It appears that even celebrity endorsements doesn’t do much for firms operating in the Californian cannabis market. TPCO Holdings (NEO: GRAM) last night revealed that it is scaling back its operations yet again, this time cutting its cultivation and manufacturing capabilities.
The latest cuts come due to the hard times that have fallen on the Californian cannabis market as a result of the process of commoditization being well underway. Certain functions of cultivation and manufacturing are being outsourced to “realize benefits” related to the hard times in the industry. The decision is expected to cut production costs, while expanding potential product offerings.
“This advantage will allow us to realize significant near-term cost savings as well as further leverage our retail data and insights to stay ahead of our peers in a rapidly evolving marketplace. The days of inefficient and asset-heavy operators is quickly coming to an end as we steadily march towards the end of cannabis prohibition in the United States,” said Troy Datcher, CEO of The Parent Company.
In addition to reduced production costs, the company also expects the quality of its product to improve, as it indirectly admits that it’s current quality is inferior to other offerings on the market.
In terms of employees, the decision has resulted in a workforce reduction of 14%, with 70 employees being laid off as a result. The decision is said to result in $4.0 million in annual payroll savings. Year to date, the company has now reduced its workforce by 33%, with annualized savings said to be roughly $10.0 million.
Separately, the company also appears to be cutting other operational costs as a result of changes in cannabis legislation. The firm has closed two delivery depot locations, one in Culver City and the other in Sacramento, due to recent changes to delivery service rules, which enables drivers to carry more product at one time. Those savings are expected to amount to $1.8 million annually, while the company gained $0.5 million in sale proceeds from the asset disposition.
TPCO Holdings last traded at $0.57 on the Neo.
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