When an industry is doing well, there are more employment opportunities, and generally better pay. When it’s not, jobs are scarcer and paychecks are lower. Though there were glowing expectations for the cannabis sector, recent layoffs in the industry, signal yet another problem in the overall cannabis business landscape.
Weedmaps – A little info
There are tons of cannabis companies and brands out there, which helps explain the massive amount of competition. Sometimes, names are only familiar to those in a specific state, and sometimes the names resonate throughout the legal areas of the country. One such example, is Weedmaps.
Let’s say you’re in Chicago, or San Diego, or Boston, and you want to find yourself a list of the dispensaries around. Well, Weedmaps is your guy. As Weedmaps is a tech industry providing a service, but no actual direct cannabis product, it has the ability to operate in any location, since it isn’t associated with actual cannabis, just where to find it.
The company, which went public in 2021 under WM Technologies (and trades under MAPS), offers dispensary information for interested clients. It gives updated addresses, reviews, and menus for the different weed stores. It also helps people find doctor’s offices, different brands, and to locate delivery services in their area. Though the site itself doesn’t offer weed directly, it does allow patrons to order from their dispensary through it, making it a sort of middleman. And of course, the site offers further learning information in the form of news, strain information, and so on.
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Weedmap’s mobile app is the most downloaded and used marijuana application in either the Google Play store or Apple store. It acquired the Denver-based software company MMJMenu in 2011, which provides software for dispensaries to handle all kinds of things like checkouts, inventory, and managing patients. In 2019, the company announced it would launch its own point of sale service, called WM Retail, with live menu integrations.
Founded in 2008, the company is headquartered in Irvine, California, with additional offices in Denver, Tucson, New York, Barcelona and Toronto. About a year after opening, the New York Daily News had this to say about the new company: “There’s a new stoner’s paradise on the Web… where medical marijuana patients can connect with other patients in their area, to freely discuss and review local cannabis co-operatives and dispensaries.” At the time, this was a much bigger deal than it is today.
The company partnered with NORML, a social welfare organization that pushes for marijuana reform, in 2011. Making it more official that it was a fighter in the legalization effort. It even opened a museum exhibit in West Hollywood in 2019, aptly titled the Museum of Weed. The 30,000 square-foot enterprise tells the story of marijuana in the last 100 years. The museum is currently closed, with no further info on reopening.
Cannabis layoffs – Weedmaps cuts 25% of staff
Sounds like Weedmaps is doing pretty great, right? A real winner in what’s proved to be a difficult industry. Yet, things aren’t as clear-sailing, as the above description implies. While Weedmaps has certainly enjoyed much success, its also ran into some issues. Issues that represent some of the overall problems in the cannabis industry. Last month, Weedmaps made yet another announcement. That it would lay off 25% of its staff. That’s an entire quarter of the company. And for a company that actually does well in the industry.
There are some details about the move. WM Technologies is looking to get rid of 175 of its employees, which is about 25% of its staff, according to a regulatory filing on November 29. The layoffs will cost WM Technologies approximately $10.7 million, which include severance and benefits payments.
Though it might not happen all at once, its expected that this transition will “be substantially complete by the first quarter of 2023, subject to local law and consultation requirements, which may extend the process in certain countries.” By the end of 2021, the company had 607 employees between the US and Canada. This announcement comes after the company already cut 10% of staff in August due to lowered revenue.
Why is this happening? According to the regulatory filing, “This decision was based on cost-reduction initiatives intended to reduce operating expenses and sharpen the company’s focus on key growth priorities.” This makes sense as at the same time, the company warned investors to expect “a year-over-year decline in the low double digit percentage area” for the 4th quarter. In fact, WM Technology lost 80% of its value on NASDAQ this year.
Things were bad enough that this past November, old CEO Chris Beals, decided to leave out, and was replaced by co-founder, executive chair, and the former CEO, Doug Francis. This usually doesn’t happen in a company without a lot of issues. Beals not only exited the CEO position, but his seat on the board as well.
In a showing of how quickly things can about-face, the company had turned a $49.2 million profit last year, before it posted a $10.5 million loss in this year’s 3rd quarter. Also and interestingly, it had an increase in monthly paying customers from last year to this year by about 25%, but revenue per client fell 21%.
Where else is this happening?
What does it say when a company that was actually making it, turns and lets go of a huge percentage of its staff? That things might not be the smooth ride that they once were. Just as many states like Colorado are experiencing decreased dispensary sales, and less tax revenue, a company like Weedmaps also feels the burn. And its not the only one.
Another of the big and recent cannabis layoffs, was Curaleaf Holdings, which dropped about 220 employees right before the Thanksgiving holiday. Curaleaf ran into legal issues earlier when it was sued for selling tainted CBD products. Why the layoffs? According to an insider, they’re “a part of an effort to control costs and drive efficiencies in the face of economic uncertainties ahead.”
Similar layoffs were seen by Akerna, a cannabis compliance software company out of Denver. In May, that company laid off 59 employees which accounts for 1/3 of it workers, while also cutting operation costs by $440,000. Even executives are taking a 25% pay cut to help with cost-cutting. Much like a change in CEO, this never happens without problems. The company’s problem is that it lost $20.6 million in operating costs for the first quarter of 2022, ending the quarter with a working capital deficit of $15.1 million.
Then there’s tech firm Dutchie, which works with around 5,000 marijuana stores in the U.S., providing e-commerce solutions including payment processing. The Oregon-based company announced cuts this past summer of approximately 8% of its workers, amounting to about 67 jobs lost. Dutchie made this decision not because of its own losses, but as a matter of watching current trends.
Want more cannabis layoffs? Yet another is the California company Eaze, which laid off around 25 employees. Michigan retailer Lume Cannabis closed four of its 30 stores, and Nature AZ Medicine out of Arizona cut as many as 100 employees since medical sales have fallen in general. Big name Aurora Cannabis out of Edmonton, Alberta, also said in June of this year that it would cut 12% of its workforce for corporate restructuring.
And what of Canopy Growth Corp.? The largest cannabis company in 2019 has taken it hard enough to not only sell all its retail locations, but to cut 245 employees (8% of its workforce); all in hopes of saving CA$150 million in the next 12-18 months. The company even closed its cultivation facility in Niagara-on-the-Lake, which it had acquired back in 2014.
No matter how you look at it, these moves don’t signal good things for the legal cannabis business world. In fact, cannabis industry layoffs, as well as the decreased sales revenue they come from, are a great indication that if this industry is to continue, it will have to adapt fast to its new environment.
Go back to Cannabis Problems Part 1: Colorado and Lower Sales for more information on the issues that plague today’s cannabis industry.
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