Canopy Growth announces changes to global operations to drive strategic focus

CANADA – CBD-infused beverage producer, Canopy Growth Corporation has announced a series of global operational changes which the company expects to further optimize production, better align supply and demand, and improve efficiencies in its global operations.

As part of its ongoing strategic review of the business, Canopy Growth announced that it is targeting a transfer of ownership of all of its African operations to a local business.

The company has decided to exit the African market. Canopy Growth revealed that it has entered into an agreement to sell all its operations in South Africa and Lesotho. Canopy said it expects to close the transaction in the coming weeks.

In Canada, the company is planning to shut down its indoor facility in Yorkton, Saskatchewan, to further align production in Canada with market conditions.

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Canopy says that it is confident its production capacity in Canada will meet consumer demand into the future.

Canopy Growth will also cease operations at its cultivation facility in Colombia, moving to an asset-light model that leverages local suppliers for raw materials and Procaps for formulation and encapsulation activities.

According to the company, these activities will support the position of Colombia as the company’s Latin American production hub and the ongoing development of its cannabis industry.

Canopy is also closing its farming operations in Springfield, New York, citing abundance of hemp produced in the 2019 growing season. 

The company said that it will continue using this supply to produce hemp-derived CBD products for the US market. The organizational changes in the four markets include a headcount reduction of approximately 85 full-time positions.

These are part of the efforts that David Klein, who was appointed by the as the CEO in January this year is implementing to align the company’s supply and demand while improving production efficiencies.

“When I arrived at Canopy Growth in January, I committed to conducting a strategic review in order to lower our cost structure and reduce our cash burn,” said David Klein, CEO, Canopy Growth.

“I believe the changes are an important step in our continuing efforts to focus the Company’s priorities, and will result in a healthier, stronger organization that will continue to be an innovator and leader in this industry.”

In March, Canopy Growth unveiled the company’s production optimization plan that will result into the elimination of approximately 500 positions including closing its facilities in Aldergrove and Delta, British Columbia, western Canada.

Nearly 17 months after the creation of the legal adult-use market, Canopy says that the Canadian recreational market has developed slower than anticipated, creating working capital and profitability challenges across the industry.

Additionally, federal regulations permitting outdoor cultivation were introduced after the company made significant investments in greenhouse production, which saw the Canopy halt plans to bring a third greenhouse online in Niagara-on-the-Lake, Ontario.

The company now operates an outdoor production site to allow for more cost-effective cultivation, which the company believes will play an important role in meeting demand on certain products that rely on cannabis extracts.

Along with this announcement, the company expects to record estimated pre-tax charges of approximately CAD700-800m in Q4 Fiscal 2020 ending 31st March, as the company completes its organizational & strategic review.

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