Problems in other areas of the economy have begun to take hold at Cannabis companies as well.
There have been a slew of high profile layoff announcements in recent weeks as CEO’s prepare for what they expect to be a tough economic road ahead.
In early June Tesla (TSLA) – Get Tesla Inc. Report CEO Elon Musk said that he felt “super bad” about the future of the economy. He also announced that Tesla would reduce its salaried workforce by 10% in the next three months.
While the electric vehicle maker will increase its hourly worker headcount — those Model 3s aren’t going to build themselves after all — the layoffs will affect about 3.5% of the company’s workforce.
On June 23, Netflix (NFLX) – Get Netflix Inc. Report announced it’s laying off 300 employees, saying that its “costs are growing in line with our slower revenue growth.” This round of layoffs comes just weeks after the company laid off 150 employees, including executive-level employees at its Drama Series, Spectacle and Event TV, and Comedy Series Divisions.
Crypto trading platform Coinbase COIN just laid off about 1,100 people, representing about 18% of its workforce. “We appear to be entering a recession,” which “could lead to another crypto winter, and could last for an extended period,” Coinbase said in a blogpost.
Employment issues are hitting the tech sector so hard that the Los Angeles Times is keeping a running count of Silicon Valley companies laying off workers and initiating hiring freezes.
Aurora Is Cutting Deep
Aurora Cannabis ACB is the latest company to prove that the cannabis industry isn’t immune after announcing the layoffs of 12% of its workforce.
Aurora confirmed to the CBC that it is making the cuts in an effort to get leaner. The layoffs are part of a plan for the company to cut between $70 million and $90 million from its budget.
In May, Aurora announced that it is closing its flagship Aurora Sky facility.
“Simply put, our business is bigger than what we need, and we must position ourselves to better secure our path to profitability and ultimately be successful in this industry in the long term,” Chief Executive Miguel Martin said in a video message to employees.
The Sky facility was part of a business that had a total production capacity of 150,000 kilograms annually, Aurora said in 2020.
The company also recently confirmed that it was closing its 200-acre outdoor cannabis farm in Westwold, British Columbia, which Aurora once touted as one of the largest in the world.
Aurora told MJBizDaily that it “no longer had a commercial need for the Valley site.”
U.S. and Canadian cannabis companies have been discounting their products in order to move inventory.
Cannabis’ Big Picture
The cannabis industry continues to dig out of the explosive buildout that occurred leading up to the pandemic.
Retailers are relying on promotions, discounts and markdowns to boost sales.
Combined discounts on mainly recreational cannabis sales in nine U.S. states more than doubled over the past five years, from 7% in June 2017 to 15% in April 2022, according to retail data from analytics firm Headset.
The firm expects cannabis discounting to continue until the industry has “more experience and data” to make better decisions about managing products, prices and inventories.
Total flower discounts in Washington state, one of the most mature cannabis markets in the country, reached 20% for the first time in November 2021 and topped 23% in April.
The employment rate is a lagging indicator for the economy, so while unemployment sat at 3.6% in May for the third consecutive month, that number will probably climb in the coming months.
Aurora has been cutting costs for months due to current economic realities. But a leaner company can only help the company navigate the potential economic storms ahead.