Canopy Growth’s downsizing leaves Smiths Falls, a once-booming Ontario town, in limbo

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On a Monday morning in February, the parking lot of Canopy Growth Corp.’s WEED-T vast 42-acre headquarters in Smiths Falls, Ont., is barely a quarter full. A handful of employees are huddled at one end of the lot, speaking in hushed tones, taking their time to enter the building before the start of a shift.

One of them says it’s chaos inside. Just days ago, the cannabis giant abruptly culled 350 jobs, or about 40 per cent of the remaining work force at its Smiths Falls location; 190 people lost their jobs immediately and the rest of the layoffs will take effect over the coming months. These four workers – the ones lingering in the parking lot – will be out of work in July, after almost five years as Canopy employees.

It’s a gut-wrench for many Canopy workers, especially those born and bred in Smiths Falls. They’re familiar with this story arc: Big company comes to a small town, creates hundreds of full-time jobs, town goes through a boom period, company struggles with profitability or finds a cheaper source of labour, local jobs are slashed, company exits.

It happened in 2007 with the closing of the Hershey chocolate factory that once occupied the same premises that Canopy’s factory currently does – 1 Hershey Dr., a Smiths Falls landmark. Globalization was the catalyst. Hershey sought out Mexican labour for a fraction of the cost and 700 full-time, mostly unionized jobs were lost.

Sixteen years later, the town’s workers seem to have fallen prey to the industry-specific woes of the cannabis sector – a result of oversupply, static domestic demand, unwieldy regulation that cannabis producers say have hampered efficiency, and, to an extent, poor management. 1 Hershey Dr. will be shut down again by the summer, Canopy announced two weeks ago, with approximately 500 employees remaining at a post-production site across the street. Canopy’s Smiths Falls work force will effectively have been whittled down from roughly 1,800 employees at the height of the cannabis boom in 2018.

Whatever the reason for companies downsizing, the outcome for small communities always appears to be the same. A significant number of residents are without work, planning their next move in a town of almost 10,000 that has no other large employer.

“This isn’t our first rodeo with job losses in Smiths Falls,” said Luc Belanger, a Canopy employee who got laid off two weeks ago. Mr. Belanger’s mother lost her job more than a decade ago when the Rideau Regional Centre, a mental-health facility in Smiths Falls that employed more than 500 people, closed down at the height of the 2009 financial crisis.

“I think we were just hoping that Canopy would last here. It felt different, it felt like it would last. That’s what’s disappointing,” Mr. Belanger said.

Canopy Growth’s boom and bust: A timeline

Many of Smiths Falls’ residents are quick to resist the comparison of the Hershey factory closing to Canopy’s recent downsizing. The impact of this and previous rounds of Canopy layoffs, they predict, will be felt differently because of how the economy of the town has changed.

Indeed, Canopy’s immense presence for six-odd years had a cascading effect on ancillary industries in the town. Small businesses – mainly cafés, restaurants and bars – popped up in droves, servicing Canopy’s workers and visitors to the plant. Tourism in Smiths Falls – ideally located on the Rideau Canal and 15 minutes away from the lush cottage country of the Rideau Lakes – was reinvigorated simply because Canopy popularized the town.

Unlike conventional employers of the past, Canopy dished out equity to its staff, and some, who got the timing right, ended up cash rich. Real estate boomed, and between 2018 and 2022, the town experienced its biggest construction of housing units in decades.

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When the pandemic hit it was to some extent a boon for Smiths Falls given it’s about a 45-minute drive from Ottawa. An influx of remote workers moved into Smiths Falls, snapping up property at a bargain compared to what they would have paid in larger cities.

Moreover, laid off workers are exiting old jobs into an economy that continues to be plagued by labour shortages. Job vacancies are apparent in Smiths Falls, with almost every small business, grocery or fast-food chain on the hunt for workers.

While these macroeconomic factors – remote work and a labour shortage – might mitigate the sheer scale of the layoffs, it is still unclear how this eastern Ontario town will sustain the vibrancy created by Canopy’s presence. In a sense, Smiths Falls is in an economic limbo of sorts, undeniably still buoyed by the remnants of a once-promising cannabis empire, but anxiously searching for large new sources of growth.

