Earnings Call Transcript - VFF Q3 2022

Operator, Operator

Good morning, ladies and gentlemen. Welcome to Village Farms International's Third Quarter 2022 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its financial results for the third quarter ended September 30, 2022. That news release, along with the company's financial statements are available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay, both by telephone and via the Internet beginning approximately 1 hour following completion of the call. Details on how to access replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks and uncertainties is contained in the company's various securities files with the SEC and Canadian regulatory agencies, including its Form 10-K MD&A for the year ended December 31, 2021, and Form 10-Q MD&A for the quarter ended September 30, 2022, which are available on EDGAR. These forward-looking statements are made as of today's date and except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, sir.

Michael DeGiglio, CEO

Thank you, Michelle. Good morning, and thank you for joining us for today's call. I am joined by Village Farms' Chief Financial Officer, Steve Ruffini; Village Farms Head of Canadian Cannabis, Mandesh Dosanjh; and Village Farms Executive Vice President of Corporate Affairs, Ann Gillin Lefever. As usual, we will follow the same format as in previous calls. Steve and I will review the operating highlights and financial results for the quarter, and then we'll take your questions. The headlines for our third quarter results show significant growth in Canadian cannabis retail branded sales, surpassing the underlying industry growth and resulting in market share gains. We reported a smaller loss in our Fresh Produce business, although there are ongoing macro challenges, and we continued to see solid performance in our U.S. Cannabis business despite constrained consumer spending. Focusing on our Canadian Cannabis business, as discussed in our last call, we refined our strategy in the second half of last year, leveraging several years of retail experience and our ability to identify consumer trends and market segmentation. We aimed to drive both sales and market share growth in 2022. The third quarter clearly demonstrated the success of this strategy in sales growth and market share gains. Notably, retail branded sales to provincial distributors grew 46% year-over-year and 26% sequentially. In October, Village Farms became the top-selling cannabis producer in Canada across all product categories, with market share expansion marked for the fourth consecutive month. We've evolved our market share data sources, now using HiFyre for all provinces except Quebec, where we use Weed Crawler. This data informs our business operations and is crucial to share. Our sales growth and market share gains have multiple contributors. The Pure Sunfarms brand maintained its position as the leading brand in the dried flower category, with Pink Kush and Jet Fuel Gelato performing strongly, alongside innovative new strains developed thanks to our commitment to continuous innovation. Pure Sunfarms has been the best-selling dried flower brand for six consecutive quarters. Rose LifeScience in Quebec also steadily expanded its market share with various product launches targeting back consumers. In October, Rose became the second-largest licensed producer in Quebec, a proud achievement less than a year after our majority acquisition. We also launched our new value-oriented brand, the Original Fraser Valley Weed company, in British Columbia and Alberta, where the value segment is significant. In British Columbia, we've had a complete quarter of sales data, showing our increase in market share from 6.5% in Q2 to 8.5% in Q3, further rising to 9.4% in October. This was achieved despite regular sell-outs in a province where we are already the top-selling LP. In Alberta, the Fraser Valley launch has rekindled market share growth, thanks to our clear brand strategy and unique strains that are now 100% hang-dried. We are optimistic about our continued growth with the Fraser Valley brand, which launched its first SKUs in Ontario in mid-October with promising early results. We are also maintaining support for the rollout of Promenade and growing our first brand, Pure Sunfarms. This reflects exceptional execution. On the cost side of our Canadian business, we have also been effective. Our gross margin remains within the target range, and SG&A expenses significantly decreased compared to the second quarter, both in absolute terms and as a share of net sales, as we have completed most of our major brand launch investments. This has contributed to our 16th consecutive quarter of positive adjusted EBITDA for our Canadian Cannabis segment, a record since Q4 of 2018, with increases in adjusted EBITDA driven solely by cannabis sales over the last two quarters. We are enhancing profitability while expanding market share, showcasing remarkable execution. In summary, our Canadian cannabis business is growing sales, increasing market share, and attracting new customers while lowering costs, improved by scaling our cultivation operations and gaining experience, further enhancing profitability for future growth. Turning to our U.S. Cannabis business, Balanced Health Botanicals is performing well and remains profitable despite restrained consumer spending. Last quarter, I noted a broad slowdown in consumer purchasing, worsened by uncertainties in the CBD category's access to traditional retail. We have been proactive in seeking new sales opportunities and implementing initiatives for customer traction and retention, which are generating positive outcomes. During the quarter, our subscription program grew by over 5%, exceeding 19,000 active subscribers. Balanced Health also launched its second product in the Synergy+ line, Deep Sleep Synergy+, designed to assist customers with sleep using plant-based ingredients. Our recent success in Canada boosts my excitement and confidence in our international prospects. We are making steady progress on our international strategy, particularly during the third quarter as we target burgeoning legal cannabis markets where we believe we can excel. Through our Netherlands subsidiary, Leli Holland, we hold one of just 10 licenses to cultivate and distribute cannabis in the Dutch supply chain program, anticipated to be the first significant legal recreational market for cannabis in Europe. We are eager to participate in what is expected to be a major market for large-scale cannabis cultivation and distribution for recreational use in Europe. In other international markets, we are very pleased with the pace of sales in the Australian medical market and our exports from Canada. Sales to Altum International, our investment partner, have significantly accelerated this year, alongside new customer shipments initiated during the quarter. In fact, our Q3 sales to Australia have more than tripled over the last two quarters. Preparations for our initial exports to Israel and Germany via our Canadian Cannabis business are ongoing, though the process has taken longer than expected due to evolving testing protocols and country-specific approvals. However, we are ready, and our market intelligence supports that our product will be consumer-preferred, making it a close race to see which market we will ship to first. Now, addressing our Fresh Produce business, we are facing several significant pressures, notably input cost inflation. The current demand-supply balance has limited our ability to pass on costs to our customers. In Q3, we continued to encounter the impact of the Brown Rugose virus, which affects global growers and yields, although it is restricted to our Canadian operations. Some inflationary pressures did ease in Q3, reflected in improved financial results compared to earlier quarters, which Steve will cover shortly. While we anticipate these pressures to continue into next year, we believe we have passed the worst of it, which should improve year-over-year comparisons in 2023. Last quarter, I mentioned the commencement of an intensive operational review of the Fresh Produce business, which is progressing positively. We are currently analyzing two independent consultant reports, and the findings are already aiding us in assessing customer profitability and other operational aspects. Following the recent election results, we are hopeful for clearer insights into the future of cannabis regulation at both federal and Texas levels, alongside potential regulatory processes during the upcoming lame duck session. I look forward to sharing updates on these developments at the appropriate times. Now, I will turn the call over to Steve Ruffini.

