Zachary George, president and chief executive of SNDL Inc, oversaw a second-quarter loss of nearly $8 million. The Edmonton-based company, which operates liquor and cannabis retail chains across Alberta, reported revenue of $235.8 million, a four percent drop from the previous year. This performance reflects a broader shift in consumer behavior, especially in key markets like Alberta.
SNDL owns and operates Liquor Depot, Wine and Beyond, Ace Liquor, and Value Buds stores. Most of its retail footprint lies in Alberta, a province with a privatized liquor retail model since 1993. The firm rebranded from a cannabis grower, Sundial Growers, in 2022 after acquiring it for $320 million. This transition from a cultivation company to a major retail force has not yet fully offset the challenges in both alcohol and cannabis sales.
Liquor sales shrink, and CFO points to a global trend
Liquor remains the largest segment of SNDL’s business but declined in Q2, falling about five percent to $134.7 million. CFO Alberto Paredero-Quiros attributed the slump to a broader global trend. "It’s a global phenomenon," he said during an earnings call, noting that "most markets are down by low to mid-single digits." This observation aligns with broader data showing a shift in consumer habits.
The slowdown in liquor sales aligns with Canadian drinking trends. Beer volumes have dropped for nine consecutive years, and overall alcohol spending fell 1.6 percent to $25.8 billion last year, according to Statistics Canada. These trends suggest a long-term shift in demand, not just a temporary downturn.
Affordability and federal taxes under fire
Richard Alexander, president of Beer Canada, cited affordability as a key factor. "Canadians are still experiencing an affordability crisis," he said, explaining that "less disposable income leads to changed purchasing behaviour." Beer sales, especially in restaurants and bars, have been hit hardest. The impact of reduced discretionary spending is evident in declining sales across all alcohol categories.
Federal excise duties on alcohol have increased automatically by 18 to 20 percent since 2017 under a policy that requires no parliamentary vote. While Ottawa has now limited future increases to two percent until 2028, Alexander argues the damage was already done. "Volumes decreased 18 to 20 percent right across Canada," he said. The combination of rising costs and stagnant incomes has led to a significant decline in alcohol consumption.
Cannabis also under pressure
Cannabis sales in SNDL stores slipped by 1.4 percent to $83.2 million in the second quarter. The company blamed market contraction in Alberta and Ontario for the decline. The issue was compounded by the Jeeter vape line, where production inefficiencies led to a $9.2 million loss—up from $3.1 million in the same period last year. SNDL’s cannabis operations are struggling to keep pace with the broader market decline.
George, the CEO, acknowledged the production problems but called them "temporary." The issue centered on a specific manufacturing team in Kelowna, which he said the company is managing through. George said the challenges are fixable and not indicative of a long-term decline. The manufacturing setbacks highlight the operational difficulties SNDL faces in expanding its cannabis offerings.
SNDL remains flush with cash, bets on U.S. market
Despite the losses, SNDL has $183.2 million in cash and no debt, allowing it to buy back 11.7 million of its own shares at a cost of $23.5 million. George described the stock as "trading well below" intrinsic value and said share repurchases remain an "attractive use of capital." The company’s strong cash reserves position it to weather the current downturn while investing in future growth opportunities.
The company has also shifted its gaze south of the border. SNDL recently finalized a debt-for-equity deal with Parallel, a U.S. cannabis company in default. The deal gives SNDL control of 56 retail locations in Florida, Texas, and Massachusetts. Approval from regulators and Nasdaq is still required before those stores appear on SNDL’s balance sheet. While the U.S. cannabis market presents a new frontier, it also comes with significant regulatory uncertainties.
SNDL shares fell nearly 10 percent to US$1.22 following the Q2 report. Management remains optimistic about the second half of 2026, betting on future growth from the U.S. retail expansion and operational improvements. The company’s ability to adapt to changing consumer preferences and navigate new markets will determine its success in the coming years.