"Embark on a journey through the shifting landscape of Canada’s cannabis industry as we explore the closures and transformations of large-scale facilities, delving into the factors driving this evolution in the ever-changing world of cannabis cultivation—authored collaboratively by yours truly , Brian, and my buddy Hal from Chat GPT."
In recent times, numerous large cannabis greenhouses and indoor grow operations in Canada have faced closures or sales, reflecting the industry's struggle to find equilibrium amid overproduction. These facilities, ranging from 100 million to over 500 million Canadian dollars, shut down for various reasons.
Some operations collided with the harsh economic realities of the cannabis market, experiencing overproduction and plummeting prices due to excessive cultivation capacity. Greenhouses were closed when they proved less cost-effective than expected, leading to financial challenges for both executives and investors. Additionally, some facilities shut down as companies, burdened with significant debts, including those owed to the Canadian government, became insolvent.
For instance, when Phoena Group, formerly known as CannTrust, sought creditor protection, its Niagara facility with 450,000 square feet of cultivation space was closed. Overall, about one-third of Canada's licensed indoor and greenhouse marijuana cultivation area has been taken offline in recent years.
As of March 2023, Health Canada reported 16.3 million square feet of licensed cultivation area for greenhouse and indoor facilities, down from the peak of 23.9 million square feet in mid-2020. Outdoor production, however, has been slower to decrease, with 63.2 million square feet still licensed, reflecting an 18% decrease from the late 2021 peak of 76.7 million square feet.
Experts suggest this trend may persist until prices stabilize. Recent examples, such as Alberta-based SNDL closing its CA$100 million indoor facility, indicate ongoing adjustments to enhance competitiveness.
The closure of SNDL's facility removed 448,000 square feet of licensed cultivation area. Other notable closures include Canopy Growth Corp.'s flagship facility and facilities by Tilray Brands and Cronos Group.
The largest facilities closing were often established during the industry boom from 2017 to 2020. New entrants with lower costs gained market share, contributing to the decline of legacy facilities. Factors like price compression and a lack of demand for low-THC flower also played a role.
As larger facilities shut down, a shift to smaller, micro-cultivation facilities is noted. These operations offer lower startup costs and produce higher-quality cannabis. In 2022, Canada awarded 58 standard cultivation licenses and 130 micro-class licenses, reflecting a move towards smaller, more quality-focused production.