CBD company Elixinol Wellness is shuttering its operations in the European Union and the UK, and will focus its attention on the U.S. and Australian markets, according to an internal email reviewed by HempToday.
Addressing the situation in Europe, the company, formerly known as Elixinol Global, said its retreat from the EU and UK markets — once identified as lynchpins in its strategy — is based on “most unfavourable circumstances” over the past year including COVID-related disruptions, the UK’s departure from the European Union and regulatory changes.
Those forces combined to create a “depressed trading environment that has rendered our current EU operations non-viable and without sufficient prospects to materially improve business results in the foreseeable future,” the email said.
Elixinol had reported in August that group revenue for the first half of 2021 was down 70% – from$7.9 to $4.8 million, compared to the same period in 2020.
‘Prudent, strategic choice’
Elixinol said it expects to complete the wind-down of its EU and UK operations near the end of November. It is unclear how many employees are affected, but the email said “all roles will become redundant.”
“Whilst this is an extremely disappointing outcome, it is also a prudent and strategic choice that allows us to focus investment on the areas of the business that hold the most promise,” the email noted.
Following a June 2020 capital raising that brought Elixinol $11 million from institutional and retail investors, the company said it was shedding non-CBD assets to concentrate on that business in the U.S., UK and EU.
Signals in August
Elixinol signaled its withdrawal from Europe in its mid-year 2021 report released in August when it announced it had terminated an agreement reached in March 2021 to acquire CannaCare Health GmbH of Germany. Elixinol said at the time that the €9-million stock-and-cash deal would give its products distribution across Germany, Austria and Switzerland, and provide access to the UK market for CannaCare brands.
The company said it has Novel Foods applications under review with the UK’s Food Standards Agency (FSA), and could re-enter that market if those products are cleared. “But this is not expected to happen within the near term,” according to the email.
Rough going in UK
Elixinol lamented a slow approval process for CBD in the UK in its half-year 2021 report. “Despite industry expectations, the FSA has not been able to process Novel Food Application submissions leaving brands and retail customers uncertain which products will be able to remain in distribution,” the report said. “Feedback from major UK retailers through the period has highlighted a reluctance to place replenishment orders or consider new listings until the FSA publishes a list of authorised CBD products.”
Despite its sharp drop in income, Elixinol also reported at mid-year that its adjusted EBITDA for the first half of 2021 was up by 53% over the analog period in 2020, attributable to “business optimisation efforts.”
Elixinol Wellness, with headquarters in Colorado, USA and Sydney, Australia, trades on the Australian Stock Exchange.