“The next resurgence in Smiths Falls will start with the next employer who moves into 1 Hershey Drive,” said Nick Ritchie, a prominent brewery owner in the town and a former Canopy employee himself. “If that factory is torn down, it would be a shame.”

Shawn Pankow, the current mayor of Smiths Falls, says he got a call from Canopy’s chief executive officer David Klein on Feb. 8, a day before the company was slated to announce its largest-ever round of layoffs: a 35-per-cent cut to its entire work force across the country.

“I sensed it was not going to be good news,” Mr. Pankow told The Globe and Mail. “No one likes to see people lose their jobs and the people at Canopy who were making these decisions knew the people who were losing their jobs.”

But the most distressing news was the closing of the 1 Hershey Dr. factory altogether, ruling out the possibility that Canopy would one day recoup its presence in Smiths Falls. “That part was terribly disappointing,” Mr. Pankow said.

He noted, however, that because Canopy had been laying people off in droves over the last two years in tandem with the cannabis industry bust that began in 2020, the phased approach lessened the gravity of the impact on the town. By 2020, the number of Canopy employees had dwindled slightly from roughly 1,800 to 1,500. By the beginning of 2023, there were fewer than 900 Canopy employees left in Smiths Falls. That number will drop further to about 500 by July.

On the surface at least, Mr. Pankow is perhaps putting on a brave face. The town, he says, is a completely different beast circa 2023 than it was pre-Canopy and he is confident it will be able to withstand the impact of the job cuts.

Canopy put Smiths Falls on the national radar, shone a positive light on the community and attracted other employers to the area, he points out.

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“We are still having unprecedented levels of demand for housing, because people are moving from Ottawa, Toronto, parts of southern Ontario for a better quality of life at an attractive cost. So yes, we’re disappointed about Canopy downsizing, but we are very happy they came to Smiths Falls to begin with and I would never change my opinion on that.”

To some extent, the narrative of Smiths Falls as a boom town bears out in the data.

Between 2016 and 2021, its population grew by 5.4 per cent, to 9,254 people, according to the 2021 census. The town’s economic development officer, Julia Crowder, estimates Smiths Falls’ current population to be more than 9,500 and has forecast that an additional 3,000 people will move into the town by 2046.

As of 2022, there were 375 operating businesses in Smiths Falls. While 10 businesses closed by the end of 2021, 19 new ones opened that year and most empty stores on the town’s main drag have been reoccupied over the last one year, Ms. Crowder said.

In 2022, the town also approved 400 new housing units, ranging from apartments to detached homes. Indeed, a large crane looms over the town, situated in a real estate development called Lépine Apartments – luxury units geared toward retirees downsizing, or remote workers looking for new accommodation. Housing construction is visible throughout the town, whether it is old homes that are being renovated or new neighbourhoods being built from scratch.

Critically, people in the town have gotten wealthier. Between 2015 and 2020, the average annual individual income jumped from $33,664 to $42,400. It is still, however, vastly below the provincial average of $52,600.

Part of this income bump can be attributed to the kinds of jobs that Canopy created. Not only did the company hire workers who were paid minimum wage or slightly above for the manual labour of growing and tending to cannabis plants, it hired engineers, chemists and those with more advanced skills in the pharmaceutical sector, alongside a slew of sales, marketing and administrative staff.

Ms. Crowder and Mr. Pankow both believe that the town’s relative prosperity can also be explained by the number of white-collar remote workers who moved to Smiths Falls during the pandemic. There are no data on exactly how many families of a certain income group moved into the town, but anecdotally, according to Ms. Crowder, the numbers are significant enough to keep small businesses that used to rely heavily on Canopy’s office traffic, afloat.

Still, Smiths Falls is not a broadly prosperous town, by any margin. The 2021 census shows that just over 300 individuals earned more than $100,000 annually. Almost 70 per cent of Smiths Falls residents earned an annual income of less than $50,000 in 2020.

“Canopy has left a colossal hole in the economy of Smiths Falls,” said Scott Reid, the Conservative member of Parliament for Lanark-Frontenac-Kingston, the electoral district that includes Smiths Falls.

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“Tourism and remote work appear to be a permanent and beneficial part of the Smiths Falls economy, but I wouldn’t want to exaggerate how much that will help,” Mr. Reid said. His constituents would be best served by another cannabis company moving into Canopy’s premises, because workers in the town already have the necessary skills and experience, he added.

