Dive Brief:

Canopy Growth said last week it hadn't finished scaling up its cannabis beverage production facility in Smiths Falls, Ontario for commercial production and will not launch its products this month as previously announced.

Canopy didn’t give an updated timeline for the launch, but said it doesn’t think the delay will impact its fiscal 2020 revenue. The company plans to further update when it releases its fiscal third-quarter results in February.

"Canopy has had seven weeks to work with THC in the brand new beverage facility to scale processes and IP it has developed in the R&D environment," CEO of Canopy Growth David Klein said in a release. "In order to deliver products that meet our customer’s high standards we are electing to revise the launch date while we work through the final details."

Dive Insight:

This is not optimal timing for Canopy. In Canada, cannabis-infused products were allowed to start hitting shelves in December, and sales have been picking up. The news of Canopy's delay came the day after the government-run Ontario Cannabis Store opened and sold out of all available edibles and beverages.

Without a new timeline presented for its launch, this delay could put other brands out ahead of Canopy, and the company could miss out on the initial excitement of legal cannabis edible sales.

Canopy, which is the biggest cannabis company by market value, previously stated it would stagger the launch of its new cannabis products starting early this month. The first wave of cannabis chocolate products was expected to arrive at retail early this month, along with the first batch of its ready-to-drink cannabis-infused beverages. The next wave of Canopy's drinks were going to be launched in early February.

Canopy had two chocolate items ready for sale when cannabis-infused products were legally available in Canada last month, but no beverages or vapes, according to BNN Bloomberg. At the same time, other companies like Aurora Cannabis pushed out more than a dozen products.

The delay likely isn't pleasing Constellation Brands, which has invested nearly $4 billion in the cannabis company. Since the investment, Canopy has weighed down Constellation's earnings. Despite its original high expectations for the company, Constellation disclosed a loss of $484.4 million on its Canopy Growth investment in October.

"Today’s update will do little to satisfy investors who have already seen Canopy downgrade sales guidance twice this fiscal year," Jefferies analyst Owen Bennett told Bloomberg. "We also note there appears no excuse for this announcement, with the delay caused by lack of clarity internally rather than unforeseen external factors, which is even more worrying."

Canopy submitted its final documentation for its beverage facility to Health Canada last June and received its license in late November, so this delay wasn't caused by any regulatory complications.

Constellation recently increased its oversight of Canopy by installing one of its employees as CEO. Last year, Bruce Linton, former co-CEO and a board member of Canopy Growth, was fired. In December, Canopy Growth appointed board chairman and Constellation Brands Chief Financial Officer David Klein as the cannabis company's next CEO. Klein will have to deliver better results, and this delay is not the best first impression as Canopy's new leader.

There is a big market in Canada that Canopy will want to capitalize on. Although cannabis food and beverage products are just starting to hit shelves now, Canada legalized recreational marijuana nationwide at the end of 2018. In the first full year of marijuana legalization, domestic beer volumes in Canada fell 3.9% compared to 2018 largely because more people were smoking, according to Beer Canada.That market could represent what could happen in the U.S. if the country also legalizes cannabis in food and beverage and more people look to buy infused products instead of traditional ones.

Despite the hurdles now, Constellation's investment in Canopy could still be a smart move in the long term if the cannabis company is able to get its act together.