After a difficult year defined by corporations laying off hundreds of staff because of declining wholesale prices and slowing demand, the formerly booming marijuana sector is set to experience more layoffs and misery in 2023 – and possibly beyond.
A wide variety of organizations, from huge multistate operators like Curaleaf Holdings and Trulieve Cannabis to tiny tech firms, have been affected by the layoffs.
The backlash has reached the executive suite, as seen by the departure of several high-profile industry executives.
To paraphrase, “I don’t think layoffs have peaked. In an email to MJBizDaily, Sara Gullickson, CEO, and creator of The Cannabis Business Advisors predicted that the trend will continue beyond 2024.
At the start of the COVID-19 pandemic, many people were able to work from home and get government aid. Revenues soared.
According to Gullickson, this climate led to increased investment in the cannabis industry.
Consumers are cutting back on spending now in anticipation of a probable economic downturn. Investors have taken note of this, as well as the government’s failure to take action on SAFE Banking or any other major reform at the federal level.
“Capital has been lost and companies must make adjustments,” Gullickson remarked.
To paraphrase, “the numbers for the cannabis industry at the end of 2020 and the beginning of 2021 were overstated in many areas, and valuations were stratospheric.”
There is a lot of destruction. Reports of layoffs have surfaced over the previous few months from
- According to a business spokeswoman, Dutchie, a cannabis retail technology startup based in Oregon, laid off 8% of its personnel in June and again in November.
- The cannabis technology firm WM Technology eliminated 175 positions in November or 25% of the staff. Weedmaps’s CEO Chris Beals, COO Juanjo Feijoo, and CTO Justin Dean all left the company after that.
- Curaleaf, headquartered in Massachusetts, laid off 220 workers in November and another 50 in August. The MSO has closed down its office in Sacramento, California.
- The Seattle-based cannabis e-commerce platform Leafly Holdings let off 56 workers in October or 21% of the total workforce. Sam Martin, the COO, left in the month of December.
- Trulieve, headquartered in Florida, may have let go as many as 36 workers in Pennsylvania in December, and an unknown number in Florida.
- Leaflink, a New York-based cannabis wholesale platform, let off 80 employees in December.
- Akerman, a Denver-based compliance software provider, laid off 56 employees in May.
- Spring big, a cannabis marketing technology firm based in Florida, recently “laid off” 23% of its staff (or 37 people) due to “attrition” and “layoffs.”
- On February 28th, 73 jobs will be eliminated at Green Leaf Medical in Saxton, Pennsylvania, a division of the New York-based MSO Columbia Care.
As the epidemic of 2020 began, Dutchie served as a metaphor for the ups and downs of the cannabis industry.
Less than a year after Dutchie raised $350 million, at a valuation of $3.75 billion, the company initiated its first wave of layoffs in June of 2017.
Reduced staffing is a result of the “dramatic market shift” in the cannabis sector, according to co-founder and CEO Ross Lipson.
But the board of directors fired Lipson and his co-founder brother Zach last month. They have taken legal action to regain management of the business.
Meanwhile, layoffs in the cannabis industry have mirrored those in other industries.
Massive layoffs have occurred at well-known companies like Goldman Sachs, Twitter, Facebook’s parent company Meta, and Amazon.
However, the cannabis market faces several particularly difficult pressures, such as:
- The continuation of mergers and the simplification of processes.
- The collapse of prices in oversaturated marketplaces.
- Struggles in obtaining funds due to interest rates being so high.
- Formerly restricted license states are increasing their total number of licenses.
Cannabis Tech and The ‘trickle-Down’ Effect
For example, in 2022, the software and technology companies that serve the cannabis industry (including Akerna, Leaflink, Leafly Springbig, Weedmaps, and others) all saw layoffs.
According to a press release, Akerna’s layoffs were part of a bigger cost-cutting plan designed to speed up the company’s transition to profitability.
The top executives also accepted a pay cut of 25%.
The business software company 365 Cannabis was sold by Akerna last week for approximately $2.8 million to some of the original investors in the company.
When Akerman bought 365 Cannabis in 2021, they paid a lot more than that. Following the announcement, trading volume in Akerna (KERN) shares on the Nasdaq increased significantly.
Gullickson claims that the difficulties being experienced by growers and retailers are affecting ancillary businesses that do not come into direct contact with plants.
She wrote, “We’re seeing a trickle-down effect.”
Capital and revenue losses on the plant-touching side threaten the viability of many supporting industries that count on plant operators as customers.
Cannabis Tech and The ‘trickle-Down’ Effect
Consultant Andrew DeAngelo of California told MJBizDaily that some cannabis marketing tech firms had lately lowered prices to compete in the crowded industry.
It’s possible that some companies went public too soon, expanded beyond their means, and are now right-sizing to return to a more manageable size.
However, he warned that reducing headcount isn’t without its costs, adding that layoffs in the technology industry may have peaked in 2022.
He opined that further staff reductions might have disastrous effects on the company’s ability to function.
However, in terms of layoffs continuing into this year, I am more concerned about those whose work involves contact with plants.
UFCW vice president Ademola Oyefeso said that unionizing is good for everyone involved in the cannabis industry.
He told MJBizDaily in an email that while union contracts are good for workers because they provide benefits like living wages and health insurance, they are also good for businesses because of the stability and predictability they bring.
The United Farm Workers and the International Brotherhood of Teamsters have been actively recruiting marijuana industry workers across multiple states and plan to continue their efforts through 2023.
According to Oyefeso, “the layoffs experienced over the past few months make it evident that the cannabis industry is not immune to the effects of the rest of the economy.”