Experts predict more cannabis layoffs and executive departures coming this year

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TORONTO — A rash of cannabis company layoffs and executive departures in recent weeks is likely to continue as the industry faces a rocky year, according to observers.

They are anticipating the coming months will bring more dramatic staffing cuts and changes to leadership at small and large cannabis companies alike as they grapple with the recent roll out of edibles, a history of overspending and a lack of profitability.

The predictions come in the wake of Aurora Cannabis Inc.’s announcement Thursday that it would be slashing 500 staff jobs, taking nearly $800 million in goodwill writedowns and seeing 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 per cent of its workforce in a bid to cut costs and Sundial Growers axing some of its workforce.

Even smaller cannabis companies have been hit with hard times. Zenabis Global Inc. cut about 40 staff, mostly in head office roles in Vancouver, in early January. TerrAscend Corp., Sundial Growers Inc. and the Supreme Cannabis Company have also experienced leadership departures.

“Everything is so tumultuous,” said Akwasi Owusu-Bempah, a University of Toronto associate professor of sociology, who follows the cannabis industry. “I expect companies to completely go under. I don’t think it will just be a matter of layoffs. In the next year and even five years, I think smaller companies will go bankrupt or they might be bought by the larger companies.”

The industry’s troubles have not caught him by surprise. He has long expected them because he says the birth of any newly-regulated industry comes with “a lot of unknowns.”

Licensed cannabis producers, he says, are still figuring exactly what the size of the retail market is, how regulatory systems will work and how the international and national weed scene will look as it evolves.

“Part of what we saw here is that there was so much hype around this industry,” said Owusu-Bempah. “The companies themselves wanted to hype up the size of the industry and the size of the revenues to attract investors, which led to outsized and perhaps unjustified growth.”

Lisa Campbell, the chief executive officer of cannabis sales and marketing company Mercari Agency, said a lot of companies spent too much of their time overvaluing their companies and engaging in a war to be the biggest brand.

“A lot of money was burned through and there wasn’t so much focus on quality or execution because the focus was on who could send out more press releases and acquire the most companies,” she said.

“We all kind of saw the writing on the wall and that many companies were running out of money. It makes sense that a shakeup was inevitable. It was just a question of when.”

She has noticed industry morale is low, especially because of the departures of so many leaders that shepherded companies through the early days of legalization and shaped the industry into its current form.

The recent turmoil should be turning political heads, added Omar Khan, the national cannabis sector lead at Hill+Knowlton Strategies.

“Governments need to take note of the recent job losses within the industry and cannot ignore that well paying jobs are being lost,” he said in an email to The Canadian Press.

“The cannabis industry has almost single handedly saved several Canadian small towns that were suffering from years of decline due to the loss of manufacturing jobs.”

He said the government should start appointing people to co-ordinate long-term economic strategies for the industry and to look for ways to monetize export potential, attract clinical trials, deal with research and development investment and reduce overall regulatory burden, so that the legal cannabis industry can better compete with the illicit market.

 

Companies in this story: (TSX:ACB, TSX:TLRY, TSX:ZENA)

Tara Deschamps, The Canadian Press