Canopy Growth CEO ‘Prunes’ & ‘Fertilizes’ Workforce, Cannabis Jobs Hit Hard in 2020

Article by Jeff Lagerquist, Yahoo! News

Yahoo Finance CanadaYahoo Finance Canada Canopy Growth CEO ‘prunes’ & ‘fertilizes’ workforce, pot jobs hit hard in 2020 Jeff Lagerquist Jeff Lagerquist A worker shakes cocoa nibs into a machine during a tour at a Canopy Growth facility that produces cannabis derivatives in Smiths Falls, Ontario, Canada October 29, 2019. REUTERS/Blair Gable “There’s been more layoffs since then,” she said in an interview, admitting that she lost track of the grim figures as the year drew to a close. “We’ve seen a lot of shedding of staff.”

From bud trimmers to executives, 2020 was a nail-biting year for employees in the Canadian cannabis industry. Thousands lost their jobs as producers scrambled to cut costs and shut down facilities in order to bring the size of their harvests in line with weaker-than-expected demand.

In the span of just three days last February, Tilray (TLRY) and Aurora Cannabis (ACB.TO)(ACB) laid off a combined total of roughly 650 workers in their respective bids to improve financial performance. Canopy Growth (WEED.TO)(CGC), HEXO (HEXO.TO)(HEXO) and a slew of others followed suit, and layoffs and plant closures rippled across the industry throughout the year. For a number of companies one round would not be enough to reach their downsizing targets.

Like the legal pot sector itself, which was once focused on growing as much product as possible, the pot job landscape appears to be shifting from quantity to quality, as companies mature from their startup roots. At Canopy, one of the largest employers in the sector, that’s meant saying goodbye to 1,500 workers but it’s also been hiring, bringing on new consumer-focused talent in pursuit of profit.

“We’re pruning in some areas and fertilizing in others,” CEO David Klein told Yahoo Finance Canada in an interview.

Canopy’s first big cut of 2020 came on March 4. The company laid off 500 workers, closed two massive greenhouses, and told investors to brace for a writedown of up to $800 million in its next quarter.

At the end of March, Canopy said its headcount was 4,362. Today, 3,346 work for the Smiths Falls, Ont.-based company, including about 500 new hires brought on throughout last year. The company expects to save $150 million to $200 million over the next year to 18 months with the aim of turning a profit in the second half of 2022.

Canadian cannabis producers eliminated a record number of positions last year in a bid to “right-size” their companies, according to the chief executive of a Toronto-based industry staffing agency. When she crunched the numbers last fall, Alison McMahon of Cannabis At Work estimated Canadian pot firms shed 2,700 positions in 2020 – about 30 per cent of the industry’s total workforce.

“There’s been more layoffs since then,” she said in an interview, admitting that she lost track of the grim figures as the year drew to a close. “We’ve seen a lot of shedding of staff.”

Klein, a transplant from Canopy’s largest investor, Corona beer-maker Constellation Brands (STZ), said the goal of his sweeping overhaul has been to transform Canopy from a “startup cannabis company that had a lot of production” to a “basic stock standard CPG (consumer packaged goods) company.”

One important goal has been to break Canopy of its habit of growing too much cannabis and writing down millions in unsold inventory. It’s a trait many large Canadian producers have shared, fuelling concerns about industry-wide oversupply and price compression.

“We’ve not come out of a quarter where our kilograms harvested were very much in line with our kilograms sold. So we’re no longer building inventory,” he said, referring to the three months ended Dec. 31, 2020.

At the same time, Klein said the 500 new hires last year, many of whom analyze sales data and run consumer panels, have significantly improved the efficiency with which Canopy supplies provincial wholesalers and retailers with products.

“A year ago, we were filling about 50 per cent of orders as written by the provinces,” he said. “In December, we were at over 98 per cent. So, we’ve got better at actually supplying the customers what they want, and not having to grow a lot of excess. That’s the way you’d want a business to operate over time.”

McMahon said where there was once a huge need for master growers to oversee new cultivation, she now sees more job postings on her website for manufacturing edibles, vapes and other extracted products. Sales and financial roles are also on the rise, she said, as companies face stiffer competition and more pressure to turn a profit.

“We’ve continued to see a lot more maturity around those internal operations types of things,” McMahon said. “Everyone is needing to get to a point where they are actually profitable.”

In August 2019, Statistics Canada reported that 9,200 Canadians worked in the country’s pot sector as of that April. McMahon said it’s tough to predict if there will be net employment growth after the roughly 2,700 jobs eliminated in 2020. The fact that cannabis was deemed an essential service amid the COVID-19 pandemic helped to insulate the sector from the level of job losses seen elsewhere, she said.

Federal cannabis legalization in the United States is another factor that could impact employment in Canada as producers like Canopy increasingly look to grow their business south of the border. Canopy said it has recently bulked up its U.S. sales team to manage the launch of its collaborative CBD line with Martha Stewart, and plans to fill more American roles, including a leader for its U.S. beverage unit.

“At this point, I wouldn’t say we are seeing Canadian jobs go to the U.S. That could change once the U.S. actually moves to full federal legalization,” McMahon said. “I would say the biggest peaks and valleys that we see regionally today are more tied to the retail market in different provinces and the volume of stores.”

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