A Canopy Growth Corp. flagship facility that was once emblematic of the prospective wealth and new beginnings of the country’s legal cannabis industry is being sold back to its original owner, chocolate maker Hershey Canada.
The sale of the Smiths Falls, Ontario, facility – for 53 million Canadian dollars ($39 million) – is part of Canopy’s drive to shed costs and transition to an “asset-light” model, the struggling company said in a news release.
But it’s also symbolic of Canada’s faltering marijuana industry, which has sustained more than $20 billion in losses.
Canopy – which has yet to record a profit – has lost almost CA$6 billion since becoming the first cannabis company to go public in 2014, when it was known as Tweed Marijuana.
Back in February, Canopy said it planned to shutter the Smiths Falls facility and lay off 800 workers to save money.
The facility has a rich history and has undergone a major transformation over the past 15 years.
Hershey stopped producing chocolate in Smiths Falls in 2008, leaving the plant empty for years.
In 2013, Tweed Hershey Drive – a company affiliated with Canopy Growth – bought the plant from Icon International, a specialized finance company in Canada and the United States, according to local media reports at the time.
“This is the latest milestone in our focused effort to reduce costs and further enhance our balance sheet,” Canopy CEO David Klein said of the facility’s sale back to Hershey.
“Once again, we have demonstrated Canopy Growth’s ability to achieve significant organizational and operational change to position the Company for future growth in the Canadian market.”
In announcing the pending sale Thursday, Canopy said it will retain its Smiths Falls-based post-harvest manufacturing facility.
Canopy plans to centralize its post-harvest manufacturing at its former beverage facility in Smiths Falls.
In addition, the company is moving its head office across the street.
The former beverage facility has been retrofitted to support both post-harvest manufacturing and office functions, Canopy told MJBizDaily in an emailed statement.
For almost three years, Klein has been unwinding many of Canopy’s decisions, and the Hershey facility sale is the latest example.
This year alone, Canopy has grossed roughly CA$155 million from the sale of seven properties, the company said in its release.
The foundation for Canopy’s losses was largely laid by former executives, who aggressively expanded the business across Canada and around the world.
The problem was the company – and the industry – overshot production capacity and overestimated demand for cannabis products.
By 2017, before adult-use marijuana was legal, Canada’s licensed producers had bankrolled more than enough production capacity to meet demand for recreational cannabis.
But companies kept building and buying, and by 2021, Canadian cannabis businesses had sold less than 20% of the marijuana they had produced – a major factor in the industry’s mounting losses.
Canopy, for its part, bought large greenhouses in Canada and overseas in Colombia, Denmark and Lesotho.
Unwinding those purchases, which started in late 2019, has affected thousands of workers.
In 2020, Canopy said it was ceasing some cultivation in Africa, Canada, Colombia and the United States to “improve efficiencies” in its global operations.
Months later, Canopy shuttered more facilities across Canada to save money.
Canopy also unloaded greenhouses in British Columbia, which it once touted as the largest cannabis greenhouses in the world.
Matt Lamers can be reached at firstname.lastname@example.org.