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Canopy Growth lays off 200 workers in third cut made since March

UnknownCanopy Growth Corp. says it will be cutting 200 workers in its third round of cuts in the last two months.

The Smiths Falls, Ont.-based cannabis business says the employees impacted are working in several departments and located in Canada, the U.K. and the U.S.

Chief executive David Klein says in a statement to The Canadian Press that the decision will allow the company to better focus its resources and ensure it is delivering high quality products to every market.

He says Canopy prioritized being first for a long time, but going forward it will be focused on doing things the best and in the product formats that show the greatest promise.

In mid-April, Canopy laid off 85 full-time workers, closed a handful of facilities and ceased operations in several countries as it tried to optimize its production and better balance supply and demand.

In early March, it cut 500 workers, took a writedown between $700 million and $800 million, closed two greenhouses in Aldergrove and Delta, B.C. and cancelled plans to operate a third in Niagara-on-the-Lake, Ont.


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Canopy Growth to lay off 500, close two greenhouses

In early January, the company delayed the debut of its cannabis beverages

Canopy Growth Corp. is orchestrating a massive overhaul involving a layoff of 500 workers, a multimillion-dollar writedown, the closure of two greenhouses and the cancellation of plans to operate a third.

The Smiths Falls, Ont., cannabis company revealed the moves Wednesday in a press release that attributed the cuts to the Canadian recreational pot market developing “slower than anticipated” and “profitability challenges across the industry.”

The company, which is behind the Tweed, Spectrum Therapeutics, Tokyo Smoke and CraftGrow brands, said the actions will “align supply and demand while improving production efficiencies over time.” (In February 2019, Couche-Tard entered into a multi-year agreement with Canopy that involved the opening of one of its Tweed-branded store in London, Ont.)

“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,” David Klein, the company’s chief executive, said in a statement.

“Today’s decision moves us in this direction, and although the decision to close these facilities was not taken lightly, we know this is a necessary step to ensure that we maintain our leadership position for the long-term.”

Canopy estimated that the pre-tax charge it will record in its next quarter, ending Mar. 31, will be between $700 million and $800 million.

It deemed the facilities it will scrap – greenhouses in Aldergrove and Delta, B.C. – “no longer essential to its cultivation footprint.”

Those greenhouses account for about 278,709 square metres (3-million sq. ft.) of licensed production space that was put to use in February 2018, after retrofitting was done to prepare the company to supply the new adult-use cannabis market in Canada.

The company, however, struggled to create working capital, the cannabis market did not mature as fast as it anticipated and federal regulations permitting outdoor cultivation were introduced long after Canopy had begun investing in their greenhouses.

Canopy now operates an outdoor production site that’s made cultivation more cost-effective. It believes that site will play an important role in meeting demand for products necessitating cannabis extracts.

The company also said it will no longer pursue plans to operate a third greenhouse in Niagara-on-the-Lake, Ont.

Such decisions are the latest in a string of troubles for Canopy and the industry. It announced in early January that the debut of its cannabis drinks – it has 13 planned – will now be delayed because it requires more time to develop its beverage facility and “the scaling process is not complete.”

In February, it recorded a $124.17-million loss in its third quarter of 2020.

Canopy’s cuts come nearly a month after Aurora Cannabis Inc. slashed 500 jobs, took roughly $800 million in goodwill writedowns and announced the departure of Terry Booth, the Edmonton-based company’s chief executive officer.

Aurora’s news was preceded by Tilray Inc. saying it would lay off 10% of its workforce in a bid to cut costs, Sundial Growers axing some of its workforce and Zenabis Global Inc. laying off about 40 staff, mostly in head office roles in Vancouver.


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Canopy says new generation of cannabis products won’t be on shelves until January

Canopy Growth Corp. says its new generation of cannabis-infused food and beverage products won’t be on store shelves until January in most markets.

The Ontario-based company says it was not allowed to sell its new product formats into distribution channels until Dec. 16 and it is rolling out products in a staged fashion from then to ensure a smooth rollout.

Canopy has been describing this phase of Canada’s legalization of marijuana products as Cannabis 2.0.