But some of the biggest names in cannabis across the country – Aurora Cannabis Inc. and Tilray Brands Inc., for example – have been struggling to achieve consistent profitability and, like Canopy, have been downsizing their operations. Deep-pocketed investors who could once pump tens of millions into turning a chocolate factory into a high-tech cultivation hub have long fled the space. Small and mid-sized producers are either being bought up or are closing down entirely. Some producers are focusing on entering the U.S. market, especially states with less stringent regulation and lower taxes.

“There’s been an air of uncertainty for over 18 months now, so I wasn’t surprised that I was laid off,” said Mr. Belanger, the former Canopy employee. A native of Smiths Falls, he was hired by Canopy in 2018 to work in the company’s post-production and packaging department. Over the years, he moved up the ladder, ending up in a senior quality-control role. “I got very lucky in my Canopy career, because I started right at the bottom,” he said.

Mr. Belanger now faces a dilemma. If he stays in Smiths Falls, his job options are confined to small businesses in the area, potentially paying him much less than he used to earn at Canopy. He could move to Perth, Ont., a town to the west of Smiths Falls where the U.S. multinational 3M has a manufacturing plant. There are also various other mid-sized industrial businesses in the area, where he says he could get some kind of inventory role, but nothing that could put him back on the career trajectory that he was on.

“There’s nothing I really want to do around here. If I want to progress in the cannabis industry, I need to leave Smiths Falls,” he said, adding that many of his former colleagues who are based in the town also feel like they might have to move to seek out more gratifying employment experiences.

The most beneficial part of having Canopy as the town’s largest employer over the past six years, was not just the number of jobs it created, but the quality of the jobs, said Chris McGuire, a Smiths Falls town councillor. “You had stock options, benefits and incentives. Walmart and Burger King might be hiring, but they don’t offer all that. You could get retrained as a personal support worker or a nurse, and sure, you would have an easy time finding a job, but maybe that’s not what people want to do,” he added.

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Some former Canopy employees, especially those in more white-collar roles, have managed to stay on in Smiths Falls, thanks to the rise of remote work. Jordan Hawn moved to Smiths Falls to work at Canopy’s visitor centre five years ago, when the company had grand plans of turning it into a global tourist hub. But the visitor centre was shut in the pandemic and never reopened.

Mr. Hawn, who has a background in sales and marketing, eventually opened his own brand strategy company. But he acknowledges he’s one of the luckier ones because of his educational level, and past work experience in sales.

Most of Canopy’s work force in Smiths Falls, according to Mr. Hawn, worked in cannabis production, with only a handful in office roles.

“If I was looking for an in-person job, it would have been harder for me to remain in Smiths Falls. There’s way more opportunity in Ottawa for someone with my background. But my wife and I wanted to remain in Smiths Falls, and we’re lucky we could make it work because of the jobs we have,” he said.

The town feels a tad quieter without throngs of Canopy employees with their company-branded lanyards lining up for lunch at local establishments or crowding a pub on a Friday evening, Mr. Hawn says. But all that happened before the pandemic anyway, and since the province reopened, he hasn’t observed a drastic change in the town. Smiths Falls businesses remain open and somewhat busy.

At one point in 2019, when Canopy co-founder Bruce Linton was still the company’s CEO, and Canopy was seemingly on its way to becoming the largest cannabis producer in the world, Jamie Creighton recalls there were upwards of 3,000 people in and around the company’s headquarters. “At its peak, it was really something. Because in addition to the employees, there were hundreds of construction workers, security folk, and contractors hired by Canopy. The restaurants couldn’t keep up. No one in town could organize a dinner for 1,500 people and their spouses.”

For six years, Mr. Creighton ran a food truck business at 1 Hershey Dr., serving Canopy employees for breakfast and lunch. The slow but steady pace of layoffs made his business obsolete, and he’s since pivoted to running Sip, a bistro in the main part of the town. “My clientele are retirees, so my business is not going to be affected by these layoffs,” he said.

His wife, however, was part of the most recent layoff round, and he acknowledged there will be a substantial decline in their household income. But the town, he believes, has already adjusted to the decrease in jobs because the downsizing happened slowly, and in waves.

“As tragic as it is, I don’t see this as the end of anything for Smiths Falls. It could be the beginning of something more reliable and sustainable,” Mr. Creighton said.