Week recap: cannabis companies laying off part of their workforce

Over the course of this week, a number of cannabis businesses had to lay off part of their workforce. Among these, the most important surely are Hexo, Emerald Health, and CannTrust.

The company reduced its workforce by 200 jobs to “ensure [its] long-term viability”, the chief executive said. This announcement maybe did not come as much of a surprise, for two weeks earlier the company had cut its net revenue forecast for Q4 and withdrew its 2020 outlook. Among the reasons, the company pointed to the ‘slower-than-expected cannabis store rollouts and early signs of pricing pressure’.

Chief executive Sebastien St-Louis commented, "While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp," he said in a statement. "The actions taken this week are about rightsizing the organization to the revenue we expect to achieve in 2020."

CannTrust has been going through pretty hard times over the last months. The company had its licenses suspended as it was growing cannabis in unlicensed rooms, which were hidden behind fake walls – that is why Health Canada officers did not notice anything when they audited the facility. Not only that; as part of the product grown in those unlicensed rooms was already sold and delivered, to the point that some companies had to issue recalls for CannTrust products, which were sent back.

On 24th October, the company has ultimately announced that ‘there will be a series of phased layoffs between late October and the end of the year’. The cuts are expected to produce a monthly savings of about $400,000 and cost up to $800,000 in severance payments – if employees are not recalled within 35 weeks.

Robert Marcovitch, CannTrust’s chairman and interim CEO, stated: "This was a difficult decision, but it is imperative that our workforce reflects the current requirements of our business. Reducing the company's current operating expenses supports our financial sustainability, and places us in the best position to fully resume production upon the reinstatement of our licenses. We look forward to rehiring at that time." However, as the statement implies, the rehiring will occur only if the remediation plan that the company is carrying out will be successful in addressing all the compliance issues which caused Health Canada to suspend CannTrust’s licenses.

Emerald Health Therapeutic
The last big company that cut its workforce was Emerald Health Therapeutic. The company has eliminated 33% of its workforce since August 1, 2019. In a press release, the company has stated that “management expects that the reorganization will enable Emerald to realize material cost savings beginning in the Q1, 2020.”

During the month of October, Emerald Health received a number of licenses, such as an expansion license for its Quebec operation, and another cultivation expansion license for its Metro Vancouver organic cannabis operation. With regards to that, the company commented that “[O]ur two wholly-owned organic and craft operations are now increasing cultivation toward full production to serve the premium part of the market.” Emerald Health stated that “The reorganization is not expected to impact Emerald’s cannabis production or its client service.”

Dr. Avtar Dhillon, Executive Chairman of the Board and President of Emerald, said: “Although such decisions are difficult, we will evolve our strategy, structure, and capabilities as necessary to be able to capitalize on key trends in the changing cannabis sector.”

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