Pot company Canopy Growth to lay off 243 workers as it moves to cut costs

Canopy Growth stock image
Canopy Growth stock image

Canopy Growth Corp. says it will lay off more than 200 workers as part of a new cost-reduction strategy that will make cannabis cultivation more affordable and uncover supply chain efficiencies, though it didn’t offer a target date for profitability.

Brenna Eller, vice-president of media and communications for the Smiths Falls pot company behind the Tweed, Tokyo Smoke and Doja brands, said Tuesday that the 243 affected workers span Canada, Europe and the U.S., with the Canadian portion located mainly in Ontario.

Their job cuts are a key piece of the cost-cutting plan that will also see the company retool its facilities, review procurement strategies, implement flexible manufacturing processes and reduce third-party professional and office fees.

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Canopy anticipates the moves will create between $100 million and $150 million in savings within a 12-to-18-month range and – like a series of other cannabis companies that have embarked on overhauls recently – help it reach profitability by better aligning supply with demand.

“To realize profitability and power growth, we are taking critical actions to further evolve Canopy Growth into an agile organization with a clear focus on the areas where we have the greatest potential of success,” Canopy CEO David Klein said in a news release.

Market headwinds

“These necessary changes are being implemented to ensure the size and scale of our operations reflect current market realities and will support the long-term sustainability of our company.”

When Canopy reported its most recent quarterly results, Klein warned market headwinds could hamper the company’s ability to be profitable in Canada, even after it spent months uncovering $85 million in cost savings.

Canopy previously predicted it would be profitable in the second half of its fiscal 2022, but reassessed that goal last November.

At the time, the company did not provide a new timeline, but announced that reaching its past goals will take longer than expected because of market share challenges and a slower-than-expected U.S. launch of its BioSteel products.

Canopy did not announce a new profitability timeline Tuesday with the unveiling of its cost reduction plan, but said it expects lowering per-gram cultivation costs through facility improvements to generate between $30 million and $50 million in savings and reduce expenses by $70 million to $100 million over the next year and a half.

The overhaul will result in between $250 million and $300 million in charges in Canopy’s fourth quarter and between $100 million and $250 million in non-cash impairment charges, largely driven by goodwill and intangible asset impairments.

The company halted operations at five facilities across the country, took $800 million in writedowns and laid off more than 200 workers in December 2020, while promising at the time the “difficult” decision would accelerate its path to profitability.

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