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???? is sitting on 1.4 billion grams of mostly unsellable cannabis.
Another ~1 billion grams was already destroyed.
The 10 biggest producers (all pubcos?) account for 43% of production, and almost all of the $16 billion losses
This is a capital markets trainwreck.
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@MJBizDaily
11:34 AM · Oct 11, 2022
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???? is sitting on 1.4 billion grams of mostly unsellable cannabis.
Another ~1 billion grams was already destroyed.
The 10 biggest producers (all pubcos?) account for 43% of production, and almost all of the $16 billion losses
This is a capital markets trainwreck.
cc
@MJBizDaily
Matt Lamers ??
@matt_lamers
But this is the biggest impact from the chaos wrought by cannabis pubcos:
They're selling cannabis at a substantial loss to themselves, forcing competitors large and small to match the their lower prices.
Capital markets are bankrolling LPs who sell products at a huge loss.
11:41 AM · Oct 11, 2022
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It's not just an unfair excise tax regime that small or privately owned cannabis producers are up against.
They're also competing vs. irrational capital markets, who made it almost impossible to turn a profit in this industry by bankrolling unnecessary production.
11:46 AM · Oct 11, 2022
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Who else is bankrolling the biggest cannabis producers?
The Canadian federal government.
Canada dumped around $300 million in fee pandemic-era grants to the biggest cannabis producers, amid a MASSIVE production glut, thousands of job cuts, and mass product destruction.
11:54 AM · Oct 11, 2022
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???? has a small number of heavily government-subsidized cannabis producers who lost billions of dollars, cut thousands of jobs, unfairly undercut their competitors, compensate executives hundreds of millions of dollars (in total for all of them) ...
12:04 PM · Oct 11, 2022
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But this is the biggest impact from the chaos wrought by cannabis pubcos:
They're selling cannabis at a substantial loss to themselves, forcing competitors large and small to match the their lower prices.
Capital markets are bankrolling LPs who sell products at a huge loss.
Matt Lamers ??
@matt_lamers
·
2h
It's not just an unfair excise tax regime that small or privately owned cannabis producers are up against.
They're also competing vs. irrational capital markets, who made it almost impossible to turn a profit in this industry by bankrolling unnecessary production.
Matt Lamers ??
@matt_lamers
·
2h
Who else is bankrolling the biggest cannabis producers?
The Canadian federal government.
Canada dumped around $300 million in fee pandemic-era grants to the biggest cannabis producers, amid a MASSIVE production glut, thousands of job cuts, and mass product destruction.
Matt Lamers ??
@matt_lamers
·
2h
???? has a small number of heavily government-subsidized cannabis producers who lost billions of dollars, cut thousands of jobs, unfairly undercut their competitors, compensate executives hundreds of millions of dollars (in total for all of them) ...
Matt Lamers ??
@matt_lamers
These are just some of the things smaller or privately owned cannabis producers are up against. Also some responsible publicly traded ones.
This is also why I have no time for the "too many stores" theory, which seems to be the topic of 90% of mainstream news reports.
Matt Lamers ??
@matt_lamers
Amid all this, Canada's securities regulators, most notably the Ontario Securities Commission, has been conspicuously quiet.
It's bizarre and worthy of further scrutiny, which I will be doing.
12:28 PM · Oct 11, 2022
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Home / Canada
Canadian marijuana industry employment tumbled as producers drew federal COVID-19 cash, analysis shows
author profile pictureBy Matt Lamers, International Editor
November 17, 2021 - Updated December 17, 2021
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A breakdown of the Canadian cannabis job gains and losses
(This is the first in a series examining employment and pandemic-related wage subsidies in Canada’s cannabis industry.)
Thousands of Canadian marijuana industry workers have lost or left their jobs since early 2020, even as their employers received more than 140 million Canadian dollars ($112 million) in federal subsidies to retain or rehire employees amid the pandemic, an MJBizDaily analysis has found.
That raises questions about both the cost-effectiveness of the wage-subsidy program and whether most of the funding went to businesses in need of serious restructuring even before the pandemic hit – instead of businesses struggling to cope with the pandemic’s fallout.
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The job losses also have come at a time when annual executive compensation at certain cannabis companies jumped, in some cases to levels exceeding annual revenue.
These findings and questions emerged after MJBizDaily examined the regulatory filings for 50 of the largest Canadian cannabis businesses by market capitalization.
The analysis looked at the number of people the companies employed before the pandemic versus the number detailed in the most recent regulatory disclosures – or, in some cases, after the pandemic started but before significant mergers and acquisitions occurred that might have resulted in job losses.
All told, roughly 6,000 people lost or left their jobs at licensed cannabis producers since the end of 2019, representing 30% of some 20,000 positions tracked by MJBizDaily.
Cannabis industry veteran Jeannette VanderMarel – who co-founded licensed producer The Green Organic Dutchman (TGOD) – called the job losses “catastrophic.”
Four companies accounted for almost three-quarters of the lost jobs:
Canopy Growth.
Aurora Cannabis.
Sundial Growers.
Tilray, before it merged with Ontario-based Aphria in May.
Of the 50 businesses MJBizDaily analyzed, 25 either gained employees or experienced no net loss in staff.
Most of the layoffs MJBizDaily tracked occurred in 2020, and the data accounts for only some of the cannabis industry job losses this year, because most companies have not yet disclosed their 2021 employment levels.
At the same time, the data shows companies that recorded a net loss in the number of workers received the vast majority of the CA$180 million in grants from the federal government – or about CA$141 million in total.
The grants, mostly from the Canada Emergency Wage Subsidy (CEWS), covered some of the wages for employers whose businesses were affected by the pandemic so they could retain or rehire workers and prevent further job losses.
Approximate wage subsidy and job gains and losses
A list of companies collecting wage subsidies in Canadian dollars along with their job gains and losses. Source: Revenue Canada, Regulatory filings, MJBizDaily research
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entriesSearch:
Company Type Wage subsidy applied for or received Pre-pandemic workforce ... as of Current workforce ... as of Workforce net difference
Aurora Cannabis Licensed producer $50,600,000 3,000 Sept. 2019 1,643 9/27/2021 -1,357
Canopy Growth Licensed producer $50,000,000 4,434 3/31/2020 3,259 3/31/2021 -1,175
Sundial Licensed producer $6,100,000 1,064 12/31/2019 394 12/31/2020 -670
Tilray (pre-merger) Licensed producer $5,089,653 1,646 12/31/2019 1,030 12/31/2020 -616
Hexo Licensed producer $0 1,260 7/31/2019 798 7/31/2020 -462
Supreme Cannabis Licensed producer $0 750 9/17/2019 400 9/24/2020 -350
Tilray Nanaimo Licensed producer N/A 300 9/16/2021 0 Projected -200
Organigram Licensed producer $12,152,000 770 8/31/2019 552 11/20/2020 -218
Zenabis Licensed producer $4,924,973 740 12/31/2019 564 12/31/2020 -176
Hexo's (2021 acquisitions) Licensed producer N/A 155 11/9/2021 0 Projected -155
Showing 1 to 10 of 52 entriesPreviousNext
Human toll
The pandemic struck the cannabis industry at a particularly sensitive time.
After spending billions to expand via mergers and acquisitions, the largest LPs collectively lost more than CA$5 billion.
The companies took steps to stem the losses, which ultimately included destroying more cannabis than they were able to sell.
In essence, the largest companies poured billions of dollars into cultivation facilities, with the financial backing of Bay Street and Wall Street, even after MJBizDaily reported in January 2018 that those businesses had already bankrolled more than enough capacity to meet demand.
The gamble apparently backfired and ended up putting the largest companies at a competitive disadvantage, as they soon became too slow to react to the fast-evolving sector.
In the ensuing months, many facilities were closed and sold for pennies on the dollar.
“There is a human toll, and I think that’s clearly been missed,” said VanderMarel, who also helped launch Good & Green in 2018 before it was acquired in 2019 by 48North, where she served as co-CEO.
VanderMarel said that a focus on stock price over customers and quality control contributed to many problems for the large producers.
She suggested that having thousands of employees made some companies look good, “even if it wasn’t really reflective of what the company was doing or what it needed.”
“But showing job growth showed corporate growth, which was the goal to maintain or raise the stock valuation in order to get more investor money.”
Who hired, who fired
A majority of the cannabis businesses analyzed experienced a net gain in employment during the pandemic, as they hired to keep up with demand in an industry that has seen month after month of record national sales.
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That’s consistent with previous MJBizDaily reporting that found smaller, more nimble producers have been taking significant market share from larger rivals throughout 2020 and 2021.
The four companies that experienced the biggest net gain in employment since the end of 2019 were:
Alberta-based retailer High Tide, which added 342 employees.
British Columbia’s Pure Sunfarms, which gained 266 workers.
Aphria, which added approximately 150 employees before its merger with Tilray.
The Valens Co., which grew its workforce by 145.
In all, the roughly two dozen businesses that added to their workforces employed 1,697 more people as of their latest employment disclosures, compared with the respective disclosures they made before the pandemic started.
Twenty experienced a net loss in the number of people they employed. Data was not available for two: Choom Holdings and TerrAscend Corp.
According to the regulatory filings, the four companies with the biggest disclosed net job losses after the pandemic started versus before it began were:
Canopy, which employed 1,175 fewer people as of March 2021, 27% lower than one year earlier.
Aurora, which employed 1,357 fewer people as of September 2021, 45% less than September 2019. (Aurora discloses its workforce data every September.)
Sundial, which employed 670 fewer staffers at the end of 2020 versus one year earlier.
The premerger Tilray, which employed 616 fewer people versus one year earlier.
Tilray did not immediately respond to a request for comment.
An Aurora spokesperson acknowledged the company received CEWS funding amounting to approximately CA$50 million.
“Like other Canadian businesses, we have applied the funds to support the continued employment of Canadians through our business operations in Canada,” the spokesperson said.
A spokesperson for Canopy said via email that CEWS funds allowed the company to partially offset losses compounded by the COVID-19 pandemic and that the company “has strategically hired approximately 1,000 new team members who are critical to the long-term growth of the business.
“We thank the Federal Government for recognizing the value of the cannabis industry as a source of innovation, economic growth, and job creation for Canadians,” the spokesperson wrote.
Scale before sale
Some large, licensed producers shrank their workforces almost as fast as they built them.
Aurora, for instance, had just under 1,000 employees in 2018. That number ballooned to 3,000 employees the following year before falling to 2,380 and 1,600 in 2020 and 2021, respectively.
“Many cannabis companies can benefit from large cuts – and they truly need them,” said Mitchell Osak, president of Toronto-based Quanta Consulting.
The companies that expanded the quickest had to take aggressive rightsizing measures, which at least partly precipitated their respective market-share declines over the past two years.
No one company currently controls more than 14% of the Canadian market outside Quebec, according to BMO Capital Markets.
“Widespread and rapid layoffs really hurt the morale and engagement of the people remaining,” Osak said.
“This will result in lower productivity and create resource gaps and could increase future turnover/complicate growth as the remaining employees disengage and ‘look to jump from the sinking ship.’
“Fundamentally, it’s hard to shrink and grow at the same time.”
Businesses that avoided staff cuts fared much better.
The CEO of Motif Labs, Mario Naric, told MJBizDaily the Ontario-based company has been methodical in its expansion.
“Our methodology to date has really been sales before scale,” he said.
“We designed our licensed (processing) site to be able to scale into a big business, but we started with modest amounts of equipment and people until we can prove out the model.”
