Blaming a tepid market that grew “slower than anticipated,” Canopy announced it will close its Aldergrove and Delta greenhouses, both in BC, and laid off 500 workers. It also canceled plans to build a greenhouse on the 60 acres it purchased in Ontario.
MJ Biz Daily, Vice, BNN Bloomberg
- Employees at the facilities learned Tuesday of a major meeting scheduled for Wednesday. The next day, one employee said, they were “basically told that everyone’s terminated.”
- Many of the laid-off employees (a purported 90 at Delta and 160 at Aldergrove) were Guatemalans employed under the federal Temporary Foreign Worker program, designed to help companies fill temporary labour shortages with foreign hires. Many will be forced to return home.
- Advocates for temporary foreign workers noted a large group of women just arrived in the country in December after going into debt to get to Canada.
- BC Independent Cannabis Association president Courtland Sandover-Sly accused Canopy of taking advantage of the Temporary Foreign Worker program at a time when they suffered no “genuine labour market need.”
The Aldergrove and Delta greenhouses were Canopy’s largest in BC, with a combined 3M square feet of production space. Closing them will cost the company an impairment of between $700M and $800M in fiscal Q4 2020.
- In November, Canopy had 5.4M square feet of licensed capacity. The cuts reduce that capacity by 55%.
- Brock University professor Michael J Armstrong noted prior to legalization, LPs made decisions like greenhouse acquisitions in the hope of dominating an industry that hadn’t yet appeared. Now each LP must adjust to “the market share it actually got.”
- The facilities made products for extraction, which MKM Partners’ executive director Bill Kirk said suggested lower demand for extractions-based products like vape pens and edibles.
- Canopy stressed its new outdoor production allows for “more cost-effective cultivation.” Less that two years ago, in May 2018, the company joined the Canadian Cannabis Council and other LPs in lobbying the Senate to ban outdoor growing.
BMO analysts estimated Canopy invested $500M in BC Tweed, which they said “highlights the undisciplined capital spending by previous management.”
- The decision highlights the risks lingering after many LPs’ pre-legalization rush to acquire as many production facilities as they could, often at greatly inflated rates.