Ontario-based BioSteel Sports Nutrition Inc., known for its popular pink hydration sports drink, has filed for creditor protection in both the U.S. and Canada. The move comes as its parent company, Canopy Growth, has ceased funding the business, leading BioSteel to take this step to protect its assets. In this article, we’ll explore the reasons behind this decision, the company’s history, and its efforts to find a new buyer.
BioSteel’s Journey:
BioSteel, founded in Toronto in 2009 by John Celenza and former NHL player Mike Cammalleri, experienced rapid growth through marketing partnerships with numerous professional sports teams and athletes, including NHL, NBA, and NFL stars. However, in 2019, Canopy Growth acquired BioSteel with the goal of diversifying its product range. Unfortunately, this strategy did not yield the expected results.
Financial Troubles:
The decision to file for creditor protection was driven by BioSteel’s inability to secure funding and its continuous negative cash flow. The company has chosen to preserve its assets and undergo a court-supervised sale process for the benefit of its stakeholders.
Impact on Canopy Growth:
Canopy Growth invested approximately $366 million in BioSteel since the acquisition, and the sports drink company was responsible for a significant portion of Canopy’s financial losses this fiscal year. Cutting ties with BioSteel is seen as a necessary step to stabilize Canopy’s finances.
Workforce and Sales:
BioSteel had 190 employees in the U.S. and Canada, but the insolvency filing will result in the layoff of about 181 employees in the BioSteel division. However, the company did report a growth in sales revenue, with $24 million in the first three months of 2023.
Challenges and Regulatory Issues:
BioSteel faces challenges related to its sponsorship deals, with missed payments and regulatory scrutiny. An investigation into the company’s books revealed revenue overstatements, leading to inquiries by the SEC and Canadian regulatory authorities.
Seeking a New Buyer:
BioSteel’s plan is to find a buyer who can operate it as an independent company. It has engaged with potential buyers and received preliminary proposals, but none have fully committed financing, leading to the creditor protection filing.
While BioSteel faces financial difficulties, its goal is to navigate these challenges and find a suitable buyer to continue its operations. The company’s journey highlights the complexities of the sports drink industry and the cannabis sector’s efforts to diversify.
FAQs (Frequently Asked Questions):
1. Why did Canopy Growth acquire BioSteel in the first place?
Canopy Growth acquired BioSteel in 2019 with the intention of diversifying its product range and venturing into the beverages market.
2. What is the immediate impact of the insolvency filing on BioSteel’s workforce?
The insolvency filing is expected to result in the layoff of approximately 181 employees in the BioSteel division.
3. What challenges does BioSteel face regarding its sponsorship deals?
BioSteel has faced challenges with missed payments related to its sponsorship agreements, particularly with the NHL.
4. What is BioSteel’s plan moving forward?
BioSteel aims to find a buyer who can continue to operate it as an independent company, and it has engaged with potential buyers to explore this possibility.