It has previously warned that it was unlikely to deliver on its previously announced sales targets for its financial fourth quarter due to difficulties with distribution in Ontario, the country’s biggest provincial market.

It now says that its Cannabis 2.0 products, beginning with its first chocolate bars and beverages, should be in stores in early January. It says its new line vape pens and cartridges should launch in late January.

Based in Smiths Falls, Ont., Canopy has been a pioneer of Canada’s commercial cannabis industry but has seen its stock price decline from a peak in April due to difficulties in the first year of legal non-medical product sales.

In October, Canopy purchased a majority stake in BioSteel Sports Nutrition Inc.


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Canopy Growth buys majority stake in sports drink company BioSteel

imagesCannabis company Canopy Growth Corp. has bought a majority stake in BioSteel Sports Nutrition Inc., a maker of sports nutrition products.

The deal gives Canopy Growth a 72% stake in BioSteel with a path to full ownership.

Financial terms of the all-cash agreement were not immediately available.

With the acquisition, Canopy Growth gains an entry into the sports nutrition and hydration business.

Founded in 2009, BioSteel is best known for its pink sports drink that is used by professional athletes.

The company also has partnerships with USA Hockey, Canada Basketball, Athletics Canada and the Professional Hockey Players Association.

“This acquisition allows us to enter the sports nutrition space with a strong and growing brand as we continue towards a regulated market of food and beverage products that contain cannabis,” Canopy chief executive Mark Zekulin said in a statement.

“We view the adoption of CBD in future BioSteel offerings as a potentially significant and disruptive growth driver for our business.”


Martha Stewart says CBD products with Canopy likely ready in mid 2020

A CBD line of products Martha Stewart is developing with Canopy Growth will likely hit the market in the middle of next year, said the American food and lifestyle guru.

The pair is working on some “really good projects right now” and if all is approved they would be ready by mid-2020, said Stewart.

“We’re developing different things for the home, for food and for pets at present. I’m also interested in skin care and other things like that,” she said during an on-stage interview at the Elevate Conference in Toronto.

In February, Stewart said she was teaming up with the Smiths Falls, Ont.-based licensed producer in an advisory role to develop a line of products containing cannabidiol or CBD.

Canopy said at the time it would leverage Stewart’s knowledge of consumer products while exploring the use of CBD and other cannabinoids as they related to both humans and pets.

CBD is the non-intoxicating compound found in cannabis and hemp. While pot remains illegal at the federal level south of the border, the U.S. legalized hemp cultivation at the end of last year.

Meanwhile, the U.S. political climate is becoming more receptive to cannabis with legislation potentially opening the door to the massive market. Earlier this year, the bipartisan STATES ACT – legislation that would amend the Controlled Substances Act and could effectively make cannabis federally legal in states where recreational consumption is legal – was reintroduced in Congress.

And this week, the U.S. House of Representatives is set to vote on the Secure and Fair Enforcement Banking Act – legislation that would offer protections for financial institutions that serve state-authorized cannabis and ancillary businesses.

Stewart also said during the discussion alongside Canopy’s chief executive Mark Zekulin that she hoped that cannabis would be legalized eventually in the U.S.

“There’s been a tremendous stigma attached to it in terms of crime… And I think that, that will all go away.”

She said she ventured into the space because it was an “emerging and exciting market.”

Stewart, who has written several cookbooks, said she isn’t ruling out developing one focused on cooking with cannabis.

“I’m not ready to do it yet, but that might be a possibility,” she said.


Ontario to issue 50 new cannabis store licences: What could this mean for c-stores?

cannabisOntario is set to get 50 more cannabis stores starting in October, and applicants will have to first show they have their finances and retail space ready to go.

The announcement June 26th comes as some of the first 25 of the province’s legal pot shops that were supposed to open April 1 are still not up and running.

Those initial retailers were chosen through a lottery to open Ontario’s first brick-and-mortar cannabis stores—when the drug became legal recreationally last October it was only available online through the government-run Ontario Cannabis Store—and that lottery system has faced criticism for not including a merit component.

