Sweetener player GLG to focus on CBD to buffer 2019 losses

09 Jun 2020 --- Natural sweetener company GLG Life Tech (GLG) has published its financial results for the financial year ended December 31, 2019. The company reported revenues of CA$10.2 million (US$7.6 million) for the year 2019, a CA$6.4 million (US$4.7 million) decrease compared to the year 2018. The report identifies competitive price pressures in the stevia market as a main factor contributing to the company’s financial situation. GLG further states it will focus on its business endeavors in cannabidiol (CBD) and specialty stevia to make up for the losses it incurred last year.

The financial report further states the company’s revenues totaled CA$2.9 million (US$2.1 million) in the fourth quarter of 2019, a CA$900,000 million (US$670,000) decrease compared to the fourth quarter of 2018 (CA$3.8 million/US$2.8 million). GLG reported a gross profit margin of 6 percent for the fourth quarter 2019, which also resulted in an 8 percentage point decrease from the fourth quarter of 2018 (14 percent). The decrease in gross profit margin was attributable to an increase in capacity charges charged to sales cost.

GLG states it lacks the cash necessary to fully fund the business operations and its strategic product initiatives. To address this cash need, management has negotiated a CA$1 million (US$744,000) revolver loan with a related party for working capital purposes in 2020.

The company is currently facing price pressure in the stevia market over the last year that has reduced the price of mainstream “Reb A” products, such as Reb A 80 and Reb A 97, to the lowest levels in years. “While these products have historically formed the core of the company’s product sales, the margins on sales of these products have grown increasingly slim,” GLG states.

GLG Life Tech sees a range of opportunities in the CBD market.Boosting stevia and CBD business
To ameliorate its financial situation in the future, the company plans to focus on speciality stevia products that are more differentiated than Reb A products. GLG eyes this approach as bringing more revenue opportunities and more meaningful margin contributions to the company’s bottom line. Additionally, the company states it is also “progressing well” on implementing a new line of business in the sweetener space distinct from its bulk stevia sales. This has the potential to significantly increase the company’s revenues and margins.

GLG is also exploring options to enter the CBD market, where it could leverage its production expertise and equipment toward an investment that would jump-start its ability to begin producing high-quality low-cost CBD products quickly. This move could be facilitated by its distributorship agreement with East West Pharma Group (EWPG) for the distribution of its high-quality CBD products.

The sweetener producer maintains it will continue to explore other complementary opportunities in the cannabis extract market. However, it does not expect to begin any CBD operations or sales in the first half of 2020. Consequently, the company anticipates revenues and margins in the second half of 2020 and beyond.

“GLG’s decision to enter the CBD space by partnering with EWPG aligns well with the company’s historical business focus and core competencies. Both stevia and CBD are, at root, agricultural products with successful endeavors stemming from access to high-quality cultivars containing elevated levels of the essential plant molecules. Also key are the quality-minded manufacturing and product control procedures. For EWPG and GLG, quality throughout the supply, production and distribution chain is paramount,” the financial report reads.

The CBD market has shown a slew of product innovation in the past year alone. Moreover, the approval to use stevia-based sweeteners in North America and Europe has helped to meet the growing demand for natural ingredients.

Edited by Anni Schleicher

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