the impact on our workforce. We are committed to working with those employees to ensure they are supported throughout this transition. I extend my deepest gratitude to each and every person impacted by this decision and thank them for their hard work and dedication to Neptune throughout their tenure."
"Today's decision, while difficult, is a step that is necessary to best position Neptune for long term success," said Julie Phillips, Neptune's Chair of the Board. "Together with management, the Board has worked carefully to explore all possible avenues and we are confident that the decision to exit the Canadian cannabis sector and realign focus on our consumer goods brands is the best next move for both the Company and its shareholders."
Renewed focus on high-potential business segments
With the planned divestiture of its cannabis business, Neptune is renewing its focus on the core brands – Sprout Organics and Biodroga Solutions – that align closely with future consumer trends and show a greater potential for future growth and profitability.
Sprout Organics, the fast-growing organic baby and toddler food brand, has made major distribution gains over the past year, expanding into Walmart and Target. The recent launch of licensed, co-branded product with CoComelon – the number one kids entertainment show globally – has far surpassed initial sales goals in Walmart stores. Neptune sees significant opportunity to continue to improve Sprout's margins and accelerate its path to profitability.
Biodroga Solutions, Neptune's B2B nutraceuticals business, has a strong foundation and a robust pipeline for continued growth. The Company's supply chain capabilities and product development expertise can also be applied to future Neptune brand and product innovations. Cedrick Billequey, Biodroga's business leader, also oversees Forest Remedies, a vegan Omega supplement brand, providing synergies between the B2B business and consumer brands.
The success of these businesses and their anticipated growth form the foundation for the future of Neptune as a CPG business built to serve the next generation of consumers.
Sarah Tynan promoted to CEO of Sprout Organics
As part of the Company's renewed focus on its CPG brands and Sprout Organics in particular, Neptune is delighted to announce that Sarah Tynan, current Sprout Chief Customer Officer, is promoted to CEO of Sprout, effective immediately. Ms. Tynan has been instrumental in garnering big distribution gains for Sprout, including Walmart and Target, and leading the highly successful CoComelon partnership. She brings deep sales experience and business acumen, including previous roles at Newell Brands and Unilever, and will continue to drive the Sprout business forward.
"Our goal with this strategic plan is to strengthen our cash position and enhance financial flexibility, centering focus on our higher potential CPG businesses," said Cammarata. "With Sarah Tynan as the new CEO of Sprout and Cedrick Billequey leading Biodroga Solutions and the personal care & beauty segments of our business, I'm confident we have not only the right plan, but the right team in place to take Neptune into its next stage of growth and profitability."
Neptune Wellness will provide further detail on the execution of this new plan over the coming months.
About Neptune Wellness Solutions Inc.
Headquartered in Laval, Quebec, Neptune is a diversified health and wellness company with a mission to redefine health and wellness. Neptune is focused on building a portfolio of high quality, affordable consumer products in response to long-term secular trends and market demand for natural, plant-based, sustainable and purpose-driven lifestyle brands. The Company utilizes a highly flexible, cost-efficient manufacturing and supply chain infrastructure that can be scaled to quickly adapt to consumer demand and bring new products to market through its mass retail partners and e-commerce channels. For additional information, please visit:
