Canada

Cannabis growing facility closure in Yorkton, Sask., among changes announced by Canopy Growth

The Canadian cannabis company behind the brands Tweed, Tokyo Smoke and Spectrum Therapeutics announced the Yorkton facility closure in a list of closures, including others in the U.S., Colombia, Lesotho and South Africa.

Canadian cannabis company says closure of facilities will align production with market conditions

Canopy Growth reported a $374.6-million loss in its second quarter last November, compared to a loss of $330.6 million the previous year. (Sean Kilpatrick/The Canadian Press)

The Ontario-based cannabis company Canopy Growth is closing its grow operation facility in Yorkton, Sask. — part of a series of changes the company announced Thursday.

It's also ceasing farming operations in Springfield, NY, and at its cultivation facility in Colombia. Canopy Growth says it is working to exit its operations in South Africa and Lesotho, a small country encircled by South Africa. Canopy says it plans to transfer all its ownership in Africa to a local business.

The company said those changes would mean cutting a total of 85 full-time positions.

A Canopy Growth spokesperson did not respond when CBC asked how many of those jobs are related to the Yorkton closure.

However, Yorkton's mayor, Bob Maloney, says as he understands it, there were six people employed by the local growing facility. He said he has heard the employees might be relocated to jobs in Edmonton, but the company itself has not confirmed that. 

"They were very quiet while [they] were here," he said. "Six employees is not a huge impact. You never like to see your business closed or people lose jobs. But you know, in the grand scheme of things, it's not a huge hit for our economy."

Canopy Growth is the owner of the Tweed and Tokyo Smoke cannabis retail shops, and the medical marijuana company Spectrum Therapeutics.

Shortly before cannabis retail sales became legal in Canada in October 2018, a managing director told CBC he expected to see the Yorkton facility expand to employ 80 people by the end of that year.

A customer checks out a sample at a cannabis store in Winnipeg on October 17, 2018, the day retail cannabis sales became legal. Since then, 'we haven't seen demand take off anywhere near like what was expected,' says a University of Regina economics professor. (John Woods/Canadian Press)

"You know it's a shame," Maloney said.

"An expansion would have been terrific for for our community, because they had some pretty aggressive growth plans. But you know, the bottom line is always going to decide those kinds of things," he said.

 "I wish them well."

Closure based on market conditions

A statement from the company says the Yorkton closure is meant to "further align production in Canada with market conditions."

"I've never been a smoker and maybe I don't understand the business as well as I could, but it doesn't seem like it's catching on," Maloney said. 

He's not alone in that thinking. 

"I think the problem we're having in the industry is demand," said University of Regina economics professor Jason Childs.

"We haven't seen demand take off anywhere near like what was expected." 

Within the first year of legalization, roughly $38 million was spent on cannabis in Saskatchewan, according to Statistics Canada data. In comparison, between October 2018 and September 2019, roughly $195 million was spent in Alberta and $56 million was spent in Manitoba, the agency said.

Jason Childs is an associate professor of economics at University of Regina. (CBC)

Childs believes pricing has an impact on overall demand, given that there's still an illicit cannabis market running and reducing its prices in response to legal competition, which must adhere to regulations. 

He compares major companies such as Canopy, Aphria and Aurora to the giants in the commercial beer industry, producing a large volume of product that will suit a lot of people's taste. 

"It's not going to be anybody's super-favourite, but it's going to be OK-ish to everybody. And that's not the correct model of thinking about cannabis consumers. They're more akin to craft beer consumers. So there are going to be specific varieties that they like, and specific producers."

He says prices have come down since legalization, and the legal market is getting better at catering to people's tastes at this point. But the prices haven't come down enough, he says — which may be in part due to the cost of regulation.

"It's very, very expensive under the current regime to be a cannabis producer in Canada. So that would be why you'd see Canopy and others collapsing their production into one location," Childs said.

"The idea that this was going to be a revenue source, and a significant revenue source for many provincial [governments] and the federal government, I just don't think has panned out."

More competition could help

Saskatchewan plans to scrap its lottery system, which awarded communities limited licenses for pot shops. As of April 2020, it's accepting applications from communities with fewer than 2,500 people.

Childs said more competition might help.

"It certainly won't hurt. Competition does bring down prices and does focus the minds of the competitors, if you will. So, [it] makes people in the industry a little more focused on providing what it is that consumers actually want."

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ABOUT THE AUTHOR

Tory Gillis

Journalist

Tory Gillis began work as a journalist with CBC Saskatchewan in 2012. You can hear her deliver the afternoon news on weekdays on CBC Radio One in Saskatchewan. She has also worked as a reporter, and as an associate producer on CBC Saskatchewan's radio shows, The Morning Edition, Bluesky and The Afternoon Edition.

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