Stephen Ruffini, CFO

Thanks, Mike. I want to start with a brief overview of when we acquired Balanced Health and Rose LifeScience last year and how that has influenced our third quarter results for 2022. Both acquisitions are included in our financial performance for the third quarter and the first nine months of 2022. Since we bought Balanced Health Botanicals on August 16 of last year, our comparative results for 2021 show about half a quarter's contribution from that business. As for Rose, we acquired 70% ownership in Q4 2021, so there’s no contribution from that in the 2021 comparative period. Moving on to the results, our consolidated sales for all Village Farms, which includes our Canadian and U.S. Cannabis operations and our Village Farms Fresh Produce operations, were $71.1 million for the third quarter. This is a slight decline of 2% from the same quarter last year, primarily due to a weaker Canadian dollar. On a constant currency basis, our year-over-year sales remained flat. The increase in sales from our Canadian Cannabis operations and the full quarter's contribution from Balanced Health was offset by reduced sales from Fresh Produce. We reported a consolidated net loss of $8.7 million or $0.10 per share, compared to a net income of $700,000 or $0.01 per share in the same period last year. This net loss mainly stemmed from challenges in the Fresh Produce business. Our consolidated adjusted EBITDA for Q3 2022 was negative $2.2 million compared to positive adjusted EBITDA of $6.9 million in Q3 last year, with the loss largely coming from Fresh Produce. Corporate costs were $2.8 million compared to $3.5 million for the same quarter last year, mainly due to lower selling, general, and administrative expenses. Looking at our individual business segments, Cannabis sales from our Canadian and U.S. operations increased 14% year-over-year to $35.6 million from $31.2 million, largely due to growth in our Canadian Cannabis business, boosted by Rose brands in Quebec and the addition of contributions from Balanced Health. Cannabis sales represented 50% of Village Farms' total consolidated sales this quarter, up from 43% in Q3 last year. Total Cannabis adjusted EBITDA was $5.4 million compared to $9.4 million in Q3 last year, with the decrease primarily attributed to lower margins on Canadian non-branded sales due to market price pressures and increased SG&A expenses related to brand launches and expansion efforts, particularly in our U.S. Cannabis segment. In our Canadian operations, Q3 sales saw a 15% increase from the same period last year, reaching CAD 39.8 million, marking another record quarter. Retail branded sales accounted for 82% of our Canadian Cannabis net sales, with non-branded sales and distribution fees making up the rest. Non-branded sales can fluctuate significantly; this quarter saw a decline as we sold less high-quality bulk flower and had more aged inventory, which was priced lower. However, our retail branded sales rose significantly year-over-year and sequentially, and we expect this trend to continue into Q4. Gross margin for Canadian Cannabis for Q3 was within our target range at 32%, slightly down from 33% in Q2, benefiting from improvements in cultivation efficiency but affected by pricing pressures in the non-branded market. Our Pure Sunfarms and Rose branded gross margins remain above the target range, driven by expanding market share and increased demand from new brands. We are currently managing our inventory levels to align with winter demand while reducing working capital, which might affect biomass availability for Canadian wholesale customers next year. Selling, general, and administrative expenses for Canadian Cannabis operations rose to CAD 10.5 million or 26% of net sales, compared to CAD 6.9 million or 20% of net sales in the same period last year, primarily due to the addition of Rose operations. However, SG&A expenses were lower than in Q2 in both absolute terms and as a percentage of sales, and we expect to continue improving this ratio in the next quarter. For U.S. Cannabis operations, sales for Q3 entirely came from Balanced Health Botanicals, totaling $5.1 million with a gross margin of 68%. Adjusted EBITDA was roughly flat, but it included one-time