- Canopy Growth appointed board chairman and Constellation Brands Chief Financial Officer David Klein as its next chief executive officer. He will start in the role on Jan. 14. Klein will remain on the company's board, but a new chairperson will be appointed.
- Klein has worked in a variety of senior leadership positions during the past 14 years at the alcohol giant. Constellation Brands owns a 38% stake in Canopy, investing about $4 billion in the company last year.
- Mark Zekulin, who became the sole chief executive of Canopy Growth when co-CEO Bruce Linton was fired from his position earlier this year, will be stepping down from his role and resigning his seat on Canopy's board this month.
Constellation seems to be betting that bringing on its own top people to run Canopy Growth will deliver better results.
After Constellation expanded its investment in world's largest publicly traded cannabis company last year, there were high expectations for the trendy company — but it has disappointed so far. As a result, Constellation is tightening its hold on the company with its executive moves.
In June, Canopy posted a larger-than-expected loss, which was expected to take millions out of Constellation's earnings. The negative performance early in the year led to drastic executive changes at Canopy. After Bruce Linton, the cannabis company's founder and co-CEO, was ousted in July, the companies announced the board would search for a replacement, looking at both internal and external candidates.
It shouldn't come as a shock that Canopy didn't look very far to find its new chief executive, even though the board said it looked at a wide variety of candidates with a special hiring committee using recruitment company Heidrick & Struggles.
In addition to a long tenure at Constellation, Klein has served on Canopy's board for more than a year. His experience with the company's leadership team and strategy will help him integrate quickly, which will be beneficial in the growing cannabis space, according to the release. During his long tenure at Constellation, Institutional Investor magazine named Klein its best CFO for three consecutive years.
After acquisitions and large investments, it is common for companies to replace leadership with their own people — or more experienced industry veterans . In 2017, Dr Pepper Snapple, now Keurig Dr Pepper, bought out Bai Brands for $1.7 billion. After the deal, the company forced out founder Ben Weiss and put in Lain Hancock, a seasoned executive from the beverage giant.
Klein's financial experience should come in handy, since Canopy has continued to fiscally struggle in recent months. In October, the Modelo and Corona maker reported second quarter earnings that exceeded analysts' expectations, but the company disclosed a loss of $484.4 million on its Canopy investment. Executives acknowledged in an earnings call losses could continue. Analysts told Food Dive the Canopy investment still could be a smart bet in the long term, but there is a lot of unpredictability and risk involved.
There is increasing pressure on Canopy to perform as it rolls out products. Canada is permitting some cannabis-infused products to be sold on store shelves this month. The company unveiled its Cannabis 2.0 portfolio of products last week, including cannabis chocolate products, distilled cannabis beverage products as well as vape pens and vape cartridges. Canopy said it expects to see its new products on Canadian shelves starting in January 2020.
Klein will have to deliver results for Constellation to turn around the investment that has been dragging down the alcohol giant. Confidence in the company is not lacking from its new chief executive. Klein said in the release that "no company is better positioned to win in the emerging cannabis market."