Despite the continued growth, and projections for future growth, of the emerging industry, it appears that cannabis isn’t immune to the trials and tribulations of today’s business world.
The COVID-19 pandemic left the majority of professional industries rattled, while cannabis was deemed essential among the states it’s legal for medical and recreational use, which generally worked toward its benefit. But things look a bit different today, according to a report from MJBizDaily, with North American cannabis companies cutting hundreds of jobs, closing retail shops, and cultivation facilities or just calling it quits altogether.
Perusing headlines throughout the summer, it’s slowly become clear that the cannabis industry is entering a new, unfamiliar chapter.
Last month, Colorado reported its first sustained downturn since dispensaries began selling recreational cannabis in 2014. The Colorado Sun notes the closure of dispensaries, with new ventures like delivery and social clubs already struggling. In addition, tax revenue is declining, an unfortunate collection of problems leading to more layoffs in the state.
Colorado taxes and fees collected from retail cannabis sales reached $198.3 million through July of this year, down $53.7 million from the same seven-month period in 2021.
Soon after, in mid-August, California-based cannabis advertiser Weedmaps announced it had laid off about 10% of its workers due to the widespread slowdown in the U.S. cannabis market. Business Insider also reported last week that Curaleaf had done its own round of layoffs, along with closing a facility in Sacramento.
These two cannabis businesses join the likes of Nature AZ Medicine, an Arizona medical cannabis grower that recently cut 103 employees due to the drop of medical sales, and Michigan-based Lume Cannabis, which closed four of it’s roughly 30 stores—though it indicated future plans to open three additional stores in more populated areas.
As a whole, there are numerous reasons for this move, including falling wholesale cannabis prices, a lack of extra disposable income among consumers and structural changes affecting the industry, according to experts.
Along with the economic issues impacting the cannabis industry, cannabis businesses are also dealing with staffing problems. Many public cannabis companies are in the process of turnarounds, or recovery from a period of poor performance, which often results in losing employees.
Edmonton, Alberta-based company Aurora Cannabis said in June it was cutting 12% of its workforce along with its corporate restructuring, expecting the move will save up to 90 million Canadian dollars (or $69 million USD) and put it on a more profitable path. Fellow Canadian company Canopy Growth Corp. shared last month that it cut 245 employees, about 8% of its workforce, similarly as part of sweeping company changes to help reconcile recent losses and usher in a new era of profitability.
Daniel Summer is a professor of agricultural and resource economics at the University of California, Davis and co-author of Can Legal Weed Win? The Blunt Realities of Cannabis Economics. Summer admitted that the legal cannabis industry is “volatile,” adding, “It’s a new industry, and companies are coming and going and being acquired in all parts of the industry—not just growing and processing and selling.”
As the cost of other products rise because of inflation, the price of cannabis has declined, which can also affect companies’ ability to keep employees.
Additionally, the cannabis retail structure has simply shifted.
“Everybody used to buy their beef or their fish from the person who really knew beef and fish – you walked in and talked to the baker, the butcher or the fishmonger about what you want,” Sumner said. “That’s the way it’s handled in cannabis now. But cannabis is moving away from it. It will be cheaper and more available, but there won’t be the services and employment.”
It’s a bit of a hiccup in an industry that’s seen substantial growth over the last decade, though Sumner added that the majority of job cuts are at the senior level, not hourly employees in grows and retail shops.
What will this new chapter usher in next? We’ll have to stay tuned.
