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Canopy Growth Passes $6B… in Losses… Questions Arise

Both online and in-store, massive mainstream retailers like Amazon and Walmart have weaponized the concept of “loss leader” pricing, absolutely crushing local mom n’ pop competitors and homogenizing product options for consumers in the communities they dominate.

 

The starched suits sitting atop Canada-based Canopy Growth would certainly love to be mentioned in the same demonic breath as Bezos or the Waltons but their continued ineptitude when it comes to cannabis has led to over $6 BILLION in losses, and counting, just since 2015.

 

The “loss leader” tactic only works when you have money to burn up front in hopes of gaining and retaining a dominant customer base in the long run.

 

Canopy clearly has money to burn and, clearly, they do not have enough people burning their weed to balance the bottom line. Not even close.

 

Just look at these annual losses for Canopy Growth for each fiscal year ending on March 31st:

 

2015: $9.3M (15 months)

2016: $3.5M

2017: $7.6M

2018: $67.3M

2019: $712M

2020: $1.4 B

2021: $1.7 B

2022: $320.5M

2023: $2.1 B (1Q)

 

Yep, just last Friday (August 5th, 2022), the company’s stock prices tanked by another 8% after another devastating (un)earnings report sent investors into a cage-crapping panic.

 

Canopy execs glibly blamed a drop in production, paired with falling wholesale and retail prices for pot, paired with a cutoff from COVID-related government subsidies as the reasons why they are bleeding investor cash from every orifice.

 

Way too far gone to even sugarcoat things at this point with words like “profit”, Canopy’s CFO is now promising shareholders that “cost savings will ramp up in the second half of the year”.

 

LEGACY GROWERS TIP OF THE DAY: NOBODY EVER GREW BETTER WEED BY CUTTING COSTS

 

Who are we kidding? Growing good weed was never in their pitch deck, so let’s break down their stated reasons for failing, again, to move enough boof to get into the black.

 

Drop in Production – For years, Canopy has been making headlines for all the wrong reasons, and many of those headlines lead to articles about them closing massive cultivation operations across Canada, slashing jobs along the way. This is their current business model as well, as stated by their CFO above. These are the “cost savings” that they promise to only “ramp up” as time goes by.

 

[RELATED READING: Declining Revenues Result in CA$578 Million Losses for Canopy]

 

Falling Prices – From Cali to Canada, the game is the same. Corporate cannabis floods the market with mids, crashing wholesale and retail prices. This hurts their bottom line too, of course, but this is the cutthroat “loss leader” mentality… they just have to be able to bleed longer than the local grassroots competition. It’s the old underwear gnome math from South Park:

 

  1. Flood market with low-cost boof

  2. ???

  3. Profit! (or just “save costs”!)

 

End of Government Subsidies – The fact that Canopy’s public relations team allowed this to go out as a stated reason why they suck at weed is perhaps the biggest sign of their desperation at this point.

Though sales have leveled off in recent months, cannabis markets in Canada and in the US thrived during the COVID-19 pandemic, with the plant being blessed with the “essential” descriptor as other industries were quite literally being shut down for months at a time.

Canopy, however, applied for and in 2020 was granted over $65 million in pandemic subsidies to “retain & rehire” staff. It’s now 2022 and they are blaming their underwater finances that well drying up.

 

It begs the question, though, if they got $65M to retain and rehire staff, where are they?

 

Canopy “Growth”, the Incredible Shrinking Brand

 

canopy-growth-losses-mjbizdailyAccording to some in-depth reporting from Matt Lamers, Canopy reported a total workforce of 4,434 people in March of 2020.

 

Today that number stands at around 2,900 employees… unless some pink slips went out this morning.

 

To recap, since taking $65M from the Canadian government and taxpayers to “retain and rehire staff”, their staff has decreased by over 1,500 people.

One man’s cost savings are another man’s walking papers, though, you know how it goes. Nothing personal. IT’S JUST BUSINESS.

 

The latest reports from Canopy reveal that the company recently received another $24.4M in pandemic-related government subsidies, taking their total haul upwards of $84M, and as they have implied, they’d gladly take more.

 

That’s pretty easy math. Canopy took about $56,000 in federal government subsidies for every job that they eventually terminated. And they’re still drowning.

 

This, along with similar losses measured in the billions by Aurora Cannabis, should serve as a stark warning to cannabis carpetbaggers worldwide.

 

It should also raise some red flags with anyone in the Canadian government who may be concerned with oversight or accountability.

 

Lastly, it should discourage anyone from taking a job at any level with these companies, unless eventually “saving them some costs” is a career goal.

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