Canadian marijuana industry employment tumbled as producers drew federal COVID-19 cash, analysis shows

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(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.

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:

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
CompanyTypeWage subsidy applied for or receivedPre-pandemic workforce... as ofCurrent workforce... as ofWorkforce net difference
Aurora CannabisLicensed producer$50,600,000 3,000Sept. 20191,6439/27/2021-1,357
Canopy GrowthLicensed producer$50,000,000 4,4343/31/20203,2593/31/2021-1,175
SundialLicensed producer$6,100,000 1,06412/31/201939412/31/2020-670
Tilray (pre-merger)Licensed producer$5,089,653 1,64612/31/20191,03012/31/2020-616
HexoLicensed producer$01,2607/31/20197987/31/2020-462
Supreme CannabisLicensed producer$07509/17/20194009/24/2020-350
Tilray NanaimoLicensed producerN/A3009/16/20210Projected-200
OrganigramLicensed producer$12,152,000 7708/31/201955211/20/2020-218
ZenabisLicensed producer$4,924,973 74012/31/201956412/31/2020-176
Hexo's (2021 acquisitions)Licensed producerN/A15511/9/20210Projected-155
SunnivaLicensed producer$011512/31/2018510/14/2020-110
James E. Wagner CultivationLicensed producer$0854/1/2019N/AN/A-85
Flowr Corp.Licensed producer$3,231,000 24612/31/201918612/31/2020-60
Vivo CannabisLicensed producer$705,726 25912/31/201920012/31/2020-59
Emerald HealthLicensed producer$2,002,000 16512/31/201911112/31/2020-54
Beleave Inc.Licensed producer$050Before pandemic010/1/2021-50
MedipharmRetailer, extractor$4,536,000 21012/31/201916912/31/2020-41
BonifyLicensed producer$0402018-end010/1/2021-40
Lift & CoAncillary$05312/1/20191510/1/2021-38
Neptune WellnessLicensed producer$2,069,126 1653/31/20201273/31/2021-38
Canopy Growth (Niagara)Licensed producer$03011/5/20210Projected-30
RIV CapitalLicensed producer$0193/31/2020123/31/2021-7
Hill Street Beverage CompanyRetailer, extractor$134,823 12pre-pandemic5Current-6
Eve & CoLicensed producer$010012/31/201910010/1/20210
GTEC (Avant Brands)Licensed producer$3,140,000 10011/30/20201003/16/20210
THC BiomedLicensed producer$894,257 4511/12/202046Fall 20211
Green Organic DutchmanLicensed producer$987,000 31312/31/201932212/31/20209
Nextleaf SolutionsRetailer, extractor$931,509 146/30/2019256/30/202111
48NorthLicensed producer$01309/30/20191453/1/202115
YSS Corp (NOVA CANNABIS)Retailer, extractor$91,000 11412/31/20191297/15/202015
AuxlyLicensed producer$1,945,000 4105/13/202043112/31/202021
Decibel CannabisLicensed producer$225,000 14912/31/201917112/31/202022
Heritage CannabisLicensed producer$936,329 5310/31/2019781/25/202125
Radient TechnologiesLicensed producer$1,758,168 333/31/20206010/1/202127
CronosLicensed producer$063112/31/201966512/31/202034
Entourage HealthLicensed producer$01646/21/20192117/26/202147
IndivaLicensed producer$1,138,295 9512/31/201914212/31/202047
WeedMDLicensed producer$6,365,269 1646/21/2019211Jul 26 202147
Cannara BiotechLicensed producer$09012/31/201914010/1/202150
Inner Spirit HoldingsRetailer, extractor$08812/31/201914312/31/202055
RubiconLicensed producer$929,876 787/27/20201409/30/202162
Motif LabsRetailer, extractor$199,999 12Before (via CEO)80Now68
Delta 9Licensed producer$02003/19/20203053/31/2020105
Aleafia HealthLicensed producer$4,200,000 1733/18/20203063/31/2021133
ValensRetailer, extractor$11,662,000 6411/30/201920911/30/2020145
Aphria (pre-merger)Licensed producerN/A1,2005/31/20201,3504/30/2021150
Pure SunfarmsLicensed producer$2,470,000 25212/1/20195181/1/2021266
High TideRetailer, extractor$840,000 29410/31/20196363/5/2021342
ChoomRetailer, extractor$119,916 N/AN/A1006/30/2021N/A
Mjardin GroupLicensed producer$963,972 N/AN/AN/AN/AN/A
TerrAscend CorpLicensed producer$1,141,000 365/15/2019N/AN/AN/A
Zyus Life SciencesLicensed producer$0N/AN/AN/AN/AN/A

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