In the White Hills area of St. John’s in Newfoundland and Labrador, Canada, a cannabis production facility was built for the industry behemoth Canopy Growth. Yet, more than two years after the land was leased by the corporation, this facility remains empty. With its future still uncertain.
If in use, this production facility would be able to produce 18,000 kilograms (about 40,000 pounds) of cannabis annually. This product would then be dispersed throughout Canada’s federally legal market.
However, even though documents reveal the property is under Canopy’s ownership for the next five years (which cost them $24 million), they have yet to talk about whether or not they plan to make use of this property.
Admittedly, Canopy will have the opportunity to outright purchase the 12-acre site and 21,000-square meter facility after this five-year period. And perhaps they’re waiting to do just that.
But this doesn’t necessarily reveal why they haven’t used it yet. The $90-million dollar facility is complete with a boiler room, pump room, open-concept office, and staff lounge. All of which are ready to use.
There’s a chance recent inflation levels are forcing Canopy to be cautious of future production. In fact, the corporation has already been making efforts to cut costs, such as through their $40-million sale of a New Brunswick production facility.
As of January 3, 2023, it was announced that Canopy finalized the sale of all of its Canadian retail locations. In turn, there’s a chance they have no plans to grow the brand in Canada any further. And this production facility is merely sitting under their name until the contract comes to an end.
The Five Years That Led to Canopy’s Abandonment of a St. John’s Facility
When recreational cannabis was legalized in 2018, the provincial government ensured that both Newfoundland and Labrador would have a “safe and secure supply” of marijuana.
In response, Canopy Growth secured a two-year agreement where they promised to provide the area with up to 8,000 kilograms (about 17,500 pounds) of cannabis to the area. Furthermore, Canopy promised to build a production facility that would create 145 jobs in and of itself.
According to Bruce Linton, former CEO of Canopy Growth, “we’re going to be invested here permanently.”
Unfortunately, the province didn’t provide Canopy with any investment to get this venture going. Instead, they promised a break on sales remittances it made to Labrador Liquor Corp and Crown-owned Newfoundland – both of which regulate sales and distribution of cannabis.
This break would continue until Canopy made back its (up to) $40 million investment. However, everything changed in 2020.
A number of operations across St. John’s, Fredericton, New Brunswick, Edmonton, Bowmanville, Ontario, and Saskatchewan all closed down. According to David Klein, current CEO of Canopy Growth:
“These actions will be an important step toward achieving our targeted $150 – $200 million cost savings and accelerating our path to profitability. We are confident that our remaining sites will be able to produce the quantity and quality of cannabis required to meet current and future demand.”
While these decisions were not ideal for the province, they didn’t lose any money in the process. In fact, they gained $1.9 million through the remittances mentioned above.
However, it also left a gap in the area’s cannabis market. While Canopy is supplying this sector of Canada with plenty of cannabis, they’ve withheld jobs and other opportunities. Not to mention, they left a large building completely vacant.
In the words of Industry Minister Andrew Parsons: “Do I like the fact that there’s an empty building over there where we were hoping to have a bunch of people working? Of course that’s disheartening.”
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