Cannabis company Canopy Growth to lay off 800, close and consolidate some facilities

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Canopy Growth Corp. will lay off 800 workers as part of a transformation plan that will see the company close its hallmark 1 Hershey facility and consolidate some of its cultivation operations.

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The Smiths Falls, Ont. cannabis company said Thursday that the layoff will impact 35 per cent of its workforce and take place over the next several months.

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The move is meant to help the company reach profitability and enable sustainable and long-term growth, said David Klein, Canopy Growth’s chief executive.

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“Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership,” he said, in a statement to The Canadian Press.

“We are transforming 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 to profitability and growth.”

Canopy was due to release its third-quarter earnings and host a call with analysts Thursday morning.

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Ahead of the call, Canopy said it will wind down operations at 1 Hershey Dr., a site in Smiths Falls, just south of Ottawa, where chocolate company Hershey once had a factory.

One Hershey, which has long been Canopy’s headquarters, was the company’s main site for flower and edibles production, but also housed office space.

The company will now complete post-production flower activity at 99 Lorne St., which is across the street from 1 Hershey and already has a regional distribution centre, bottling facility and beverage capabilities.

Canopy will also cease to source flower from its Mirabel, Que. facility, which is owned and operated through Les Serres Vert Cannabis Inc., a joint venture partnership between the company and Les Serres Stephane Bertrand Inc., a tomato greenhouse operator.

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Canopy previously purchased pot from the joint venture, but will cease that activity and now move to a more flexible sourcing strategy to ensure Quebec-grown products are brought to consumers in the province.

Rounding out the facility changes will be the consolidation of cultivation at Canopy’s Kincardine, Ont. and Kelowna, B.C. sites.

As the company transitions its facilities and operations, it will work to balance in-house with third-party manufacturing by focusing internal capabilities on flower, pre-rolls, softgels and oils. It will rely on third-parties, when sourcing vapes, beverages, edibles and extracts.

The final part of the changes comes in the form of a partnership with Quebec-based EXKA, which holds the world’s largest cannabis library. The company will now manage Canopy’s genetics program, ensuring Canopy can preserve its investments in genetics but also receive optimized strains and new cultivars.

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Canopy’s transformation plan comes after years of Canadian pot companies slashing workforces and tightening operations in a bid to reach their long-awaited goal of profitability.

Making the goal tough has been the strength of the illicit market, a slow move toward federal legalization in the U.S. and sales that have underwhelmed, when compared with lofty estimates some cannabis company executives first foresaw for the industry.

Now, to stay competitive and entice customers, many businesses are slashing prices.

The average price for cannabis was $11.78 per gram at the start of 2019, shortly after legalization, but fell to $7.50 per gram in 2021, a November report from Deloitte Canada and cannabis research firms Hifyre and BDSA said.

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The average price for vape cartridges has similarly fallen by 41 per cent from $32.02 per gram around legalization to $19 per gram a year later.

Such drops have prodded Canopy into refocusing its product mix on the premium sector, which typically commands higher prices and generates a more loyal consumer basis than value items.

The move toward premium was coupled with an ongoing cost-cutting plan in recent years involving hundreds of job cuts, the retooling pf its facilities, reviewing procurement strategies, implementing flexible manufacturing processes and reducing third-party professional and office fees.