expenses that will benefit future periods. This compares to last year's contribution of $3.9 million, also at a gross margin of 68%. Turning to the Fresh Produce segment, Q3 performance was impacted not only by rising input costs due to inflation but also by production setbacks caused by the brown rugose virus affecting global tomato production, which led to increased costs and lower production volumes. Sales were $35.5 million compared to $41 million last year, primarily due to reduced tomato volumes and prices. Increased freight costs due to diesel price hikes also affected our bottom line. Consequently, we reported a negative gross margin for Fresh Produce of $3.3 million, a decline from last year’s positive gross margin. Now, regarding cash flows and our balance sheet, as of September 30, we had around $23 million in cash and approximately $45.2 million in working capital, excluding cash. We reported operating cash outflows of $6.8 million after working capital adjustments during the quarter. In August, we initiated an at-the-market offering of up to $50 million to address capital needs, especially considering our Fresh Produce challenges and opportunities in cannabis. We raised $800,000 from the issuance of shares at an average price of $2.84 during Q3, and in October, we generated gross proceeds of $3.9 million from shares issued at an average price of $2.11. I’ll now turn the call back to Mike.

Michael DeGiglio, CEO

Thanks, Steve. Before opening the call to questions, I want to take an opportunity to touch on a couple of popular Canadian market discussion points that centered around the theme that it is a difficult market for LPs, investors, and lenders. One theme is to be decelerating total sales growth, price compression is real, although there are signs it may be stabilizing. However, from a volume perspective, the market continues to grow at twice the rate of dollars, 40% year-to-date. We are well aware of the oversupply in the Canadian market that has led to price compression and slowing growth. We agree, but you also see many regions remain committed to the Canadian market. First, the market is growing, led largely by volume, which is growing at twice the rate of dollar sales. Price compression has helped convert legacy consumers to the legal market, which is continuing. New users are also attracted by the growth in the category options. Second, capacity is coming out of the Canadian market, which, while painful for operators and investors, will improve category dynamics. Third, with the right strategy, one can be profitable and drive strong growth as we have demonstrated for 16 straight quarters. This ties directly to our global cannabis strategy, which is driven by 3 centers of excellence since 2018: cultivation execution at a cost advantage that yields a consistent high-quality product, consumer-led insights to build brands and innovation, and strong commercial partnerships with our customers. So while others abandon this continued Canadian growth, we continue to take every opportunity to expand our leadership position in a market that is still forecasted to double from current levels to $8 billion in this consumer product industry, which is why this week, we are proud to have made 2 major announcements that result from our investments. First, we are the first licensed producer to implement hang-dry processes at scale. Hang drying minimizes direct handling of the flower to preserve natural bud structure and aromas while delivering a high terpene potential. I am pleased to say these products are now broadly in the market. It's an achievement in years in the making with the combined contribution of engineers, scientists, cultivators, and dollars invested across our entire organization. Second, this morning, we announced the launch of our third BC-grown brand, Soar. Soar complements and further expands our Canadian portfolio with a brand that is designed to deliver an elevated cannabis experience via limited quantity batches of select cultivars chosen for their exotic and unique genetics that are hand harvested and, of course, hang dried. Products will be available in Alberta starting this week and in Ontario and BC in weeks to come. With that, we'll now turn the call over to questions.

