Cannabis producer Tantalus Labs restructures, lays off workers

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Another Canadian cannabis producer is entering court-supervised restructuring amid cut-throat competition and heavy government taxation of the 4-year-old industry.

In an email to MJBizDaily, British Columbia-based Tantalus Labs confirmed it has filed a Notice of Intent for Restructuring in Canadian federal court.

“This filing comes with the difficult reality of laying off the substantial majority of our team, retaining only a few key employees to navigate the complexity of this restructuring process,” CEO Dan Sutton said in the email.

Sutton said the company is initiating “the process of restructuring with the mission to find a path forward for our brand and winning products to continue to deliver value to customers and distributors nationwide.”

Tantalus Labs becomes the latest casualty in the Canadian cannabis space.

Toronto-based retailer Fire & Flower Holdings recently received an order for creditor protection from a Canadian court, putting approximately 1,400 full- and part-time workers in limbo.

Before that, Vaughan, Ontario-based cannabis producer Phoena Group was granted creditor protection and is winding down its operations.

Sutton has been a leading voice in the industry’s drive to prompt the Canadian government to ease the excise burden on cannabis businesses.

MJBizDaily reported in May that a growing number of Canadian cannabis producers are unable to pay their excise bills, and their debts are mounting.

Federally licensed Canadian producers owed the Canada Revenue Agency 192.7 million Canadian dollars ($145 million) as of March 31, 2023 – over three times more than the amount owed in the previous year.

Canadian governments at all levels have collected billions of dollars in payments from cannabis businesses – from sales, not profits – in the form of excise tax, other forms of tax and various fees.

For example, Canada’s CA$3.1 billion in wholesale sales in the 2021-22 fiscal year alone, government “rent” amounted to CA$1.55 billion – or roughly half of all wholesale sales.

“Notwithstanding years of advocacy with government, we have been unsuccessful in achieving excise tax reforms that would permit a business of our scale to continue to operate successfully in its current form within the Canadian cannabis industry,” Sutton said.

Sutton said Tantalus – which is not publicly traded – delivered roughly 45% sequential revenue growth in the second quarter of this year.

“Despite continued market success by firms like Tantalus,” he added, “the regulatory and taxation environment is persistently so burdensome that even today, five years into recreational legalization, free cash flow in the Canadian cannabis industry remains systemically challenged.”