Petr Sykora scored a hat trick and Peter Sejna added two goals as HC Davos hammered Canada 8-1 on Wednesday.
Robbie Earl added a goal and two assists for Davos, which earned a bye into the tournament semifinal. Pavel Brendl added a goal and an assist while Dario Burgle also scored.
Pascal Pelletier replied for Canada, which won its opener 7-1 against HC Vitkovice Steel on Monday.
Canada trailed 2-1 entering the third period but things unravelled quickly.
"We got too impatient trying to tie the game when instead you have to keep in the game," Canada coach Marc Crawford said. "We tried to push at a level that made our risk-reward ratio not very much in our favour.
"When you are careless with the puck and trap too many forwards deep, that's double trouble and against a team with high-level skill, that's the way they want you to play."
Crawford said Canada needs to get back to basics if it has any hope of rebounding.
"The system works, you just have to stay with it. (The players) are showing that they want to play well and showing that they want to make something happen, I like that attitude," he said. "You take educated risks, you take risks that have a payoff and don't put you in a high-gambling level. We were guilty of not making very good decisions, but we'll get better."
Jake Allen allowed all eight goals for Canada, which now has to play GA Wolfsburg in the quarter-finals Thursday.
Crawford said Allen was hung out to dry by his teammates on a few occasions in the third.
"There wasn't anything really wrong with Jake, we were defensively not sharp enough. Maybe I should have taken him out but that's always a delicate thing. If you take him out it's like your pointing a finger," Crawford said. "He's going to be fine. Goaltending can sometimes be a very humbling position."
Davos blew a tight game wide open early in the third. Sejna scored on the power play at 2:57 before Earl stretched the lead to 4-1 at 6:25.
Sykora blasted a slapshot past a down-and-out Allen at 10:30 to complete his hat trick and Sejna added his second just under two minutes later.
Burgle made it 7-1 at 15:55 before Brendl completed the rout at 17:17.
Sykora opened the scoring with a short-handed effort with two minutes left in the first. The former NHLer fought off a defender on a partial breakaway and beat Allen with a shot that squeaked under his arm.
Sykora made it 2-0 at 13:27 of the second before Pelletier got Canada to within one with 25 seconds left in the period.
Crawford would not say if Allen or veteran goalie Mary Turco, who played the opener, would start against Wolfsburg.
The Spengler Cup, the world's oldest professional international hockey tournament, has been held in the picturesque mountain town of Davos since 1923. The competition features five European club teams and a Canadian entry comprised largely of European-based pros.
Canada has appeared in nine of the last 11 Spengler Cup finals, last winning the tournament in 2007.