Over the last period, many of the biggest cannabis companies started carrying out the restructuring of businesses, putting projects on hold and laying off staff.
However, the bomb dropped today when Canopy Growth, the last giant of cannabis that didn’t announce any restructuring, revealed the layoff of 500 staff, and the writing down of a couple of greenhouse projects.
Pains at Canopy
The company plans to close its facilities in Aldergrove and Delta, BC, which results in the layoff of 500 staff. Additionally, Canopy plans to no longer bring a third greenhouse to Niagara-on-the-Lake, Ontario. According to them, these actions are part of the effort to align supply and demand while improving production efficiencies over time.
The greenhouses in B.C. account for approximately 3 million square feet of licensed production space and were put into commission, beginning in February 2018, after a period of phased retrofitting to help Canopy Growth scale up to supply the new Canadian adult-use market. “Nearly 17 months after the creation of the legal adult-use market, the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry,” the team with the company explains. “Additionally, federal regulations permitting outdoor cultivation were introduced after the company made significant investments in greenhouse production. The company now operates an outdoor production site to allow for more cost-effective cultivation which will play an important role in meeting demand on certain products that rely on cannabis extracts. Following an organizational strategic review of production capacity and forecasted demand, the company announced today that these facilities in Aldergrove and Delta, British Columbia are no longer essential to its cultivation footprint.”
David Klein, Canopy Growth CEO, said that the decision to close these facilities was not taken lightly: “We know this is a necessary step to ensure that we maintain our leadership position for the long-term.”
After Aurora’s February announcement of the restructuring of the company as a consequence of the difficulty to reach profitability, the month of March begun with the cannabis giant Tilray announcing the full-year 2020 results, signaling the continuing growing pains of the cannabis industry. Indeed, even though the full-year 2020 revenue totaled nearly $167 million – that is a 287% jump over the previous year – the company reported a net loss of $321.1 million. Thus, the company expenses keep being higher than profits. However, Brendan Kennedy, Tilray CEO, said that the company’s diversified business model “positions us well in the current volatile market environment.”