Operator, Operator

The first question comes from Tamy Chen of BMO Capital Markets.

Tamy Chen, Analyst

I wanted to begin with the flower category and follow up on your closing comments, Mike. A couple of quarters ago, you mentioned that some SKUs in your flower portfolio were moving slowly. Is that still the case, or have you managed to clear that inventory? Additionally, I've noticed from the HiFyre data that the 28-gram large pack is showing growth within the industry, while smaller pack sizes are declining. This raises a concern that the category might be becoming more focused on value and becoming commoditized. I would like to know your perspective on the current evolution of the flower category.

Michael DeGiglio, CEO

Yes, Tamy. Okay. I'm going to let Mandesh take that question. Go ahead, Mandesh.

Mandesh Dosanjh, Head of Canadian Cannabis

Yes, that's a great question, Tamy. Regarding our SKU assortment, we continuously assess how our SKUs perform across various categories. We are confident in our strategy and approach. Currently, we don't see any slow-moving SKUs in our portfolio. Our commercial team is effectively managing the cycle of our SKUs, phasing out those that aren't meeting our success criteria while integrating new innovations in our flower products. You have likely noticed this with our recent launches over the last quarter. We have been actively introducing new flower SKUs, milled offerings, and pre-rolls. We believe our exposure risk is low and we are executing our strategies well. You are correct about the trend in consumer preference shifting between small and large formats. Customers are looking for value, and we have captured this with our Fraser Valley Weed Co, which focuses exclusively on a large format of 28 grams. This approach allows us to enhance efficiency at the SKU level. We still value the 3.5-gram format with Pure Sunfarms and are excited about the launch of Soar cannabis, which will be available in an exclusive 7-gram format that performs well in the premium sector. We believe we are well-positioned across various format sizes. Our team excels at category management and has refined our assortments to maximize efficiency in SKU count. Our strength in large formats aligns with our cultivation capabilities, cost advantages, and brand recognition. We will continue to offer both 3.5-gram and 28-gram options, enabling consumers to try new SKUs at a lower price point, especially for innovative products. We are monitoring market trends closely and will adapt as necessary, maintaining a balanced mix to ensure we can respond effectively.

Tamy Chen, Analyst

Got it. Okay. And my follow-up is, wanted to get an update on how you're thinking about the rest of your Delta 2 expansion? You sort of touched on it. It sounded like you were saying the current demand you see is fully utilizing the online production capacity you currently have. So I presume that means no change in your plan, you are going to continue to bring online the rest of that facility.

Michael DeGiglio, CEO

I can respond to that, Tamy. About a year or 18 months ago, we decided to expand Delta 2, with the understanding that we would maintain our market share. As Steve pointed out, most of the costs have already gone towards completing the other half of Delta 2. With the acquisition of Rose in Quebec and their strong performance, along with support for their production facility, and the growth in our international sales—like in Australia and soon in Germany and Israel—we believed it was wise to proceed with the expansion of Delta 2. We are nearly at full capacity now, and as Steve mentioned, we will evaluate this closely before deciding whether to proceed with completing the other half, based on our confidence in maintaining our market share in international exports.

Operator, Operator

The next question comes from Aaron Grey, Alliance Global Partners.

