Canopy's closure of St. John's facility part of bigger industry picture, says expert

Brad Poulos says Canopy is dealing with overcapacity problems.

Overcapacity leading to shifting strategies, says Brad Poulos

Canopy was set to open its largest site in Atlantic Canada in the White Hills area of St. John's, but it cancelled those plans before even growing any cannabis inside. (Erik White/CBC )

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."

Brad Poulos, who teaches a class called The Business of Cannabis at Ryerson University’s business school, says he was not surprised by the Canopy growth closures across Canada. (Joe Fiorino/CBC)

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.

"I have to say I saw it coming three years ago.… The writing was on the wall," Rideout told CBC Newfoundland Morning.

"When you look at a company like Canopy Growth, their main focus is recreational marijuana. They're in larger markets like Toronto, Montreal, Vancouver. Those are the main hubs of distribution. There was no need for them to come here in the first place, when they could have had an outlet built here and simply ship in."

Bond Rideout says he was against the Canopy deal from the start and thinks it hindered N.L. producers' growth. (Submitted by Bond Rideout)

Rideout said the province's deal with Canopy affected N.L. producers' ability to grow cannabis, something he hopes can resume soon.

"It was stacking the deck against local producers," he said. "It took away the legitimacy from these local producers, in my opinion.… When they give this support and this legitimacy to someone from away to come in, it speaks volumes for what they feel about their own people."

Read more from CBC Newfoundland and Labrador

With files from The St. John's Morning Show and CBC Newfoundland Morning