One of the country’s largest cannabis operators is abandoning its Michigan grow operations. Chicago-based PharmaCann told employees Monday it would shutter its 207,000-square-foot LivWell Michigan cultivation site in Warren, laying off at least 170.
Todd Lince, president of Teamsters Local Union No. 337, confirmed the news to Crain’s. The Teamsters had just organized the PharmaCann-owned operations in early November.
“They told us they just can’t be competitive in Michigan …” Lince said. “We knew they were having financial troubles. But this doesn’t have anything to do with us organizing; we didn’t even have a contract yet.”
Lince said the employees will be terminated by the end of January and the union will work with PharmaCann to get the employees a severance package.
Representatives from PharmaCann and its attorneys did not respond to several requests for comment. It’s also unclear whether the closure of its cultivation and dispensary in Warren will lead to closures of its two other Michigan LivWell dispensaries in Cheboygan and Sault Ste. Marie.
The PharmaCann closure plan comes only weeks after competitor Fluresh LLC, doing business as Tend.Harvest.Cultivate. announced it was closing down its $46 million, 105,000-square-foot grow facility in Adrian at the end of November.
The company, doing business as Tend.Harvest.Cultivate, couldn’t make the economics of the operation work as the average price for an ounce of marijuana flower plummeted 21% year-to-date to just $73.99 in October.
“It cost me more to grow in Adrian than I could sell on the market,” CEO Brandon Kanitz told Crain’s. “The site is not profitable.”
Fluresh and PharmaCann’s LivWell are victims to the state’s low prices, which are a consequence of market oversupply.
There were 3.56 million active plants being grown in Michigan in October, down from 3.77 million in September; but still up 73% year-over-year. The decline in active plants last month is likely due to the influx of product from “Croptober,” where operators harvest their seasonal outdoor grows for the market.
Illicit market marijuana infiltrating the regulated market also plays a roll in decreasing prices as well.
PharmaCann, however, is just the latest multi-state operator — it operates in six states including New York, Illinois, Maryland, Massachusetts, Ohio and Pennsylvania — to abandon maturing state markets due to financial pressures.
Last year, for instance, New York-based Curaleaf began shuttering its dispensary operations in California, Oregon and Colorado. It eventually shuttered its Michigan operations months later at the end of last year.
MSOs prefer to target more newly legal states that have high consumer prices due to more demand than supply, raking in much higher margins than in markets like Michigan.
PharmaCann is also likely looking to clean up its books after filing in August to launch an initial public offering.
Canadian competitor Cronos Group Inc. took a 10.5% stake in PharmaCann in June for $110.4 million, valuing PharmaCann at $1.1 billion, according to a Reuters report.
For Michigan, PharmaCann’s exit is likely good news as it removes more supply from the market — at least temporarily.
The Warren cultivation building at 21590 Hoover Road is owned by mega-cannabis REIT Innovative Industrial Properties, who will move to place another operator in the facility.
Earlier this year, Evart-based Lume Cannabis Co. took over the lease for the 56,000-square-foot Harvest Park facility at 10070 Harvest Park in Dimondale formerly operated by then-troubled Skymint. Innovative Industrial also owned that building.
Two industry sources, who asked to remain anonymous, confirmed to Crain’s that they have been contacted by Innovative Industrial about the PharmaCann cultivation building in Warren.
More at PlatinumManagement