Cannabis North lays off 20% of staff

48North Cannabis Corp. (TSXV: NRTH) will lay off approximately 20 percent of its employees as it ends its outdoor growing operations. On Monday, the Toronto-based company said 26 employees will be laid off and its Good Farm facility in Brant County, Ontario will be closing immediately. The decision comes during a significant transition period for the industry and a nationwide oversupply, according to 48North. Last October, analysts warned that an oversupply of resin and weak demand for medium-sized buds would lead most outdoor growers to sell their 2020 crops. According to the latest Health Canada data, there were over 6.19 million square feet of licensed acreage in the country as of November. That's compared to 2.09 million square feet of licensed indoor growing space in the same month. 48North says the closure is an important step towards profitability as it anticipates annual savings of at least $ 5 million. But the company has been "reluctant" to reveal details of why it won't replant its outdoor farm this year, according to Chris Damas, executive editor of the BCMI Cannabis Report. The industry analyst says 48North has failed to successfully market its organically grown weed in the highly competitive extract market. And organic farming comes with a high risk of mold. "It was clear: Good Farm was losing money and its bio-biomass didn't even pay annual labor costs," he said in an email. "You had to close it." While the company sells a leading topical brand Apothecanna, Damas suspects that most infused body cream consumers don't care whether or not they are made from organic biomass. 48North says it will continue to focus on developing its portfolio of budget cannabis products in Canada. The company will rely on strategic partnerships with licensed producers and on DelShen, its indoor manufacturing facility in Kirkland Lake, Ontario, it said in a statement. "Today's announcement puts us in the best position to accomplish this mission by restructuring our workforce and reallocating resources towards commercialization, branding, innovation and deepening relationships with retailers and wholesalers," said Charles Vennat, CEO of 48North . "That was a difficult decision." Damas notes that 48North's premium flowers grown at the DelShen site are selling very well. He wonders, however, why 48North also parted ways with Chief Grow Officer Kristen Gauthier and Chief Financial Officer Sean Byrne. Byrne is replaced on an interim basis by Donnacha Rahill. It's also unclear whether the company's extraction lab joint venture with Fume Labs will survive, Damas adds. Last year, 48North said it grew 12,000 kilograms of dried cannabis at a cost of $ 0.25 per gram outdoors on the now-closed Good Farm, compared to indoor growers who often spend $ 2 per gram. The company reported a net loss of $ 7.1 million on net sales of $ 7.6 million for the fourth quarter of 2020. 48North's shares fell 10 percent on Monday to $ 0.18 on the TSX Venture Exchange.