Aaron Grey, Analyst

It's great to see the positive outcomes on the retail front. I'd like to start by discussing the significant reduction in SG&A. It appears that much of this is related to investment spending and branding, as well as the completion of some innovations. I am interested in understanding the timing of SG&A as you launch Soar and introduce Fraser Valley into Ontario. How do you plan to balance the spending on the brand while ensuring you maintain or even grow your market share despite the reduction in SG&A?

Michael DeGiglio, CEO

Yes, we are very comfortable with our position. Last year, we indicated that there would be increases in SG&A because launching three brands with Promenade and supporting Quebec with their other brands requires significant resources. Additionally, we've just launched two new brands and invested in scaling hang dry, which represents a substantial expenditure that we planned for. We anticipated needing to increase our spending, and now it's akin to what Pure Sunfarms is doing in terms of maintaining. We have already shown a reduction in SG&A, and we will continue to lower it to levels comparable to the past. This percentage is acceptable for sustaining our growth in the Canadian market, and we are confident it will remain at a favorable level to support our objectives in Canada.

Aaron Grey, Analyst

All right. Fantastic. That's great to hear. And then second for me, now you've had some time in terms of these new brand rollouts. Just kind of looking back with Fraser Valley, how do you think about cannibalization? Was it as you had expected relative to Pure Sunfarms? Pure Sunfarms is still the #1 brand. So anything that ended up surprising you now that it's been up for a couple of more months? And then how do you think about that cannibalization going forward with Soar being rolled out as well?

Michael DeGiglio, CEO

It really didn't surprise us at all, but I want to let Mandesh put some more color on that. So Mandesh?

Mandesh Dosanjh, Head of Canadian Cannabis

Yes. Thanks, Mike. Aaron, great question. So just to reiterate, we've now seen a full quarter of Fraser Valley in British Columbia, launched a little bit later in the last quarter in Alberta, and that we're seeing some 1 month of October, and I know we don't give forward-looking statements, but we've got a really good, healthy data set. And Mike is absolutely right. There was nothing overly surprising. If anything, what we saw was that it's not cannibalizing at all. I mean we grew market share on the Pure Sunfarms brand in both those provinces, British Columbia and Alberta after we launched Fraser Valley Weed Co. We also launched additional strains in Pure Sunfarms at that time, and there was no adverse impact. When we came on the call a quarter ago, we talked to you guys all about when we were launching Fraser Valley that we really saw consumer segmentation deviating into the value segment, we really saw kind of an area that we were only exposed to through our non-branded wholesale sales, and we knew it was the right time to go in with a new brand that really attacked that consumer. And we were really confident that our data was showing us that the Pure Sunfarms consumer is not really playing in that space, that we don't have a lot of risk. And that was validated as we went to market and now are seeing early results. So we're growing share and some of our best strains in Pure Sunfarms are doing better than ever. And I think that's through a commitment of our commercial sales team and the efforts that we're seeing, the relationships we're building with the boards, the presence of all of our brands. And just a strong supply chain credibility that we have with the boards and the customers and stores all the way through. So we're pleased, we're going to continue to drive that home, and we think that trend will continue through Ontario as well.

Operator, Operator

The next question comes from Frederico Gomes of ATB Capital Markets.

Frederico Gomes, Analyst

First question is on pre-rolls. It's obviously a category that is growing and you are leaders in flower, but you are under-indexing pre-rolls right now. So could you comment on how you view that segment? And what sort of efforts are you making to increase your market share there potentially?

Michael DeGiglio, CEO

Mandesh, why don't you take that, Fred.

Mandesh Dosanjh, Head of Canadian Cannabis

Yes, that's a great question. On the pre-roll side, I believe it's going to be one of the most significant categories for the industry as consumers have embraced whole flower and are starting to recognize the strains and formats they prefer, leading to a demand for more convenient pre-roll options. Our strategy has always focused on a planned approach to win where we can, winning over consumers through excellent quality, affordability, and strong brands. Now that we've established that, we want to ensure we are equally focused on the pre-roll aspect of the business, which has always been part of our plan. We aim to have multiple brands succeed with a diverse assortment while expanding our pre-roll offerings and maximizing efficiency with our SKUs. In the coming quarters, as we continue our brand expansion efforts in various provinces and navigate the board listing process, you can expect significant growth in pre-rolls. Our focus over the past several months has been on increasing our internal capabilities, which includes boosting our production capacity for pre-rolls and exploring additional co-manufacturing opportunities. We are optimistic about the pre-roll category, believing we are well positioned due to our dominance in flower, the appeal of our brands, and the strains we have in the market. You will likely see our growth in this category increase in the next few quarters.

