Almost exactly five years after SNDL opened a cannabis cultivation facility in Olds, Alberta, the Canadian producer announced it’s closing the enormous plant “to enhance the competitiveness” of its marijuana operations segment.
The company, which accumulated losses exceeding 1.1 billion Canadian dollars ($800 million) through fiscal year 2022, expects to save roughly CA$10 million annually from the closure.
Regulatory filings show SNDL spent at least CA$102.5 million on the purpose-built, 448,000-square-foot structure between 2019 and 2021.
When the company, then called Sundial Growers, first unveiled the flagship facility in October 2018, it said 500 people were expected to be employed there.
At the time, SNDL said the facility would consist of 140 state-of-the-art, individually controlled cultivation rooms, with a production capacity of more than 100,000 kilograms (110 tons) of cannabis annually.
SNDL didn’t answer MJBizDaily’s questions about the number of employees who would be potentially displaced in connection with the closure.
“In the past year, we’ve transformed our facility footprint with a clear goal of achieving profitability in our cannabis operations by 2024,” SNDL President Tyler Robson said in a statement.
“As a result, we have taken the difficult but necessary steps to simplify operations throughout our business, which includes the closure of our Olds, Alberta facility.”
Robson said the company expects to capture increased margins from “more sustainable” fixed operating costs.
SNDL said potential noncash impairment charges related to the closing of the Olds facility could be recorded during the fourth quarter of 2023.
The company said it plans to consolidate all cultivation at its facility in Atholville, New Brunswick, and centralize manufacturing, processing and production operations in Kelowna, British Columbia.
SNDL’s operations in Olds have been the subject of some controversy in the past.
Earlier this year, a provincial labor tribunal ruled that SNDL interfered with an off-site union informational meeting for employees working at the Olds facility.
The Jan. 25 ruling from the Alberta Labour Relations Board regarding the complaint by Teamsters Local 987 found SNDL breached provincial labor law when company managers “sought by intimidation or threat to compel employees to refrain from becoming union members.”
SNDL’s announcement of the facility’s closure made no mention of the tribunal ruling.
Dozens of cannabis facilities have been closed across Canada as the country continues to grapple with a massive supply-demand imbalance.
Canada’s licensed cannabis producers have already slashed nationwide indoor/greenhouse cultivation area by approximately 32% over the past few years.
In 2020, near the height of the cannabis stock craze, roughly 2.2 million square meters of indoor/greenhouse cultivation area was licensed by Health Canada for cannabis cultivation.
The latest data, for March 2023, shows that total had fallen to 1.5 million square meters.
Shares of SNDL trade on the Nasdaq.
Matt Lamers can be reached at matt.lamers@mjbizdaily.com.
