Cannabis company Canopy Growth says it has an agreement to sell its Hershey Drive facility in the town of Smiths Falls, Ont., back to chocolate maker Hershey Canada Inc. for approximately $53 million.

The approximately 700,000-square-foot facility had been utilized as a Hershey manufacturing and distribution facility for decades prior to the company’s decision to close and sell the facility in 2007.

A Hershey spokesperson told RENX it is too early for the company to say if Hershey intends to reoccupy the facility for manufacturing, distribution, or a combination of those uses.

"This project is a strategic acquisition and is another step in our continuing investment in our supply chain network to enable our leading snacking powerhouse vision,” the spokesperson said in an email reply.

“The facility provides us with the flexibility to support growth across the CMG portfolio.”

Hershey expanding in Ontario

Hershey Canada has been upgrading its supply chain in Ontario in recent years, including the development of a 518,705-square-foot distribution centre in the Southern Ontario city of Brantford in 2021.

That project was undertaken by local developer and builder Vicano Construction.

"Our intent to purchase the Hershey Drive property in Smiths Falls is another example of the strategic investments we're making in our supply chain network and our Canadian operations to support growth," said Jason Reiman, chief supply chain officer, The Hershey Company, in the announcement Thursday morning.

The transaction is part of Canopy’s transformation to what the company calls “a simplified, asset-light operating model.” Originally known as Tweed, Canopy had taken over the Smiths Falls facility in 2013 and gradually expanded its operations in the facility, before also adding another nearby building to its holdings.

Canopy will maintain a presence in Smiths Falls, continuing to operate its separate post-harvest manufacturing facility.

The transaction is subject to customary closing conditions.

Canopy's downsizing efforts

"This is the latest milestone in our focused effort to reduce costs and further enhance our balance sheet," said David Klein, chief executive officer of Canopy Growth, in the announcement. "Each of the steps we have taken as part of our transformation to a simplified, asset-light operating model supports our ability to deliver in-demand products from brands our customers love with greater agility and less execution risk. 

“Once again, we have demonstrated Canopy Growth's ability to achieve significant organizational and operational change to position the Company for future growth in the Canadian market."

Upon the completion of this transaction, Canopy Growth will have sold seven properties for an aggregate gross amount of approximately $155 million since April 1.

Net proceeds received from the sale will be used primarily to pay down Canopy’s senior secured credit facility.

The Hershey Drive sale follows a series of optimization and cost-cutting measures, including the centralization of post-harvest manufacturing at Canopy’s other facility in Smiths Falls – a former beverage distribution centre which was repurposed by Canopy. 

The company has also consolidated all flower cultivation at purpose-built sites in Kincardine, Ont., and Kelowna, B.C.