Frederico Gomes, Analyst

Okay. And then my second question is on the wholesale side. Obviously, you had a good increase in branded sales and we're seeing that. But could you provide maybe some color on how you're seeing the wholesale market right now, both in terms of demand and pricing?

Michael DeGiglio, CEO

Mandesh, go ahead and answer that.

Mandesh Dosanjh, Head of Canadian Cannabis

Thanks, Mike. As Steve mentioned regarding the wholesale sector, our strategy has always centered on taking control of our future by enhancing our market share with strong brands and quality products. Over the past few years, we've increased our share significantly, reaching about 50% to 60% of our branded sales, and that trend is continuing. This growth is driven by our focus on gaining more market share and generating higher margin sales. However, the wholesale market is currently facing price compression, with customers requiring lower prices, which impacts our margins. We are noticing a reduction in pricing activities on the flower side, but there’s still potential in the market, especially for spot demand, as well as opportunities on the extract side for customers looking to create concentrates. Our trim sales remain robust wherever we don’t need that biomass. The domestic wholesale market is very competitive and price-sensitive. Consequently, we’ve reduced our dependence on the wholesale side by expanding into multiple brands. As mentioned by Steve and Mike, our international approach is yielding better margins and allowing us to shift our wholesale focus away from non-branded flower sales.

Operator, Operator

The next question comes from Eric Des Lauriers of Craig-Hallum Capital Group.

Eric Des Lauriers, Analyst

Congrats on the nice cost management this quarter. On the Pure Sunfarms side, consistent growth there, especially in market share, has really been impressive. Obviously, these new brands are performing well. You've got some more on the sort of pipeline there. You've got hang dry coming in. I mean it certainly looks like sort of blue sky, I mean, more share gains to come, especially over sort of beyond the next year or so. Maybe just kind of taking some of these questions and flipping them on their head a bit. What are some of the biggest challenges or headwinds you see to continue share gains or maybe your longer-term share goals in Canada?

Michael DeGiglio, CEO

I think there are two main points to consider. First, in terms of our operations at Pure Sunfarms, we are executing our strategy effectively and remain committed to our progress and market penetration. We've significantly increased our focus on innovation, and this trend will continue in the long term. We see cost improvement as an ongoing process, where we consistently enhance our performance over time. Cultivation, in particular, is a business that improves with each cycle; we learn and adapt from every crop produced. These incremental improvements will accumulate over time, leading to a substantial impact in the future. The recent acquisition of Rose has been very successful; in less than a year, the company has become a strong competitor, and we are now expanding into the Maritime provinces, covering almost all of Canada. Our success hinges on execution and consistently achieving small wins. On a broader scale, the industry seems to be experiencing a wave of consolidation, with many companies struggling. As we noted earlier, this situation could be challenging for some. While companies are considering consolidation, we do not see any appealing opportunities in Canada at the moment. As the market shrinks and consolidates, this could benefit us moving forward. There is still significant market potential, with projections reaching $8 million. We will continue to invest in key innovations as needed, which has been validated by our launch of three new brands this year. Now, our focus is on maintaining operations and generating strong positive cash flows in the future. Mandesh, would you like to share more insights about our operations in the Canadian cannabis market?

Mandesh Dosanjh, Head of Canadian Cannabis

Absolutely, Mike. You did an excellent job outlining the situation. We're focusing on our core strengths while expanding our brands and markets. Eric, we need to keep executing. We've invested significant time in building our processes, teams, commercial strategy, category management, and product innovation, and we remain focused on that. I feel confident in our capability to continue this. Mike noted that we've had four consecutive periods of sustained market share growth, and the industry is taking notice. As we grow, competition will intensify, and we must determine our next steps. It's a continuous cycle of execution and innovation while staying focused on our current objectives. The market dynamics make things challenging, so having an agile and resilient team is crucial, and we believe we're well-positioned to navigate the fluctuations that may occur in the next year or so.

