Canopy Growth restructures Canadian operations, to lay off 800 in latest cost-cutting move
, BNN Bloomberg
CANOPY GROWTH CORP (WEED:CT)
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Canopy Growth Corp. is planning to restructure its Canadian cannabis operations, which will see the departure of more than one-third of its workforce while shrinking its cultivation and production businesses in its latest attempt to cut costs and seek profitability.
Canopy said Thursday that it will now grow its cannabis in two facilities in Kelowna, B.C. and Kincardine, Ont., while ending its cultivation at its Smiths Falls, Ont. headquarters as well as through its joint venture in Mirabel, Que. It will also exit production and seek third parties to make its vape, beverage, edible, and extract products, while focusing its internal efforts on higher-margin categories like flower, pre-rolls, soft gels, and oils.
In addition to restructuring its production and operations footprint, Canopy said it will reorganize some of its departments such as sales and marketing into smaller working groups. To help save on research and development costs, Canopy will partner with Quebec-based EXKA Inc. to manage its cannabis genetics program rather than develop future strains in-house. And Canopy said it will also reduce the number of in-market brand and SKU products it sells in Canada by approximately 25 per cent and 50 per cent, respectively, in order to focus on more profitable items.
As a result of the changes, Canopy said it will lay off about 800 employees over the coming months, a figure which represents approximately 35 per cent of its total workforce. The company expects to take a pre-tax charge of between $425 million to $525 million due to the cuts announced Thursday.
“Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership,” said David Klein, Canopy's chief executive officer, in a statement. “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’s announcement marks yet another round of closures and layoffs the company has undergone since cannabis was legalized in October 2018 when the company was poised to lead the nascent recreational marijuana market. Flush with $5 billion in cash from an investment made by alcohol-giant Constellation Brands Inc., Canopy embarked on a nationwide blitz with production facilities and offices across Canada in an effort to lead the country’s cannabis space.
However, due to a confluence of factors including an exponential rise in competing producers, differing provincial retail regulations, restrictive excise tax charges, and fickle recreational cannabis consumers who complained about the quality of some of Canopy’s products, the company has scaled back its presence in Canada in dramatic fashion.
In March 2020, Canopy announced it would shut down two major cannabis production facilities in British Columbia, resulting in the loss of about 500 workers. Nine months later, Canopy closed five more production facilities in St. John's, Fredericton, Edmonton, Bowmanville, Ont. and at an outdoor grow facility in Saskatchewan, which led to 200 people being laid off. Canopy later shut down a greenhouse located in Niagara-on-the-Lake, Ont., and sold off its Danish cannabis operations to a local firm while divesting its Tokyo Smoke retail division amid ongoing efforts to break a steady stream of quarterly losses.
Canopy – which reports its fiscal third quarter results on Thursday – has reported a cumulative $2.2 billion loss in the first half of its current fiscal year, while also booking sizable losses across its operations since 2019. Canopy reported a 28 per cent decline in third quarter revenue to $101.2 million while booking a net loss of $266 million on Thursday.
In an effort to stem further losses, Canopy is planning to formalize its U.S. operations, which includes three major cannabis firms that it previously announced plans to acquire once the drug is federally legalized in the U.S.
Canopy is still awaiting shareholder approval to create its “Canopy USA” stand-alone division that will control U.S. multi-state operator Acreage Holdings Inc., edibles maker Wana Brands and Jetty Extracts, while converting the equity controlled by Constellation Brands into a new share class.
The company said it has already received tacit approval from the Toronto Stock Exchange, but it is unknown whether the plans will be onside with the Nasdaq exchange.
Canopy said Thursday that it will now grow its cannabis in two facilities in Kelowna, B.C. and Kincardine, Ont., while ending its cultivation at its Smiths Falls, Ont. headquarters as well as through its joint venture in Mirabel, Que. It will also exit production and seek third parties to make its vape, beverage, edible, and extract products, while focusing its internal efforts on higher-margin categories like flower, pre-rolls, soft gels, and oils.
In addition to restructuring its production and operations footprint, Canopy said it will reorganize some of its departments such as sales and marketing into smaller working groups. To help save on research and development costs, Canopy will partner with Quebec-based EXKA Inc. to manage its cannabis genetics program rather than develop future strains in-house. And Canopy said it will also reduce the number of in-market brand and SKU products it sells in Canada by approximately 25 per cent and 50 per cent, respectively, in order to focus on more profitable items.
As a result of the changes, Canopy said it will lay off about 800 employees over the coming months, a figure which represents approximately 35 per cent of its total workforce. The company expects to take a pre-tax charge of between $425 million to $525 million due to the cuts announced Thursday.
“Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership,” said David Klein, Canopy's chief executive officer, in a statement. “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’s announcement marks yet another round of closures and layoffs the company has undergone since cannabis was legalized in October 2018 when the company was poised to lead the nascent recreational marijuana market. Flush with $5 billion in cash from an investment made by alcohol-giant Constellation Brands Inc., Canopy embarked on a nationwide blitz with production facilities and offices across Canada in an effort to lead the country’s cannabis space.
However, due to a confluence of factors including an exponential rise in competing producers, differing provincial retail regulations, restrictive excise tax charges, and fickle recreational cannabis consumers who complained about the quality of some of Canopy’s products, the company has scaled back its presence in Canada in dramatic fashion.
In March 2020, Canopy announced it would shut down two major cannabis production facilities in British Columbia, resulting in the loss of about 500 workers. Nine months later, Canopy closed five more production facilities in St. John's, Fredericton, Edmonton, Bowmanville, Ont. and at an outdoor grow facility in Saskatchewan, which led to 200 people being laid off. Canopy later shut down a greenhouse located in Niagara-on-the-Lake, Ont., and sold off its Danish cannabis operations to a local firm while divesting its Tokyo Smoke retail division amid ongoing efforts to break a steady stream of quarterly losses.
Canopy – which reports its fiscal third quarter results on Thursday – has reported a cumulative $2.2 billion loss in the first half of its current fiscal year, while also booking sizable losses across its operations since 2019. Canopy reported a 28 per cent decline in third quarter revenue to $101.2 million while booking a net loss of $266 million on Thursday.
In an effort to stem further losses, Canopy is planning to formalize its U.S. operations, which includes three major cannabis firms that it previously announced plans to acquire once the drug is federally legalized in the U.S.
Canopy is still awaiting shareholder approval to create its “Canopy USA” stand-alone division that will control U.S. multi-state operator Acreage Holdings Inc., edibles maker Wana Brands and Jetty Extracts, while converting the equity controlled by Constellation Brands into a new share class.
The company said it has already received tacit approval from the Toronto Stock Exchange, but it is unknown whether the plans will be onside with the Nasdaq exchange.
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