HEXO Axes 200 Jobs Amid Pricing Pressure

HEXO Corp. [stock_market_widget type="inline" template="generic" color="default" assets="HEXO.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has cut its workforce by 200 as part of a plan to reduce costs and achieve profitability.

The Quebec-based cannabis producer said the decision to eliminate the positions came in response to a changing market and regulatory environment. Just last week HEXO fired the first shot in a looming cannabis price war by launching a budget brand that costs consumers just $4.49 per gram.

Statistics Canada data for September 2019 showed that cannabis was sold for an average of $5.59 per gram on the black market. HEXO decided to undercut illicit distributors by 20% in preparation for the challenges that oversupply will soon present.

It naturally needs to cut costs after deciding to sell its cannabis at much lower prices, so it decided axe a number of positions. Among those to lose their jobs are chief manufacturing officer Arno Groll and chief marketing officer Nick Davies.

Chief executive Sebastian St-Louis said it was the hardest decision he has taken during his time at the company. “While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp,” he said.

St-Louis added that this “rightsizing” will bring costs in line with the revenue it expects to achieve in 2020. The Quebec-based firm will release its complete financial results for the year to July 21, 2019, on Monday, and hold an earnings call at 8.30 a.m. the following day.

HEXO blamed slower than expected store rollouts across Canada, delay in government approval for derivatives – dubbed Cannabis 2.0 – and general pricing pressure for the need to slash jobs, cut costs and reduce prices. It also lamented unpredictability caused by regulatory uncertainty and a federal and provincial level.

Supply is set to vastly exceed demand for legal cannabis in Canada amid a rush to expand capacity at facilities across the country. The only way for Canadian producers to bring demand in line with supply is to eradicate the black market.

The only way to do that is to beat it on price as well as safety and quality, hence HEXO’s decision to launch a budget range.

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Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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