Neptune Wellness Solutions Inc. (NASDAQ:NEPT) (TSX:NEPT) launched a new consumer packaged goods (CPG) focused strategic plan to reduce costs, improve the company's path to profitability and enhance current shareholder value.
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 CA$21 million 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 CA$5.8 million ($4.63 million). In addition, the company expects to see additional cost savings from corresponding reductions in corporate overhead costs and professional fees.
"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," stated 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."
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.
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.
Sarah Tynan, current Sprout chief customer officer, is promoted to CEO of Sprout. Tynan has been instrumental in garnering big distribution gains for Sprout, including Walmart (NYSE:WMT) and Target (NYSE:TGT), and leading the highly successful CoComelon partnership. She brings deep sales experience and business acumen, including previous roles at Newell Brands (NASDAQ:NWL) and Unilever (NYSE:UL), and will continue to drive the Sprout business forward.
