What was headlined a "Production Optimization Plan" translates into Canopy Growth Corp. closing two Canadian greenhouses, shelving plans for a third one, laying off 500 people and taking estimated pre-tax charges of approximately C$700-800 million in its fourth quarter of fiscal 2020 (ending March 31).
One of the leading cannabis companies, which is about 50% owned by alcohol distributor Constellation Brands, said the cutbacks were necessary for "aligning the company’s cultivation capacity with projected demand." Meaning demand hasn't met original, wildly optimistic expectations.
The company will close facilities in Aldergrove and Delta, British Columbia, resulting in the elimination of approximately 500 positions. And it no longer plans to bring a third greenhouse online in Niagara-on-the-Lake, Ontario.
"These actions are part of the Company’s effort to align supply and demand while improving production efficiencies over time," the company's statement said.
"Nearly 17 months after the creation of the legal adult-use market, the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry," the statement continued.
"Additionally, federal regulations permitting outdoor cultivation were introduced after the company made significant investments in greenhouse production. The company now operates an outdoor production site to allow for more cost-effective cultivation…"
“When I joined Canopy Growth earlier this year, I committed to focusing the business and aligning its resources to meet the needs of our consumers,” said David Klein, a former Constellation executive who was named Canopy CEO in January.
Constellation has invested an estimated $4 billion in the Canadian company. Canopy Growth's chairman, founder and co-CEO, Bruce Linton, was forced out last July.
