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Canopy Growth – End of the battle against the Cointreau brand, Fitch Ratings downgrades the Canopy share

By on June 28, 2022 0

Last year the French liquor maker Remy Cointreau REMYY sued Canopy Growth Corporation GCC for alleged trademark infringement on its Quatreau CBD-infused sparkling water brand.

Cointreau (pronounced KWAN’troh) claimed that Canopy used Quatreau, (KWA’troh) to “offset the market dominance and fame of the Cointreau brand”, arguing that “only the ‘n’ sound differentiated the two brands, Spirits Case reported earlier.

The The Canadian cannabis giant and its American subsidiary have totally or partially denied 112 of the 115 claims Cointreau and its American subsidiary filed a complaint and asked for the jury in October.

Now, according to a filing in Manhattan federal court, French orange liqueur producer Cointreau has settled the trademark dispute, reported Reuters.

After both sides asked the court to put an end to the case, the American judge Edgardo Ramos dismissed it on Monday.

Trial details

Cointreau initially accused Canopy of using Quatreau, “in order to unfairly capitalize on the goodwill and reputation of the Cointreau brand”, adding that “(the) defendants’ deliberate actions will not only confuse consumers as to their affiliation with plaintiffs and the Cointreau brand but will blur the exclusive association enjoyed by plaintiff between Cointreau and a single source of orange liqueurs.”

Canopy, based in Smiths Falls, Ont., said in a New York court filing on Sept. 21 that its Quatreau brand “has not infringed any trademark applicable under federal or state law” and does not is not “similarly confusing” with Cointreau’s trademarks and name and has not diluted it.

In addition to seeking the profits Canopy made on the products bearing the allegedly infringing marks, including court costs and attorneys’ fees, Cointreau sought a permanent injunction to restrain Canopy from infringing its marks and use any word, term, name, symbol or device on any product that may cause confusion.

Quatreau by Canopy launched in the United States in March 2021, after its debut in Canada. Shortly after, the Canadian cannabis producer partnered with Southern Glazer’s Wine & Spirits to distribute its CBD-infused beverages in the United States.

The view of Canopy’s financiers and analysts

Meanwhile, Canopy Growth was one of the top three Canadian companies to report profits in May, despite a 5% decrease year-over-year in net revenues which amounted to C$520 million ($408.15 million) in the fourth quarter ended March 31, 2022.

The company also reported that adjusted EBITDA was a loss of C$415 million in fiscal 2022, representing an increase of C$75 million in the loss of adjusted EBITDA compared to a year ago. Free cash flow for fiscal 2022 was an outflow of C$582 million, representing an 8% decrease in outflows from fiscal 2021.

Cantor Fitzgerald analyst Pablo Zuanic says in his recent memo that the Cost-cutting measures and the company’s efforts to move away from value in the domestic recreational sector should help the company achieve its goal of positive EBITDA in fiscal 2024. However, he noted that “more clarity on the pace of cash burn” would help the cannabis company.

Fitch Ratings downgraded Canopy Growth, adding that it ishighly doubtful that Canopy can improve on EBITDA trends to break even in operating cash flow in fiscal year 2025 (by March 31, 2025) as previously anticipated by Fitch, and creates greater uncertainty about the sustainability of the capital structure,” reported Marijuana Business Daily.

Fitch said their decision reflects substantial market share losses in the Canadian cannabis market as well as execution errors and challenges with the company’s cultivation strategy.

Photo by Benzinga. Source: image from Shutterstock