The once high-flying marijuana industry is expected to endure more layoffs and pain in 2023 – and perhaps beyond – after a tough year marked by companies cutting hundreds of employees amid falling wholesale prices and slowing demand.
The layoffs have involved a range of businesses, including large multistate operators such as Curaleaf Holdings and Trulieve Cannabis as well as smaller tech companies.
Several high-profile industry executives also have exited the scene, underscoring how the fallout has spread to the C-suite level.
“I don’t think layoffs have peaked. I think this will continue into 2024 for sure,” Sara Gullickson, CEO and founder at The Cannabis Business Advisors, wrote in an email to MJBizDaily.
Through the first part of the COVID pandemic, people were receiving government assistance, many were working remotely. Sales exploded.
This environment fueled additional spending in the cannabis sector, according to Gullickson.
Now, consumers are spending less to prepare for a possible recession. Combined with a lack of movement on SAFE Banking or any major federal reform, investors have taken notice.
“Capital has gone by the wayside and businesses are having to course-correct,” Gullickson added.
“Cannabis market numbers at the end of 2020 and the beginning of 2021 were inflated in many ways and valuations were astronomical.”
The damage has been widespread. Over the past several months, layoffs have been reported by:
Oregon-based cannabis retail technology firm Dutchie, which laid off 8% of its workforce last June, and instituted another round of layoffs in November, according to a company spokesperson.
Cannabis tech company WM Technology, which laid off 175 employees, or 25% of its workforce, in November. CEO Chris Beals, Chief Operating Officer Juanjo Feijoo and Chief Technology Officer Justin Dean subsequently resigned from the company, which operates Weedmaps.
Massachusetts-based Curaleaf, which cut 220 employees in November and 50 in August. The MSO shuttered its Sacramento facility.
Seattle-based cannabis commerce platform Leafly Holdings, which cut 56 employees in October, or 21% of its workforce. COO Sam Martin departed in December.
Florida-based Trulieve, which laid off as many as 36 employees in Pennsylvania in December and an undisclosed number in Florida.
Florida cannabis marketing technology company Springbig, which reduced its workforce by 23%, or 37 jobs, through “layoffs and attrition.”
Green Leaf Medical, a subsidiary of New York-based multistate cannabis operator Columbia Care, which is cutting 73 employees in Saxton, Pennsylvania, effective Feb. 28.
Dutchie’s plight
Dutchie, in some ways, has underscored the cannabis industry’s roller-coaster ride since the outbreak of the pandemic in 2020.
The company’s initial round of layoffs last June occurred less than a year after Dutchie raised $350 million; the company was valued at a whopping $3.75 billion.
Co-founder and CEO Ross Lipson attributed the cuts to the “dramatic market shift” in the cannabis industry.
Last month, however, Lipson and his co-founder brother, Zach, were ousted from the company by the board. They are now suing to try to take back control of the company.
Meanwhile, the cannabis industry’s layoffs have dovetailed with cuts at mainstream companies.
Household names including Goldman Sachs, Twitter, Facebook parent Meta and Amazon have shed thousands of employees.
But the cannabis industry’s pressures are uniquely challenging, including:
More consolidation and streamlining operations.
Price compression in over-saturated markets.
High interest rates and challenges raising capital.
Formerly limited license states expanding license numbers.
Cannabis tech and the ‘trickle-down’ effect
Layoffs at Weedmaps, Leafly, Leaflink, Akerna, Springbig and other software and technology companies serving the cannabis industry demonstrate how that sector was hit particularly hard in 2022.
In Akerna’s case, the layoffs were part of a larger cost-cutting plan to accelerate the company’s path to profitability, according to a news release. The executive team also agreed to a 25% cut in compensation.
Last week, Akerna announced the sale of 365 Cannabis back to some of the business software firm’s previous investors in a deal worth roughly $2.8 million.
That was significantly less than what Akerna paid to acquire 365 Cannabis in 2021. Nasdaq-traded shares of Akerna surged in response.
According to Gullickson, even though their services are specialized and needed by the broader cannabis industry, the problems facing cultivators and retailers are trickling down to non-plant-touching ancillary companies.
“We’re seeing a trickle-down effect,” she said.
“As capital and revenue declines on the plant-touching side, it strangles many of the ancillary businesses that rely on those operators for their customer base.”
Have tech layoffs peaked?
California-based consultant Andrew DeAngelo told MJBizDaily that in the case of cannabis marketing tech companies, some had recently reduced fees to compete in an increasingly cluttered market.
Others may have gone public and grown too quickly, and are right-sizing as a result.
But he said fewer staff comes at a cost, and in the case of tech, layoffs may have peaked in 2022.
“I’m not sure they can cut any more people than they have without doing serious damage to their actual operations,” he said.
“But I worry about the plant-touching folks a little bit more in terms of layoffs continuing into this year.”
Ademola Oyefeso, international vice president of the United Food and Commercial Workers International Union (UFCW), encouraged cannabis workers to join unions, which he said benefits both employees and employers.
“At the same time that cannabis workers are benefitting from the job security that a union contract offers, like family-sustaining wages and affordable health care, their employers are also benefiting from the consistency and dependability that comes with a collective bargaining agreement,” he said in an email to MJBizDaily.
UFCW and Teamsters have been signing up marijuana workers in several states, and will continue their work in 2023.
“It’s clear from the layoffs seen the past few months that the cannabis industry is not immune to the impacts of the rest of the economy,” Oyefeso said.
H/T: mjbizdaily.com
