Organigram lays off 400 workers, cites COVID-19 pandemic
Retail expert says cannabis industry not pandemic-proof, pot not considered essential everywhere
Moncton-based cannabis producer Organigram has laid off 400 employees, about 45 per cent of its workforce, as a result of the pandemic.
No one from Organigram was available for an interview Tuesday, but in a news release the company said it offered "voluntary layoffs" to some employees in an effort to contain COVID-19.
"These are unprecedented and trying times. Our priority right now is to make sound strategic decisions that are in the best interests of our people and which will contribute to the long-term sustainability of [Organigram]," said CEO Greg Engel.
Bruce Winder, a retail expert with Retail Advisors Network in Toronto, said many expected the cannabis industry would do well during the pandemic with so many people home-bound.
"I know initially that cannabis stock surged because folks thought that there's going to be a lot of cannabis being used throughout this pandemic," he said.
However, Ontario's recent announcement that cannabis stores are no longer considered essential and must close has caused "a bit of an issue" for cannabis companies who supply recreational users.
"Organigram is one of many companies, I think, that's had to lay off folks … to protect employees but also due to reduced demand from the recreational side," Winder said.
Winder said even before the COVID-19 outbreak hit, the cannabis industry was already facing "significant headwinds" with issues around price point, product assortment and quality.
Given the enormity of the situation, he said the layoffs at Organigram are unfortunate but not surprising.
"They're one of thousands of companies across Canada, across many industries and sectors that have had to do some temporary downsizing both to protect employees and themselves and lower their liability but also because demand has fallen off," he said.
Industry will rebound
Organigram said it expects to be able to meet demand for the short tem, according to its statement, with a group of employees continuing to work in production and packaging.
"Lump-sum payments will be paid to the affected employees to help bridge the gap to available government programs," the release stated.
Winder said he believes the larger players in Canada's cannabis industry, including Organigram, will rebound and thrive after the pandemic ends.
"I think if they've got a strong brand, and they've got a good following — even if it's regional … I think they're going to weather the storm here."
Winder said he expects there will be a "shake out" in the industry with many smaller producers unable to survive which will lead to consolidation.
"If anything [demand] is going to grow and depending what happens in the U.S. election — you could see cannabis become legal in the U.S. over the next few years, and, if that happens, it's going to be a significant growth opportunity for folks like Organigram."
The temporary layoffs started March 24.
"We continue to monitor this rapidly changing situation and will make the decisions necessary to ensure the safest environment for our employees as well as insulating our business as best we can under the circumstances," Engel said.