Winnipeg cannabis company lays off 40 workers

A Winnipeg-based cannabis company says it's laying off about 40 workers and scaling back growing operations as it copes with an over-saturated market.

The layoffs at Delta 9 Cannabis are the first at the company since it was founded in 2012, affecting workers at the Winnipeg cultivation facility, CEO John Arbuthnot said.

The company plans to reduce capacity by roughly 40 per cent at that facility, Arbuthnot said, as it struggles in a market that now has too much product available and too many people competing to make a profit off it.

"We hate making these decisions and they don't come without a good amount of thought and planning," Arbuthnot said.

It's hoped the layoffs will be temporary and the workers affected can be called back after a few weeks or months of reduced capacity, he said.

The board of directors and executive have also agreed to reduce their compensation as part of Delta 9's plan to save $3 million to $4 million this year, the company said in a news release.

Delta 9 now employs slightly more than400 people, Arbuthnot said.

While the company is still profitable in its retail stores it just opened its 40th location it's faced challenges in its cultivation and wholesale operations, where the industry "continues to see struggles relating to an oversupply of cannabis products [and] an overly competitive market environment," Arbuthnot said.

A year ago, Delta 9 was sellingproducts in the bulk market for $2 to $3 a gram, he said. Nowthe same products are going for anywhere from 50 cents to $1.25 a gram.

However, retail cannabis prices have stayed pretty much the same for the past few years, he said.

The average price of cannabis "dropped measurably in 2019 and 2020 from those early legalization highs of north of $10 a gram down to, say, $5 to $6 a gram on average," where it's stayed, Arbuthnot said.

The company still expects to continue supplying all six of the provincial markets it serves. The cutback in production will eliminate overcapacity that was going to other producers within the industry who would then reprocess the product into things like extracts or pre-rolls, he said.

Medical cannabis clinic closed

The company has also closed its medical cannabis clinic, where services have been suspended since the end of December amid declining interest, Arbuthnot said.

"It had declined over the years to the point where we're talking in the hundreds of patients annually, not into the thousands, as it was prior to legalization," he said.

"Declines there have probably been north of 80 per cent since legalization."

Arbuthnot said some patients say their diminished interest in medical cannabis services stems from the fact that they get taxed on it something advocates havebeen calling for an end to for years.

"Unfortunately, I think we haven't done the things as a country to make our medical cannabis program continue to make sense," Arbuthnot said.

"In many cases, patients are seeing better product availability in the recreational or adult use market versus the medical market."

Longtime cannabis advocate Steven Stairs said cutbacks at a company like Delta 9 are a red flag that draws attention to how serious issues like over-saturation and challenges with government rules are for the cannabis market right now.

"Delta 9 wasn't supposed to be the company to be laying off people. It was looked at as the I don't want to call it like a beacon of light but, you know, the shining example of what a local Manitoba cannabis company could be doing on a big scale," said Stairs, chair of the Cannabis Business Association of Manitoba.

"Delta 9 was the big producer in the province, so it's a sign that the system is not great for anybody right now."