Canadian cannabis company Canopy Growth Corporation has entered into an agreement to sell its Hershey building in Smiths Falls, Ontario back to its original owner, Hershey Canada, Inc., for approximately $53 million.
The deal is part of the company’s aim to simplify and limit assets in its operating model, and Canopy Growth will retain its Smith Falls-based post-harvest manufacturing facility.
“This project is a strategic acquisition and is another step in our continuing investment in our supply chain network to enable our leading snacking powerhouse vision,” said The Hershey Co. spokesman Todd Scott, per Yahoo! Life. “The facility provides us with the flexibility to support growth across the consumer goods portfolio.”
According to Scott, it’s still too early to discuss future hiring plans or what the company plans to produce at the 700,000 square-foot facility.
Canopy CEO David Klein described the deal as an “important sale” and shared his excitement for the future.
“This is the latest milestone in our focused effort to reduce costs and further enhance our balance sheet,” Klein said. “Each of the steps we have taken as part of our transformation to a simplified, asset-light operating model supports our ability to deliver in-demand products from brands our customers love, with greater agility and less execution risk. Once again, we have demonstrated Canopy Growth’s ability to achieve significant organizational and operational change to position the Company for future growth in the Canadian market.”
The recent move, coinciding with Canopy’s goal to minimize expenses and streamline operations, reflects some of the broader issues cannabis companies are currently facing in the U.S. A number of companies like Canopy have slashed costs as they navigate some of the current obstacles in the industry.
Namely, consumer demand for weed isn’t always meeting expectations, illicit sellers are still thriving despite continuing legalization and the U.S. as a whole isn’t enacting federal legalization as soon as many businesses and professionals may have hoped.
Canopy’s recent move follows recently shared numbers from the company’s second-quarter earnings report, showing quarterly sales of CA$109 million ($81.2 million USD), besting the analyst consensus estimate of CA$67.98 million with year-over-year growth of 26.32%. Canopy also reduced its debt by more than $1 billion.
Back in February, the company announced that its hallmark 1 Hershey Dr. facility, which at one time acted as Canopy’s headquarters and primary site for flower and edibles production, would be closing as part of goals to consolidate operations. Canopy said that it would need to lay off approximately 800 of its staff, or about 35% of its workforce, as part of the move and a decision to stop sourcing flower from its facility in Mirabel, Quebec and to consolidate operations in Kincardine, Ontario and Kelowna, British Columbia.
Canopy expects to have let go of seven properties, hitting a gross amount of about $155 million since April 1, once the Hershey deal closes.
When Canopy first acquired 1 Hershey Dr. when the cannabis market as a whole was growing, rather than cutting, and federal legalization seemed more imminent. The company purchased the building for $6.6 million along with 923,980 in shares from a group of investors, including former Canopy Chief Executive Bruce Linton and the Guy Saumure company.
Linton received 70,800 of the 94,397 shares issued, due to his status as part owner of the facility.
Once the Hershey deal is wrapped, Canopy plans to complete post-production flower work across the street from the Hershey Drive location, at 99 Lorne St. That location already has a regional distribution center, bottling facility and beverage capabilities.
