News of widespread layoffs at cannabis companies across the United States has dominated headlines, but an analysis of employee counts at America’s largest multistate operators shows several actually grew their payrolls last year.
The fact that employee payrolls were up for some marijuana MSOs at the end of 2022 but down for others underscores how several factors can play a role in determining a company’s health.
Those factors include geographic footprint, taxes, operating costs and capital availability, experts said.
“The present moment is the Great Rationalization for the industry,” Paul Josephson, a New Jersey-based partner and leader of the cannabis industry group at the Duane Morris law firm, told MJBizDaily via email.
“Price compression and profitability varies tremendously by state and even within a state. So smart operators are taking a hard look at where they are investing their human capital.”
That means winding down operations in some areas and investing in others with more opportunity for revenue growth.
The number of employees at MSOs such as Ascend Wellness Holdings, TerrAscend Corp., Ayr Wellness and Curaleaf Holdings increased last year compared to 2021, according to securities filings.
By contrast, employee numbers at other MSOs such as Trulieve Cannabis, Cresco Labs, Columbia Care and Verano Holdings dropped, according to securities filings.
Employee numbers at cannabis tech platforms Weedmaps and Leafly Holdings also shrank over the course of 2022.
A report by Vangst estimates that total employment in cannabis in the United States declined by 2% - even though sales rose by 3% from $25.3 billion in 2021 to $26.1 billion in 2022.
Jeff Wissink, a Chicago-based principal at the advisory, assurance and tax firm CohnReznick, told MJBizDaily via email that downsizing and lower head counts are a result of the lack of liquidity in capital markets, high taxes and the high costs of doing business.
"That means that regardless of the market(s) in which you operate, you must run an exceedingly lean operation to achieve even minimal profitability," he wrote in an email to MJBizDaily.
"If you’re not reaching profitability, you need to understand how long your runway is from a cash perspective."
Head count decreases alone aren't necessarily indicative of the health of a business, Wissink said. Revenue growth and profitability are also important to take into account.
Trulieve employee count drops
Florida-based Trulieve (Canadian Securities Exchange: TRUL; over-the-counter markets: TCNNF) had the most significant drop in employee numbers, from roughly 9,000 at the end of 2021 to 7,600 at the end of 2022 - a 16% decline.
During Trulieve's fourth-quarter and year-end earnings call, CEO Kim Rivers said the MSO is aiming for annualized growth cost savings of approximately $100 million.
Revenue grew to $1.2 billion in 2022 from $938 million in 2021, which Trulieve attributed to the company's:
- $2.1 billion acquisition of Harvest Health & Recreation.
- Expanding its footprint in Pennsylvania.
- Expansion into Massachusetts and West Virginia.
So far, Rivers said, the company has reduced wage costs by approximately 20% by eliminating redundancies related to the Harvest Health acquisition.
Trulieve also exited the Nevada market, shuttered some of its California retailers and closed "duplicative" production assets in Florida, where it is ramping up production at its 750,000-square-foot facility.
"The new facility utilizes state-of-the-art automation and a proprietary design, which we expect will yield efficiencies and cost-savings as the facility ramps throughout the year," Rivers said on the earnings call.
The company did not respond to requests from MJBizDaily for more detail.
According to Wissink, Trulieve and other companies reducing employee counts will see long-term benefits only if they streamline underlying processes and systems.
"Meaning, if you simply reduce headcount, but don’t ultimately reduce the amount of work that needs done or the efficiency by which you do that work, those headcount(s) will ultimately creep back in," he noted.
Head count, revenue up at MariMed, Ascend, TerrAscend
The employee count at Massachusetts-based MSO MariMed (CSE: MRMD; OTC: MRMD) more than doubled over the course of 2022, from 326 at the end of 2021 to 681 in 2022.
MariMed's revenue grew from $121.5 million in 2021 to $134 million in 2022, and MariMed's net income was more than $13.6 million in 2022, up from $7.6 million in 2021.
During the company's fourth-quarter and full-year earnings call, CEO Jon Levine attributed the results to organic growth and plenty of M&A.
In 2022, Levine said, MariMed:
- Acquired and consolidated its Maryland vertical operation.
- Bought an Illinois craft grow license and a dispensary license.
- Acquired a Missouri processing and distribution license.
- Won a new medical dispensary license in Ohio.
"We are very excited for Ohio and Missouri, our two newest high-growth markets," he said.
Employee numbers at multistate cannabis operator TerrAscend (CSE: TER; OTC: TRSSF), which has offices in California, Pennsylvania and Ontario, Canada, grew by 37% in 2022.
TerrAscend reported net revenue of $247 million in 2022, a 21% increase from its 2021 revenue of $194 million.
President and Chief Operating Officer Ziad Ghanem (who was recently appointed to the CEO role) attributed the growth to the company's customer experience.
"The look and feel of our stores, the quality of our service, friendliness and efficiency are the reasons for the loyalty of our customers and patients," he said on the company's earnings call.
Employee count at New York-based MSO Ascend Wellness (CSE: AAWH; OTC: AAWH) grew by 33% through 2022, from approximately 1,500 at the end of 2021 to more than 2,000 workers at the end of last year.
Ascend's revenue grew 22% in 2022 to $406 million. The company reported a net loss of $80.9 million.
Frank Perullo, Ascend's co-founder and interim CEO, attributed the growth to success in New Jersey's new adult-use cannabis market.
Ascend also grew cultivation capacity by 40% and its dispensary count by nearly 20%.
New York-based Curaleaf hasn't reported its full-year or fourth-quarter financial results yet.
CEO Matt Darin told MJBizDaily in an interview that the company's employee count has increased overall despite recent layoffs and its exit from California, Colorado and Oregon because, after four years of growth, it's time to optimize investments.
"We're making sure that we are allocating our resources where we see the best opportunities," he said.
"So that's why we're hiring and growing and expanding in places like Florida, where we continue to open new stores and continue to increase operations and launch new products."
Weedmaps, Leafly employee counts drop
Cannabis tech platforms Weedmaps and Leafly both lost employees in the past year.
The employee count at California-based Weedmaps decreased by nearly 4%, from 607 to 583, from 2021 to 2022.
In the fourth quarter of 2022, revenue also declined for Weedmaps to $49.3 million from $54.2 million in the fourth quarter of 2021.
Full-year revenue grew to $215.5 million in 2022 from $193.1 million in 2021.
Weedmaps' net loss was $82.7 million last year compared with a net income of $152.2 million in 2021.
Executive Chair Doug Francis said Weedmaps will focus on "driving a lean mentality" in every aspect of its operations in the coming year.
"We've already done the heavy lifting, removing excess layers of management across the company, simplifying processes and changing the way we work to drive sales and savings," he said.
The head count at Leafly dropped from 236 to 204 through 2022.
Another recent round of layoffs led to the termination of another 40 employees.
Revenue grew by 10% through 2022 to $47.4 million. The company reported a profit of more than $5 million, but operating costs skyrocketed by more than 40%.
Wissink attributed the company's challenges to the same macroeconomic issues the rest of the industry is facing.
"When things get tight, cannabis companies cut budgets on marketing," Wissink added.
"Weedmaps and Leafly ultimately make their money on cannabis companies spending on marketing.
"They’re going to be hurt given current market trends. This goes for really any supplier of 'discretionary spend' to the space."
Kate Robertson can be reached at kate.robertson@mjbizdaily.com.