Naric suggested that some businesses are resorting to mass layoffs because of a lack of focus or “a shotgun approach of getting into every single category under the sun.”
“Focus permeates through everything we do, from the processes we pursue to the people we employ and how we choose to strategically scale our business,” he said.
“We don’t take any decision lightly, which is why we’ve employed the people we need, right when we needed them, and we’ve kept them through all of COVID and the industrywide layoffs.”
CEO pay skyrockets
Cash compensation paid to executives at large producers has climbed since the start of the pandemic, including at companies that experienced the largest drops in their workforces, MJBizDaily research found.
For example, Canopy Growth awarded executives retroactive raises in 2020 that, in some cases, were between 30% and 100%, according to regulatory filings.
Also in 2020, Aurora executives pulled in cash bonuses worth nearly CA$700,000.
Tilray awarded CEO Irwin Simon a retroactive raise this year, increasing his annual salary by 30% to CA$2.1 million, according to the latest proxy. That’s the highest salary in the cannabis industry.
Simon’s cash bonuses so far this calendar year total CA$16.7 million.
The biggest compensation packages in 2020 went to:
Neptune Wellness Solutions CEO Mike Cammarata, who earned CA$58.7 million. (Cannabis is one of Neptune’s four verticals.)
Canopy CEO David Klein, whose compensation package was CA$42 million from January-March 2020 before falling to CA$3.5 million over the next 12 months.
Aphria CEO Simon, who had total compensation of CA$18.6 million.
In the cases of Neptune and Canopy, a significant portion of the pay was in the form of stock, options and restricted shares, which will only be paid out if the respective businesses see significant reversals in their share prices.
In a statement, a Neptune spokesperson said the business “was grateful to receive this funding which was a vital asset to allow us to continue operations, especially during our transition from a B2B extractor to a diversified CPG company.
“While we do have a cannabis vertical in Canada not all of our businesses fall under that category.”
Regulatory filings show that Tilray’s median worker salary, which does not include the CEO, was CA$18,589 from January to May 2021.
Canopy’s median worker earned CA$58,261 last year.
Not all cannabis CEOs saw a windfall, or a potential windfall, during the pandemic.
Norton Singhavon, CEO of British Columbia-based Avant Brands, deferred his salary.
“I do not believe any of the companies with significant compensation packages have demonstrated the performance required to justify it,” he told MJBizDaily.
“We have cannabis CEOs who have been compensated the equivalent of JPMorgan’s CEO. I think this is something that leaders, board members, compensation committees and executives need to address moving forward, or investors will view the cannabis sector as one that is rifled with self-enrichment.”
Matt Lamers can be reached at matt.lamers@mjbizdaily.com.
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Matt Lamers ??
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Hexo trumpeted “a significant positive total cumulative return” for its shareholders between 2017 and last July – even though the stock tumbled during that time and was at risk of being kicked off the Nasdaq.
mjbizdaily.com
Marijuana producer Hexo touts 'significant' shareholder return despite tumbling stock price
Cannabis producer Hexo Corp. is trumpeting “a significant positive total cumulative return” for its shareholders despite falling stock prices.
12:38 PM · Oct 11, 2022
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Since 2018, almost 900 million grams of unpackaged dried cannabis has been destroyed by licensed producers because of overproduction and quality issues – a weight approximately equal to 650 Toyota Prius cars.
mjbizdaily.com
Canadian growers destroyed a record 425 million grams of cannabis last year
Canada’s federally licensed producers destroyed a record 425 million grams - or 468 tons - of unsold, unpackaged dried cannabis in 2021.
Matt Lamers ??
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Canadian cannabis producers (the big ones!) have sold less than 20% of output since adult-use legalization
mjbizdaily.com
Canadian cannabis producers have sold less than 20% of output since adult-use legalization
Cannabis producers in Canada have sold less than 20% of their production since the country launched adult-use sales in October 2018,
12:41 PM · Oct 11, 2022
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