How Village Farms Turned Margin Discipline Into a Profitability Machine

Village Farms International (VFF) just delivered a masterclass in operational excellence. The company’s Q3 2025 results showcase what happens when cost management becomes embedded in your DNA—and the numbers are impossible to ignore.

The Math Behind the Turnaround

The headline: Village Farms squeezed consolidated adjusted EBITDA to $20.7 million, representing 31% of sales. A year ago? Just $4.7 million, or 8.5% of sales. That’s not a small tweak—that’s a fundamental business shift powered by disciplined execution.

What’s more impressive is that management explicitly stated this improvement came from operational discipline rather than riding a temporary pricing wave. This distinction matters because it signals sustainability. Operating cash flow jumped to $24.4 million, proving the efficiency gains are translating into real cash generation.

Where the Real Discipline Symbol Emerged

The Canadian cannabis segment became the discipline symbol for Village Farms’ entire platform. Here’s why:

Gross margin expansion was dramatic: 56% in Q3 2025 versus just 26% a year prior. That 30-point swing didn’t happen by accident. Management identified the key levers:

• Higher productivity and improved crop yields reduced per-unit costs
• Lower packaging inputs cut materials waste without compromising quality
• Strategic product mix shift toward higher-margin international export sales captured premium pricing
• Continuous-improvement initiatives embedded efficiency into daily operations

Result: Canadian cannabis adjusted EBITDA surged 306% year-over-year to $19.3 million, representing 41% of segment sales.

Can This Momentum Sustain?

During the earnings call, management committed to something concrete—a long-term gross margin target range of 30%-40%. By anchoring this publicly, they’re essentially saying cost control isn’t a cyclical play but an operating culture shift.

The broader market has taken notice. Village Farms’ stock has climbed 383.3% over the past 12 months, substantially outpacing the broader consumer staples sector’s 2.5% growth and the S&P 500’s 21.8% advance. From a valuation lens, the forward 12-month price-to-sales ratio sits at 1.6, suggesting the market hasn’t fully priced in the margin recovery yet.

The Bottom Line

Village Farms proved that relentless focus on cost discipline, yield optimization and operational efficiency can reshape a company’s margin profile. Whether these gains hold depends on maintaining that cultural commitment to discipline—and so far, the execution suggests they mean it.