48North Cannabis discontinued outdoor marijuana production on its Brant County, Ontario farm, signaling changing thinking about the value of low-cost outdoor production in an industry that is experiencing a major glut of supply.
The outdoor growing area was previously classified by 48North as a “game changer” prior to its first season in 2019 and promises low-cost production of cannabis primarily intended for extraction.
At the time, Ontario-based 48North stated that it was the first Canadian cannabis producer to apply for an outdoor grow license.
In a press release released Monday, 48North described the decision to end outdoor growing as “an important step on the company’s path to profitability as it increases its focus on efficient product manufacturing, branding and distribution”.
“The decision comes during a significant industry transition and oversupply nationwide,” added 48North.
The company, which later reduced its workforce by about 20%, said the change will save more than 5 million Canadian dollars ($ 4 million) in annual fixed operating costs.
Kirsten Gauthier, Chief Growth Officer, and Sean Byrne, Chief Financial Officer, are also leaving 48North, according to the press release.
Canada’s licensed outdoor marijuana production space had already exceeded its licensed indoor growing space in early 2020.
By February 2020, the number of outdoor production permits had doubled from early summer, and Health Canada had many outdoor production applications in the queue.
According to Health Canada, licensed Canadian cannabis producers had almost three times more outdoor canopy space than indoor by August 2020 as some large manufacturers reduced greenhouse capacity after years of overstretching.
That 3: 1 outside-to-inside ratio appears to have been roughly stable as of November last year, when the latest Health Canada figures showed the Canadian manufacturers’ 22.5 million square feet of licensed indoor growing space increased by 66.6 Millions of square feet have been dwarfed by outdoor manufacturing space.
A spate of unsold marijuana inventory has affected prices, pushing many producers to reduce growing capacity.
For example, Ontario-based Canopy Growth announced late last year that it would be discontinuing outdoor growing across Canada and working with other major manufacturers to reduce indoor production.
Some analysts have warned that the oversupply situation exacerbated by outdoor supplies will continue to have ramifications for Canadian manufacturers.
Solomon Israel can be contacted at [email protected].