Article by CBC News
An expert in the cannabis business industry says the closure of five Canopy Growth facilities across Canada, including in St. John’s, is the latest step in the evolution of the legal cannabis industry.
Brad Poulos, an instructor at Ryerson University’s school of business management, told The St. John’s Morning Show on Thursday that often when industries get created more suppliers than needed enter the market.
“That’s kind of what’s happened with the cannabis industry, so now what we’re seeing is the natural shakeout that comes after that,” he said.
Canopy announced Wednesday it would be pulling the plug on operations in several provinces, including its St. John’s facility, which hadn’t opened yet. The company also closed operations in Edmonton, Fredericton and Bowmanville, Ont.
The company said closing the facilities is part of the effort to improve margins and accelerate its “path to profitability.”
As a result, 220 people across Canada are out of a job.
Poulos said he was not surprised by the announcement. It can be tough to turn a profit on legal cannabis in Canada, he said.
“The problem is that there’s just so much overcapacity, and that’s what Canopy is dealing with here,” he said. “They themselves, as well as the industry as a whole, just has an overcapacity problem. So large players like Canopy and Aurora are rationalizing operations.
“By the time legalization came around in 2018, the industry was already overbuilt.”
Poulos said the COVID-19 pandemic has created a boom in cannabis sales and is not a factor in the closures.
“We can speculate on why, but it’s not because of COVID that Canopy is closing these facilities,” he said. “Although they’re a big player and enjoy a reasonable market share in this industry, they don’t need those facilities in order to meet what they believe will be their own internal demand.”
Province ‘stacked the deck’ on local producers, says entrepreneur
Bond Rideout, a cannabis businessman hoping to grow product in Fair Haven, on Newfoundland’s south coast, said he was opposed to the idea of Canopy coming in from the start.