Charlotte’s Web (OTC: CWBHF) has been caught in a protracted sales downturn, but management is optimistic that it can still turn the tides for the once stand out CBD maker.
The MLB-partnered company reported a 14.8% slide in net revenue in 2023, down to $63.2 million from 2022. Lower sales in both e-commerce and business-to-business (B2B) sectors drove the decline.
While the company has been taking “multiple actions to maintain gross profit margins, reduce cash burn, and safeguard our financial position,” according to CFO Jessica Saxton, she emphasized in a call with investors that’s not the only strategy.
“I think it’s important for us to note that we are not in purely cost-cutting mode,” Saxton said. “There are ways that we can deploy our cash better and increase our return on investment.”
True North
Part of the turnaround strategy, according to CEO Bill Morachnick, is the “True North” strategy being undertaken, which he said targets operational efficiency, data-driven decision-making, and market growth.
It’s sort of a branded extension of the savings strategies the company has already been pursuing.
“We are in the process of doing deep dives on our ROI associated with pretty much all of our discretionary spend,” he said. “We have made a big focus right now in our marketing, starting with paid media because it’s a big chunk of the dollars that we spend.”
Apparently it’s paid dividends on the balance sheet. The company’s net loss improved in the fourth quarter, falling from $35.2 million in the fourth quarter of 2022 to $8.5 million for the period ended Dec. 31, 2023.
E-commerce
Direct-to-consumer sales continue to play a significant role for Charlotte’s Web, but the dynamics of playing in that space are changing.
Morachnick noted the importance of updating the company’s IT infrastructure, saying it’s needed before it can enhance marketing efforts. He said the firm’s made progress by setting up a new customer relationship management system.
“The next big unlock is the Shopify platform,” he said. “So, a new e-commerce platform that we will deploy in (the second quarter), and with that comes a whole set of tools that allows us to do things that we are not able to do today.”
Management hopes the e-commerce platform upgrades will improve the customer experience and drive revenue growth. Saxon said the company’s been test piloting with businesses to work out kinks.
“What I can say is the initial reaction is really positive. We have seen an uptick in terms of volume … it’s probably too soon to give any more than that. We are closely monitoring it,” she said.
Other strategic moves
The company also slashed prices on its tinctures by about 25% to try and boost revenue.
“It was completed to position us competitively, drive value and really maintain quality as well,” Saxon said.
The actual amount of the price drop varied, from $2 to $75, depending on the product’s strength and size, she noted.
In addition, the company extended its partnership with Major League Baseball, an agreement that enhances brand visibility and distributes sponsorship costs over a longer period. But that partnership will likely see other changes as well.
“By extending that out by a couple of years our existing agreement … it flattens out the cost structure associated with it, but it also gives us time to work together to come up with the type of activation that’s in both parties’ interest,” Morachnick said.
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