Canopy Growth Targets European Cannabis Expansion After MTL Deal and Cost Cuts

Key Points

• Canopy Growth is refocusing on consumer cannabis after cutting more than C$30 million in costs, refinancing operations and acquiring MTL Cannabis to strengthen cultivation and product quality.
• The company reported growth across its businesses, including 20% in Canadian adult-use cannabis, 18% in medical cannabis and 10% in Europe for the latest reported periods. Gross margin also improved to 31%, up 600 basis points year over year.
• Europe is Canopy’s main near-term growth opportunity, particularly Germany, Poland and the U.K. Management aims to increase European revenue from roughly C$40 million annually to more than C$100 million by leveraging premium products and an EU GMP-compliant supply chain.

Canopy Growth NASDAQ: CGC is positioning itself for further expansion in medical cannabis, European markets and Canadian recreational cannabis after restructuring operations, reducing costs and acquiring MTL Cannabis, President and CEO Luc Mongeau said during a Canaccord Genuity presentation.

Mongeau, who has served as CEO for 18 months, said the company has shifted its focus toward operating as a consumer cannabis business rather than prioritizing cash management and pursuing opportunities across too many markets. He said Canopy reduced costs by more than C$30 million, refinanced the organization, strengthened its management team and acquired MTL Cannabis.

“We are really taking the next few critical step to position Canopy Growth to really win in the global cannabis market,” Mongeau said.

Growth Across Canadian and European Operations

Mongeau said Canopy holds the No. 1 position in Canadian medical cannabis and has improved its standing in the Canadian adult-use market. The company was ranked No. 10 in Canadian recreational cannabis when he joined, moved to No. 8 after streamlining operations and now ranks No. 6 following the MTL Cannabis acquisition, according to Mongeau. Its goal is to become a top-three player in the market.

While acknowledging that Canadian recreational cannabis is a relatively mature market, Mongeau described it as a roughly C$5 billion market growing at 3% to 5%. He expects the industry to consolidate, noting that more than 1,000 licensed producers currently operate in Canadian recreational cannabis. He said the market could ultimately be led by approximately seven major participants.

For fiscal 2026, Canopy reported 20% growth in Canadian adult-use cannabis and 18% growth in its medical business, Mongeau said. For the first quarter of fiscal 2027, he said consolidated revenue rose 13%, including:

• 10% growth in Europe;
• 10% growth in Canadian recreational cannabis;
• 22% growth in Canadian medical cannabis; and
• 6% growth at Storz & Bickel, its medical vaporizer business.

Mongeau also said the company’s gross margin reached 31% in its latest quarterly results, representing a 600-basis-point improvement from the prior year. During the discussion, the operator characterized the most recent margin level as “36-ish percent,” but Mongeau specifically cited 31% during his presentation.

MTL Cannabis Acquisition Targets Flower Supply and Quality

A central component of Canopy’s strategy is improving cultivation output and flower quality. Mongeau said Canopy had not historically treated cultivation as a core operational priority, which contributed to supply constraints and inconsistent availability in international markets.

MTL Cannabis brought cultivation expertise and “passion for the plant” into the company, Mongeau said. Canopy is investing in systems, processes and capital expenditures intended to increase yields and production by as much as 30%, creating additional supply for markets including Europe.

“You need great flower consistently to win,” Mongeau said, adding that the company’s operating reviews and systems are now centered on producing higher-quality flower.

Chief Financial Officer Tom Stewart said less than 20% of Canopy’s flower production is currently exported. He said the company is integrating MTL’s operations with Canopy’s facilities and production footprint to eliminate overlap, reduce costs and improve the quality of products supplied to consumers and patients.

Canopy has three cultivation facilities and is converting a hybrid facility to fully indoor cultivation, Mongeau said. The company is cultivating in Canada at facilities certified under European Union Good Manufacturing Practice, or EU GMP, standards.

Europe Seen as Major Opportunity

Mongeau identified Europe as Canopy’s largest near-term opportunity, particularly Germany, Poland and the United Kingdom. He said Canopy has invested in sales teams, distribution relationships, brands and connections with pharmacists and doctors, but its progress in Europe had been hampered by inventory shortages.

In Poland, Canopy recently returned to inventory availability and rose to the No. 3 market position, Mongeau said. The company is also making its first shipment to the United Kingdom during the current quarter, with related sales expected to appear in the third quarter.

Canopy’s European business is currently operating at approximately C$10 million per quarter, or about C$40 million annually, according to Mongeau. He said the company is targeting a run rate of more than C$100 million, and eventually C$100 million to C$150 million annually, supported primarily by Germany.

The company’s supply chain is EU GMP-compliant from cultivation through importation into Germany, repackaging and distribution, Mongeau said. He said Canopy is also working to qualify its Smiths Falls facility to produce EU GMP-compliant cannabis 2.0 products, including softgels, oils, concentrate distillates, vapes and eventually pre-rolls.

Stewart said Europe offers more attractive pricing than Canada and could support premium offerings based on MTL Cannabis flower quality. Rather than compete primarily in value-priced products, Canopy plans to focus on premium categories, he said.

Brands and Vaporizer Expansion

Mongeau said Canopy plans to use its Tweed and Spectrum brands to compete in premium European medical cannabis segments. He said Germany continues to have a sizable price band of roughly €5 to €7 that has remained resilient despite broader pricing discussion in the market. Recent German research showed positive attitudes toward Tweed, Spectrum and MTL brands, he said.

Canopy also sees expansion potential for Storz & Bickel, which Mongeau described as the leading herbal medical vaporizer company. The company is pursuing innovation in concentrate vaporizers, a category Mongeau said is substantially larger than herbal vaporizers.

Overall, management said it is prioritizing cultivation, operating efficiency and a controlled expansion of its EU GMP supply chain rather than rapidly entering every emerging European market. Stewart said those foundational investments should benefit additional markets as they open.

About Canopy Growth (NASDAQ:CGC)

Canopy Growth Corporation is a leading Canadian cannabis company engaged in the production, distribution and sale of both medical and recreational cannabis products. Headquartered in Smiths Falls, Ontario, the company cultivates a diversified portfolio of offerings that includes dried flower, pre-rolled joints, oils, softgel capsules and edibles. Canopy Growth also markets derivative products such as beverages and wellness formulations under a range of brands, aiming to serve both patient and adult-use markets.

The company operates through multiple subsidiaries, including Tweed Inc, Spectrum Therapeutics and Tokyo Smoke, each targeting distinct consumer segments.

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