Aurora Cannabis to close Aurora Sky facility in Edmonton

Click to play video: 'Aurora Cannabis closing Aurora Sky facility in Edmonton'
Aurora Cannabis closing Aurora Sky facility in Edmonton
WATCH: Pricing pressure is being blamed for the decision to close Aurora Sky in Leduc County -- the largest marijuana facility in the world. The company revealed the news Thursday. Sarah Komadina has more – May 12, 2022

As part of its cost savings plans indicated in its third quarter results, Aurora Cannabis announced Thursday it would be closing its Aurora Sky facility in Edmonton.

“We will continue to employ a talented team in Alberta, operate an Edmonton office and remain committed to our business in Canada as a whole,” Aurora Cannabis’ vice president of communications Michelle Lefler told Global News in an email.

“This decision was not taken lightly. The company continues to make tough yet responsible changes to optimize our business to meet the challenges and opportunities of the cannabis industry and position Aurora for long-term global success.

“Our patients and consumers in Alberta can continue to rely on Aurora as a provider of premium cannabis they trust,” Lefler wrote.

Aurora Cannabis’ Aurora Sky facility in Edmonton, May 12, 2022. Global News

“Aurora’s roots will always be in Alberta. We are grateful to all Albertans for their ongoing support of our business. Most importantly, we want to recognize the hard work of our employees and thank them for their contributions.

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“During this transition, we are committed to supporting all employees who are impacted by this decision and will provide a full suite of resources to assist them.”

For their part, officials at the Edmonton International Airport are thinking of the affected employees and workers.

“Aurora Cannabis is a valued tenant at EIA and we are sorry to see this announcement related to its Aurora Sky facility,” said Myron Keehn, EIA’s vice president of air service and business development.
“We need to have further discussions with the company before we can comment on what the future looks like for this building and EIA.”

Aurora Cannabis created its headquarters in Edmonton in 2018.

The Edmonton-based company announced job cuts in December 2020. The workforce at Aurora Sky near the Edmonton International Airport — one of the world’s largest cannabis facilities — was scaled back by 75 per cent. That meant 214 workers lost jobs at that time.

Click to play video: 'Aurora Cannabis to close facility south of Edmonton'
Aurora Cannabis to close facility south of Edmonton

In September 2021, the company announced it was closing its Aurora Polaris property in Edmonton as part of a plan to streamline its operations.

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An Alberta business expert says this closure reflects how the cannabis market has evolved.

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“The market, when it first began, we didn’t know how it would look five years down the road, or even three years down the road,” said Kyle Murray, dean of the Alberta School of Business.

“It turns out — maybe not surprisingly — that price is incredibly important to consumers. The Aurora Sky facility, while it was built with a lot of technology and to create a really premium product, it’s not as cost effective as some of the other producers. In a market where consumers want lower prices, that facility wasn’t really designed to deliver.”

Click to play video: 'Cannabis cutbacks in Alberta: Where the industry stands after two years of legalization'
Cannabis cutbacks in Alberta: Where the industry stands after two years of legalization

When the facility opened, Murray said it was clear it was built to produce a premium product, but that comes at a higher price point and cost.

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“I remember thinking at the time… it was really a high-end facility and it would really require at least part of the market to be willing to pay premium prices.”

He said the cannabis industry is now adjusting to what the market — and consumers — want. Demand, he said, just isn’t at the level of supply.

“Probably, in the initial excitement, people overestimated demand and how many people wanted the product and I think they underestimated how price sensitive people would be and how important price would be in the decision.

“Demand is not what we initially thought it might be and prices are lower and there’s more pressure for prices to be lower from the consumer.”

Click to play video: 'Aurora Cannabis downsizing part of ‘right-sizing’ industry: analyst'
Aurora Cannabis downsizing part of ‘right-sizing’ industry: analyst

On Thursday, Aurora Cannabis outlined plans to save an additional $70-$90 million by the end of H1 fiscal 2023.

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Its efforts to save costs of goods sold “now include the closure of the Aurora Sky facility in Edmonton (previously announced to be operating at approximately 25 per cent capacity), in keeping with our diversified business portfolio, prudent approach to capital allocation, and our strategy in the Canadian adult-use market to focus on higher margin premium categories,” the company’s news release said.

The fiscal update showed Aurora Cannabis’ medical cannabis net revenue was up eight per cent from the year before. That revenue growth was driven by the international medical cannabis business, the company stated.

Its consumer cannabis net revenue decreased to $10.3 million from $14.4 million the previous quarter, due mainly to “industry-wide pricing pressures across our portfolio and exacerbated by retail store closures in key provinces.”

“During Q3, we continued focusing on our global medical cannabis business because it is both defensive and stable, with cash gross margins that exceed 60 per cent,” CEO Miguel Martin said in Aurora’s news release Thursday.

“In terms of the Canadian adult-use market, we continue to adjust to current conditions, are excited for future contributions from the Thrive team, and are committed to a continuous stream of innovation, including advancing our premiumization strategy.”

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In November 2020, Aurora Cannabis said it was indefinitely pausing operations at its Aurora Sun property in Medicine Hat, a decision that would result in about 30 layoffs.

In June of that year, the company laid off 700 workers and announced plans to cease operations at five facilities in Saskatchewan, Ontario, Alberta and Quebec.

Click to play video: 'Behind-the-scenes tour of Aurora Sky'
Behind-the-scenes tour of Aurora Sky

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