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Editorial: Growing pains


July 20, 2020
By Mari-Len De Guzman


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The industry is going through some growing pains, and like a young adult it is now facing the responsibilities that come with maturity.

Over the last several months, we’ve seen cannabis corporations that were previously swimming in capital now having to make some tough business decisions as cash flows tighten up and revenues continue to underperform. It’s almost a natural progression for a new industry recovering from the highs of an overexcited market and finally climbing back down to face major corrections to pave the way for a well-balanced, competitive, thriving industry.

For now, the staff cuts and facility closures are painful, especially against the backdrop of a global pandemic that has slowed down the economy. Just over a year ago, the industry was on a hiring spree. Everyone wanted to be part of the cannabis indsutry. Positions were consistently opening up not just in the cultivation department but in other parts of the business as well. People were transferring their skills from another industry and applying them to this brand new industry. It’s such a different story today.

Not only are cannabis corporations trimming their workforce in significant numbers, some have also announced facility closures and sell-offs. And with cannabis producers working with a leaner workforce and reduced production capacity, the consequences to the market’s supply-and-demand dynamic is uncertain. For an industry that started off with a supply shortfall that literally pushed long-time cannabis consumers back to the grey market (or kept them there), a significant shortage of cannabis products – in various forms – will not help the quest to quash the illicit cannabis market.

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Despite the bad news, market reports in recent months indicate higher than average cannabis sales in the height of the pandemic, when most of the country was in lockdown. According to latest data from Deloitte Canada, 23 per cent of cannabis consumers increased their spending on cannabis products since the pandemic began. Moreover, 16 per cent of people who purchased cannabis during COVID-19 are new users.

As things start to look up and businesses gradually re-open following a continued decline in COVID-19 cases (at least in Canada), the hope is that the ripple effects of economic recovery will resonate across industries – including the cannabis industry. In the meantime, cannabis companies will continue to clean house and re-evaluate their business plans for more realistic, market-responsive strategies, and the industry will be stronger for it. A stronger cannabis industry will lead to improved revenues and better employment prospects, and hopefully help restore those jobs that have been lost through this maturing phase that we are in now.

Who says growing up is easy?