(The following article was amended at 3:10 p.m. ET with comments from Curaleaf CEO Matt Darin. In light of this development, it is now clear that the corporation will be laying off 4 percent of its staff, or 10% of its payroll.
Curaleaf Holdings, a multistate marijuana operator, announced Thursday that it will shut down most of its operations in California, Colorado, and Oregon, and cut its employment by 10%, the latest indicator of the ongoing challenges for the cannabis business as a whole.
According to a press statement, the 4% reduction in staff will save the Wakefield, Massachusetts-based corporation $60 million in 2023.
In their earnings report for the third quarter of 2022, released in November, Curaleaf stated that they had over 6,000 employees and were active in 22 states.
Hundreds of employment have been lost at other cannabis companies in recent months, including Curaleaf, located in Colorado, as well as Dutchie, based in Oregon, WM Technology, based in California, and based in Colorado.
The wholesale price of cannabis has been plummeting in all three of the states Curaleaf is leaving because supply much exceeds demand.
Due to poor wholesale pricing and difficult economic conditions, a number of California cannabis growers decided not to plant or renew their licenses in early 2022.
Wholesale prices in Colorado have likewise bottomed out in recent months. And the cannabis industry in Oregon is known to be one of the most saturated in the country.
Approximately 220 employees were put off by Curaleaf in November, following the layoff of 50 employees in California in August and the closure of a facility in Sacramento, California.
‘Future Success and Profitability
The release states that the latest actions taken by Curaleaf were necessary for the “future viability and profitability of the firm and were made as a result of recent legislative choices, price compression, and lack of enforcement of the illicit cannabis market.”
Law enforcement and government officials in southern Oregon are a case in point because of their efforts to stifle a burgeoning black market.
The three states that Curaleaf is leaving will have generated less than $50 million in revenue for the company in 2022, the company claims.
CEO Matt Darin told MJBizDaily over the phone that the company will continue to operate throughout the United States, but not in the more established cannabis sectors.
Markets “that may not be the markets where some of it took place years ago” but where “we’re seeing the growth potential and the largest opportunities,” he said.
Therefore, as the sector develops, we are concentrating on the most lucrative and secure markets.
Darin further, said that the lack of available funds is another factor in the decision.
Focusing and allocating our resources where we will see the greatest return is essential. Nor are we pulling out of these markets.
Oversupply, Illicit Operators Are Factors
When Asked Why Curaleaf Would Choose to Operate in Areas with Less Competition and Limited Licence, Darin Explained that It Had More to Do with Avoiding an Oversaturated Market and An Unchecked Black Market.
Moreover, “it Creates an Unlevel Playing Field for The Enterprises Functioning in The Regulated Market and Following the Regulations,” He Said. as A Regulated Corporation and A Public Company, Those Are Challenging Markets.
Darin Also Noted that While the Safe Banking Act’s Failure Was a Part of The Company’s Recent Layoffs, the General Atmosphere of The Cannabis Sector Was a More Decisive Issue.
It’s Not Just One Thing, He Went on To Say. Nonetheless, “it Is a Factor.”
Darin Noted that While the Future of Curaleaf’s Retail Storefronts in Oregon and Colorado Is Uncertain, the Firm Will Not Be Investing Further Resources Into Those Locations.
The Ceo Also Noted that It Is Uncertain Whether or Not Curaleaf Will Continue to Explore Uplisting from The Secondary Canadian Securities Exchange in Order to Attract Institutional Investors.
He Also Noted that The Availability of Additional Financing Remains Uncertain.
There Have Been Discussions, but Darin Says More Work Has to Be Done on The Structure, Scheduling, and Details.
But Rest Assured that We Never Stop Exploring New Ways to Gain Access to The Capital Markets.
Due to These Market Closures, Curaleaf Anticipates Generating a Cash Flow of More than $125 Million in 2018.
The Current Price Compression Caused by A Lack of Substantial Regulation of The Illicit Market Preclude Us from Achieving an Adequate Return on Our Investments, but We Believe These States Will Represent Opportunities in The Future,” Darin Added in The Announcement.
Curaleaf Shares Dropped 1.39 Percent on Thursday’s Otc Markets (curl) and 1.96 Percent on The Tsx (cura).
