WeedMD cuts outdoor cannabis output to focus on higher margin categories

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, WeedMD cuts outdoor cannabis output to focus on higher margin categories
A June 2021 photo showing the WeedMD outdoor cannabis cultivation site in Strathroy, Ontario. (Photo courtesy of WeedMD)

Canadian cannabis producer WeedMD has significantly reduced outdoor cultivation at its Strathroy, Ontario, facility, turning this year’s open-air production into a research crop that won’t be sold to consumers.

On a May 31 earnings conference call, WeedMD CEO George Scorsis said the decision to reduce outdoor production was in part linked to the company’s recently announced acquisition of indoor cultivator CannTx in an all-stock transaction whose value was not disclosed.

“Being frank, considering the high-value, high-margin ‘grade A’ product that we’re seeing in our greenhouses and now the indoor craft grow from CannTx, it simply does not make commercial sense for us to plant 27 acres outside,” Scorsis said on the call.

“We don’t need it, and we instead want to participate in higher margin categories than being a wholesaler has done in previous years,” he continued.

“We are therefore electing to turn this year into an R&D opportunity and test a very small batch with a select few strains we know that will do very well outside, all to see if yields per plant and THC and other cannabinoids are being further improved.”

During the 2020 outdoor growing season WeedMD planted 16,000 cannabis plants on the 27 licensed acres of its Strathroy property, according to a regulatory filing.

In a statement to MJBizDaily, WeedMD vice president of communications and corporate affairs Marianella delaBarrera said the company used about 22 acres of that licensed area last year.

This year, she said WeedMD is only growing on 1 acre of the outdoor site.

The outdoor crop is not meant for commercial sale, she confirmed.

“Our team, including our colleagues from CannTx, will be using it to gauge new grow media, grow material, and a new format of growing for expanded grade A yields,” wrote delaBarrera.

DelaBarrera said it’s possible that WeedMD could return to outdoor cultivation for commercial sale in the future, “however in lieu of growing copious amounts of biomass, we are focused on producing quality flower that will go into producing our consumer-centric, high-margin products.”

Although a number of Canadian cannabis producers have outdoor farms, some producers have closed them over the last year in the face of a significant oversupply issue.

Canadian producers added a record amount of marijuana to their already-ample inventories last fall when the 2020 outdoor growing season ended.

Since last November, however, Canada’s glut of dried cannabis shrank for four consecutive months, according to figures from federal regulator Health Canada.

WeedMD closed a facility in Bowmanville, Ontario in January.

In June, the company announced it was selling its subsidiary there for significantly less than it paid to acquire it in 2019.

WeedMD shares trade on the TSX Venture Exchange as WMD.

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.