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· Posted on
February 21, 2024

The pot industry is getting real hazy after Canopy cuts 60 per cent of its jobs

Canopy is cutting around 800 jobs to save on costs and be profitable.

What's the key learning?

  • Canopy's sharemarket value was once nearly $US20 billion, but now, it's going through its second restructuring in less than 12 months.
  • Canopy estimates it can save as much as $332 million and be profitable is it cuts around 800 jobs - it also blamed their performance on Canada's thriving illicit marijuana market.
  • According to Canopy, there are two very different markets in Canada: one is legal, highly taxed and regulated while the other one is thriving and illicit.

👉 Background: In 2018, Canadian Prime Minister Justin Trudeau’s government legalised the use of recreational marijuana. That same year, Constellation Brands, the marketer of Corona beer, struck a multibillion-dollar deal with marijuana producer, Canopy, that gave it a 38% stake in Canopy.

👉 What happened: At one point, Canopy’s sharemarket value was nearly $US20 billion. That was back then… But now, Canopy is going through its second restructuring in less than 12 months.

👉 What else: By cutting around 800 jobs, Canopy estimates it can save as much as $332 million and be profitable. Interestingly, Canopy has blamed their performance on none other than Canada’s thriving illicit marijuana market.

What's the key learning?

💡There’s no tougher competition than the black market (i.e. a competitor that is completely unregulated). According to Canopy, there are two very different markets in Canada. One market is legal, highly taxed and regulated. The other one is thriving and illicit.

💡In fact, it is estimated that the black market represents about 40% of Canada’s overall cannabis sales. That has meant that the $10 billion marijuana market that was supposed to materialise in Canada hasn’t come to fruition.

💡 But the issues facing Canopy aren’t limited to Canada of course. In fact, Canopy’s complaints about competition from the black market are similar to those made in US states and around the world.

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