In other Canadian jurisdictions allowing for the private sale of cannabis, successful retailers often include convenience stores. For instance, of the 24 retailers selected to qualify for cannabis sales in Newfoundland and Labrador, one is a convenience store in Labrador City. Last summer, a Co-op gas-bar in Calgary was given the green light.

Convenience operators in Ontario are watching the situation. One of the questions is whether the government will allow cannabis stores-within-a-store or insist they be entirely separate.

Either way, convenience-store operators like Alimentation Couche-Tard, which has a large number of Ontario locations, are well positioned.

“We have the ability to sell this product while meeting all government requirements (and) we can train our staff on verifying the identity of all consumers, regardless of their age,” Couche-Tard founder and executive chairman Alain Bouchard foreshadowed at the company’s 2017 annual meeting.

In February 2019, Alimentation Couche-Tard Inc. entered into a multi-year trademark license agreement with Canopy Growth Corporation, one of the winners of the Alcohol and Gaming Commission of Ontario’s Expression of Interest Application Lottery, who was preparing to operate a “Tweed” branded retail store in London, Ont. The store opened in May in a shopping plaza that is also home to Walmart, LCBO, Beer Store, Movie Theatre, Farm Boy and others.

In a release, the new partners stated: “Through this partnership, Alimentation Couche-Tard is aiming to lean on Canopy Growth’s cannabis expertise and leverage its experience with other age-restricted products to focus on the safe, responsible and lawful sale of cannabis, consistent with the legislation enacted by the federal and provincial governments. As two Canadian-made and globally-positioned companies, the London location will serve as an important entry to market that could lead to future international opportunities.”

“Alimentation Couche-Tard is excited about taking a leadership role in the development of cannabis retailing excellence in this major Canadian market. We believe the Ontario Cannabis Store and private retailers will co-exist under a tightly regulated framework with common goals to protect public health and safety,” said Couche-Tard president and CEO Brian Hannasch.

The Alcohol and Gaming Commission of Ontario will hold a lottery on Aug. 20 for the next 42 retail store authorizations. Another eight stores will be located on First Nations reserves through a separate process.

For this lottery, applicants will have to show evidence that if they are selected, they have already secured retail space that could be used as a store and that they have enough capital to open it, the AGCO said.

One licenced cannabis producer said the latest initiative will position the industry for significant sales growth in Canada’s largest province.

“After the first 25 stores began to open in Ontario, the industry saw overall sales of cannabis basically double,” Dr. Avtar Dhillon, executive chairman and president of Emerald Health Therapeutics said in a statement.

“Adult-use consumers are showing a preference for going into a physical location where they can interact with educated, savvy budtenders and we anticipate that the further expansion of physical stores in Ontario and Canada will strongly serve the growth of legal cannabis sales.”

The Ontario government decided on an initial round of just 25 stores, citing national supply issues, but that appears to be easing.

“Our government is continuing to take a responsible approach to opening cannabis stores across Ontario, allowing private sector businesses to build a safe and convenient retail system to combat the illegal market,” Finance Minister Rod Phillips said in a statement.

“With marginal improvements in national supply, we are proceeding to issue up to 50 new cannabis store licences.”

Attorney General Doug Downey said in a statement that a phased approach is still necessary.

“While the federal supply issues persist, we cannot in good conscience issue an unlimited number of licences to businesses,” he wrote.

Omar Khan, a vice-president with Hill+Knowlton Strategies who advises several clients in the cannabis industry, said the announcement is a positive step, but called for further action.

“If the government wants to eliminate the illicit market they will need to ensure that consumers are able to access legal product offerings conveniently and in a timely manner,” he said in a statement.

“This means moving aggressively towards an open licensing system as soon as the national supply situation permits, and working with the private sector to significantly improve the current online customer retail experience.”

The 42 new stores selected through the lottery will be distributed regionally, with 13 in the city of Toronto, six going to the Greater Toronto Area, 11 in the west region, seven going to the east region, and in the north, one each in Kenora, North Bay, Sault Ste. Marie, Thunder Bay and Timmins.

Stores will be allowed to open in any municipality regardless of population if the community did not opt out of having cannabis stores.

The process for First Nation stores will start in July on a first-come, first-served basis.

With files from Canadian Press.