Canopy Growth Corp. will lay off 800 employees as part of a transformation plan that will see the company close its Hallmark 1 Hershey facility and consolidate some of its cultivation operations.
The Smiths Falls, Ont. The cannabis company said Thursday that the layoffs would affect 35 percent of its workforce and take place over the next several months.
David Klein, chief executive of Canopy Growth, said the move is intended to help the company reach profitability and enable sustainable and long-term growth.
“To achieve our ambition of North American cannabis market leadership, Canopy must reach profitability,” he said in a statement to The Canadian Press.
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“We are transitioning our Canadian business to an asset-light model and significantly reducing the overall size of our organization. These changes are difficult but necessary to drive our business toward profitability and growth.
Canopy was scheduled to release its third-quarter earnings and host a call with analysts on Thursday morning.
Ahead of the call, Canopy said it will acquire 1 Hershey Dr., a site in Smiths Falls south of Ottawa. But would cease operations where the chocolate company Hershey once had a factory.
Van Hershey, which has long been Canopy’s headquarters, was the company’s main site for flowers and food production, but also office space.
The company will now carry out post-production flower activity at 99 Lorne St., which is across the street from 1 Hershey and already has a regional distribution center, bottling facility and beverage capabilities.
Canopy will also stop receiving flowers from its Mirabelle, Cue. The facility, which is owned and operated by Les Serres Vert Cannabis Inc. which is a joint venture partnership between the company and Les Serres Stephane Bertrand Inc., a tomato greenhouse operator.
Canopy previously purchased pot from the joint venture, but will spin off that activity and now move to a more flexible sourcing strategy to ensure that Quebec-grown products are delivered to consumers in the province.
Completing Canopy’s facility transformation in Kincardine, Ont., will be a consolidation of farming. and Kelowna, BC site.
As the company transitions to its facilities and operations, it will work to balance in-house with third-party manufacturing by focusing on internal capabilities on flowers, pre-rolls, softgels and oils. It will rely on third parties when sourcing vapes, beverages, edibles and extracts.
The last of the changes comes in the form of a partnership with Quebec-based EXKA, which has the world’s largest cannabis library. The company will now manage Canopy’s genetics program, ensuring that Canopy can preserve its investment in genetics but also obtain optimized strains and new cultivars.
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Canopy’s transformation plan comes after several years when Canadian pot companies have been reducing workforces and tightening operations to reach their long-awaited goals of profitability.
Making it harder to target has been the strength of the illegal market, a slow move toward federal legalization in the U.S. and sales that have fallen short of what some cannabis company executives had previously forecast for the industry.
Now, to stay competitive and entice customers, many businesses are slashing prices.
The average price of cannabis in early 2019 was $11.78 per gram, shortly after legalization, but is expected to drop to $7.50 per gram in 2021, said a November report from Deloitte Canada and cannabis research firms Hifyre and BDSA.
The average price of vape cartridges has similarly dropped 41 percent from $32.02 per gram to $19 per gram a year later.
Such drops have prompted Canopy to refocus its product mix on the premium segment, which typically commands higher prices and generates a more loyal consumer base than value items.
The move to premium was coupled with ongoing cost-cutting plans in recent years that included hundreds of job cuts, retrofitting its facilities, reviewing procurement strategies, implementing flexible manufacturing processes and hiring third-party professionals. and reducing office fees.
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