Michael DeGiglio, CEO

Yes. And the other thing, Eric, on the international side, I mean, Australia has gone very well for us. It's very frustrating. When you're in a cannabis industry, it's a highly regulated industry and you're starting to do business internationally, there's always delays and we're very frustrated with the processes, Israel change, just the way their regulations midstream early in the year, we had to readapt to that and you lose time. So we have to be patient. But where we've done very well in Canada, I think we can leverage that up internationally. We're seeing that trend in Australia, and I think we're going to see it, and we're going to be a very strong competitor, both in Israel and Germany, and that's imminent. So that's just another positive for Pure Sunfarms on the export side going forward.

Operator, Operator

Your next question comes from Michael Freeman at Raymond James.

Michael Freeman, Analyst

I want to focus on Quebec, as this area has shown significant outperformance for Village Farms through Rose, particularly over the last six months. Can you describe any changes that have occurred in the Rose business and how Village Farms has contributed to its growth in Quebec?

Michael DeGiglio, CEO

Sure. I mean look, we haven't done any acquisitions other than Rose in Canada. We look at them all the time, but Rose was one very strategic for us to be in Quebec. Quebec, one of the largest markets, as you know. It's a different approach in that the SQDC and Quebec owns all the retail stores. It's not independent. Quebec is about very patriotic towards Quebec. So we had to be there in a different way of penetrating the market, and Rose was the selection. So of course, then it's the Rose team. We really love the Rose team there. So brilliant, they got great CPG. the leadership there is very solid. And in acquisitions, you have to have a lot of synergies and be on the same page. And that's been working. Rose has continued to be innovative on their own, but working with Pure Sunfarms, we were able to help support them in the launch of the Promenade brand, which is the third brand we've launched this year, sort of as Canadian Cannabis, which is doing very well. And it's not even been a year. It will be a year next month, and I think you continue to see great market penetration by them and moving forward in the Quebec market. And they are also participating in some other provinces as well in conjunction with some of the programs with Pure Sunfarms. The other thing that's very unique is one of their brands is based on all the craft produces in Quebec, and that's very important to the government of Quebec to support very small craft growers. I think we have 11 or 12 that we consolidate and market for under the brand, and that's working extremely well. Not big numbers, but it just is another avenue of synergy across the board, and we may roll that out in some other provinces going forward. So that's where we are today. And we look at now as Canadian cannabis and the teams are all working pretty solid as well. Mandesh, do you want to add some color?

Mandesh Dosanjh, Head of Canadian Cannabis

Yes. Thanks, Mike, and great question overall. Look, the Rose team are experts at commercialization in the province of Quebec. And there were many different assets that we really enamored with in partnering, teaming up, making the acquisition of Rose. And we talked about that earlier in the year that it was going to take some time because every Board has a product call cycle, you just can't immediately implement products. And the Rose team is so adept at understanding customer segmentation, looking at pricing, what the SQDC needs. And with the last call that was happening this year, I mean, we really knew that summer fall was going to be really important for the integration of Village Farms Canadian cannabis to kick off in a very effective way. And the Rose team knocked it out of the park. I mean the amount of listings we got, Promenade is a brand fueled by Pure Sunfarms' biomass. So I think now, this is probably the first full quarter where you're really starting to see the integration of Village Farms Canadian Cannabis taking shape and showing what we can perform and do. And yes, I'm pleased to hear that you're seeing it as well, and we're really optimistic about it. And continuing to work covertly with the team to get more listings, really think about continued domination and market presence in the province of Quebec. We're excited.

Operator, Operator

There are no further questions. Please proceed.

Michael DeGiglio, CEO

I want to thank everyone for joining us today. We're very excited about our direction in cannabis, not only in Canada but extending out internationally and standing by to see what the legislation changes will be for the U.S. as we gear up for the penetration in the U.S. market in the future. Thanks for joining us today, and we look forward to talking to you in the future when we report our year-end. Thank you. Thanks, operator.

Operator, Operator

Ladies and gentlemen, this concludes your conference for today. We thank you for participating and ask that you please disconnect your lines.