Peace Naturals announces plant closure
Cronos Group announced Tuesday that it will be pulling out of its Stayner manufacturing facility by the end of 2022 as part of its “strategic and operational realignment initiatives.”
“There will be a change to the size of our organization, but we will not know the full impacts until human resources has spoken with everyone. We are committed to treating our employees the right way and do not have any additional details on the number of impacted employees at this time,” said Cronos Group spokesperson Emily Whalen.
In 2017, local dignitaries and investors joined in a gold shovel ceremony and champagne toast to announce a 315,000 square foot expansion to the facility on Concession 12 Sunnidale. The expansion included a state-of-the-art 286,000 square foot production facility, a 28,000 square foot greenhouse and a 1,200 square foot extraction laboratory. The new facility was expected to result in 100 jobs.
The expansion took residents by surprise. Because it complied with the existing agricultural zone on the property, no public process was required under the township’s bylaws.
Some analysts have said that having more than 800 licensed producers in Canada, has led to an oversupply of certain products in the legal market.
In a fourth quarter report, Cronos Group announced a 59 per cent increase in revenue in 2021 over the previous year, primarily driven by continued growth in the adult-use market in Canada and increased sales in the Israeli medical market.
Cronos Group is opting to improve profitability by sourcing product through joint ventures with large-scale Canadian greenhouse operators and a network of third-party producers.
“…In line with our focus on enhancing agility and fostering long- term growth, we have made the decision to exit our Peace Naturals Campus in Stayner, Ontario,” said Cronos Group president and CEO Kurt Schmidt in a news release. “As we continue to execute our asset-light approach and focus on brands and R&D, we will continue to leverage our joint venture with Cronos GrowCo and other contract manufacturing partnerships moving forward. We are grateful to our Stayner associates for their hard work and the contributions they have made to Cronos Group, and appreciate their ongoing support in helping to provide a seamless transition out of the facility throughout 2022.”
As a result of the Company’s planned exit from the Peace Naturals Campus, Cronos Group reported to investors it has incurred a $119.9 million non- cash impairment charge on long-lived assets in the fourth quarter of 2021. In addition, the company expects to incur charges of approximately $4.5 million in connection with the planned exit. These charges include employee- related costs, such as severance, relocation and other termination benefits, as well as contract termination and other related costs, which are expected to be incurred primarily in the second half of 2022.
“I am proud of the dedication and resilience our team has shown throughout the past year as we navigated through a dynamic market environment,” said Schmidt. “Our fourth quarter 2021 results indicate positive momentum, which we will look to carry forward as we begin to implement our strategic and operational realignment initiatives. As we look to 2022, we will continue to realign Cronos Group’s organizational structure to match our strategy, with a primary focus on adult-use products and elevating our brands through rare cannabinoids. We also remain intensely focused on positioning ourselves for long-term opportunities by continuing to invest in our brands, creating and supporting an efficient manufacturing strategy, investing in rare cannabinoids and innovation, and readying Cronos Group for entry into the U.S. cannabis market once federally permitted. We are optimistic about the future of the company and the year ahead.”
Peter Miller said Agripharm started receiving resumes from Peace Naturals employees the same day the announcement was made.
“We want to be able to absorb as many of those folks as possible but of course, it’s a really tough market and that’s only possible with our own growth, because we are running as lean as we can,” said Miller. “We do see opportunities for growth on the horizon.”
Miller said the industry is starting to see a levelling off after billions of dollars were initially invested in the cannabis sector, because Canada was the world’s first federally legal market for recreational use. He said some infrastructure is now becoming surplus as supply and demand levels the market. He remains optimistic about Agripharm’s survival and says they continue to fight forward, while seeing signs of success.
He said while there are producers who are having trouble moving their products, as the legal market has expanded certain inventory has been depleted creating opportunities for producers that have stayed scrappy and small, like Agripharm at Cashtown Corners which has been in the business for a decade. Miller said they are very proud that their Purple Hills product has become a top three brand in Canada in the premium concentrates category, which they continue to build upon.
Miller said the industry may be getting to the end of closures for producers, the next phase of the market levelling will impact retailers.
He said this is exactly what he was trying to express to Clearview Township when it was attempting to limit production and retail.
“There’s no reason to do that because there is not going to be more facilities necessarily – there will be little ones here and there but you’re going to see a lot more shut down than start up – and sure enough, here we are six months later and one of the largest producers in the market, let alone in Clearview, is shutting down,” said Miller, adding meaningful jobs will be lost.
He hopes that Clearview will opt in to cannabis retail so that Agripharm can sell its Purple Hills cannabis products using the farm gate retail model.
“That would be a real help to making sure Agripharm is one of those producers that has a long term existence,” said Miller, adding that the market would not be flooded with stores, or they would not all last.
“This moves from one part of the industry to another. The producers were over built, over funded at one point and after tremendous difficulty, they are winding down,” said Miller, adding the same consolidation will start to play out in the retail market but he is confident that Clearview consumers would buy local if they had the option.
“The underlying consumer market could double, or triple from here as the legacy market is replaced by the legal regulated market so we fundamentally see there is a longterm opportunity for sure but in the fall the producers are consolidating to a fewer number and the people who are going to successful longterm are really going to have to continue to weather some pain and have a really long term business approach,” said Miller.
He said being a family business with a workforce of 40-plus means Agripharm is taking that approach and hopes for more support from Clearview Township.
