Canopy Growth Cuts 800 Jobs and Shuts Down Flagship Canadian Cultivation Facility

Canadian Cannabis Producer Canopy Growth Announced on February 9th it is closing its cultivation facility in Smith Falls, and cutting more than a third of its workforce, reports MJBiz Daily.

The Breakdown

• The closure is part of a new strategy, where the company is attempting to shift to an “asset-light” model as they continue to struggle, reporting a net loss of 267 million for its fiscal third quarter.
• The company will be cutting its workforce by roughly 35%, with 300 of the jobs being terminated immediately.
• The cost-reduction initiatives are expected to save the company CA$140 million to CA$160 million over the next year, according to Canopy’s management.
• Part of Canopy’s transformation strategy includes moving to a third-party sourcing model for cannabis beverages, edibles and vapes as well as no longer sourcing cannabis flower from its Mirabel, Quebec, facility.

Our Perspective

This was extremely sad news, but not necessarily unexpected. Canopy Growth has been struggling for some time now and considered a quintessential example of a company that grew too big, too fast and lacked focus, showing that first-mover advantage is not always a good thing. Nevertheless, the facility was an iconic location inside the old Hershey Factory and was once considered a symbol of the Canadian cannabis industry. More than anything, we are deeply saddened by the employees impacted by these layoffs and hope that they are able to find new opportunity quickly.

Twitter Announces Policy Change to Cannabis Ads but Questions Remain

Twitter has revised its rules for cannabis advertising, saying it will now allow industry participants to promote brand preference and informational cannabis-related content for CBD, THC and cannabis-related content and services, but the policy is still heavily restrictive, prohibiting cannabis businesses from advertising their actual products for sale, reports Marijuana Moment.

The Breakdown

• Up until this point, cannabis advertising on Twitter was limited to CBD topicals.
• American cannabis companies, brands and purveyors will need to go through an approval process and will then have access to Twitter’s entire suite of advertising products.
• Advertisers will be subject to several guidelines and restrictions including a requirement to be licensed by the appropriate authorities, only target jurisdictions in which they are licensed to promote these products or services online, not target customers under the age of 21, and complying with all applicable laws, rules, regulations, and advertising guidelines.
• In Canada, twitter already allows cannabis advertising on their platform, with several companies utilizing the platform for paid ads.

Our Perspective

Although this is positive news for the industry, the initial excitement surrounding this announcement appears to be a bit overblown, with many stakeholders wrongly assuming they now have free reign to market their products. However, despite cannabis companies not being able to advertise their products for sale, the policy change does appear to provide a bit more flexibility, allowing them to potentially promote their brands and non-commercial activity. A big part of this change appears to be a combination of Elon Musk taking over the company and the fact that Twitter is now a private company. Moreover, some are pointing out that this move does not necessarily reflect shifting attitudes towards cannabis, but rather an attempt to fix Twitter’s sinking ad business and is nothing more than a cash grab from a struggling company.

Novel Cannabinoids like THC-O Deemed Illegal by DEA

Marijuana Moment reports that the DEA has clarified its stance on hemp-derived cannabinoids that are not expressed in the hemp plant naturally such as Delta-8 and 9 THCO.

The Breakdown

• There’s been substantial confusion within the cannabis industry since the 2018 Farm Bill legalized hemp containing up to 0.3 percent delta-9 THC on a dry weight basis. Since that reform was enacted, the market for natural and synthetic cannabinoids has expanded in states across the country.
• The agency’s opinion on the controversial topic became public due to North Carolina-based cannabis attorney Rod Kight requesting the DEA last year to clarify its stance on THC acetate.
• The DEA’s analysis concluded that, unlike delta-9 THC and delta-8 THC, THC-O is not a naturally occurring cannabinoid and is federally prohibited because it can only be produced through synthetic processes.
• Studies have raised concerns about its safety profile, and advocacy organizations like NORML have cautioned against the use of these lesser known, unregulated cannabinoids.

Our Perspective

Although this is an interesting update from the DEA, it does not come as much of a surprise. Companies however selling hemp products with cannabinoids ingredients that do not exist in nature should certainly take note, despite the unknowns still surrounding whether the DEA will take enforcement action or not. This is a rare instance where people in the cannabis space are going to mostly agree with the DEA’s position, as products containing synthetically derived cannabinoids are something that most industry stakeholders and consumers are weary of.