BREAKING: Major NHL and Bedard/McDavid's Sponsor Files For Bankruptcy Protection
BY SKY SEPTEMBER 14, 2023 (3:05 PM)
A Crucial Decision: Filing for Bankruptcy Protection
The decision to file for bankruptcy protection was not taken lightly. It reflects the company's determination to navigate through troubled waters and emerge with a renewed sense of financial stability. Under the CCAA, Biosteel will embark on a court-supervised sale process, aiming to safeguard its business and assets.
One of the critical factors behind this decision was Canopy Growth's choice to discontinue its financial support for Biosteel. Canopy Growth, primarily known for its involvement in the cannabis industry, had a substantial stake in Biosteel, owning 90% of its equity. The financial burden of funding Biosteel's operations weighed heavily on Canopy Growth, contributing to approximately 60% of its first-quarter losses.
Canopy Growth's stock, listed as WEED on the Toronto exchange, had been adversely affected by the cash flow drain caused by its investment in Biosteel. In response to this financial strain, Canopy Growth expects to achieve annual cash savings exceeding CDN$100 million ($74 million). Unfortunately, this cost-saving measure will also result in the layoff of 181 BioSteel employees, as indicated in an SEC filing. It's worth noting that BioSteel had approximately 190 employees as of the previous month.
Canopy Growth CEO David Klein expressed the company's rationale behind this decision, emphasizing the need to align with a cannabis-focused, asset-light strategy. While BioSteel demonstrated significant year-over-year revenue growth, its operating losses became a challenge that didn't align with Canopy Growth's evolving business strategy.
BioSteel's Roots and Ambitions
BioSteel's origins are rooted in hockey, having been founded in Toronto in 2009 by entrepreneur John Celenza and former NHL player Mike Cammalleri. The company made a name for itself by directly supplying NHL teams with its sports drink, even though Gatorade was the league's official partner. Over time, BioSteel secured partnerships with NHL stars such as Connor McDavid, Nathan MacKinnon, John Tavares, and Connor Bedard, who joined as an endorser ahead of becoming the top pick in the 2023 NHL draft.
BioSteel aimed to carve out a niche in the competitive sports drink market, striving to attain the fourth market position, with Gatorade, BodyArmor, and Powerade occupying the top three spots. These three brands collectively dominated 98% of the U.S. sports drink market in 2022, according to Euromonitor. The success story of BodyArmor, co-founded in 2011 and eventually acquired by Coca-Cola for a staggering $8 billion, served as a beacon of aspiration for many in the sports drink industry.
The decision to seek bankruptcy protection marks a pivotal moment in BioSteel's journey, as it grapples with financial challenges and the consequences of Canopy Growth's withdrawal of support. As the company enters a court-supervised sale process, it faces both uncertainty and opportunity, with the hope of emerging stronger and more resilient in the ever-evolving sports nutrition landscape.