Canopy Growth Corp’s (TSX:WEED, NYSE:CGC) Bruce Linton is all smiles about Ontario’s just-announced plan to let private retailers handle the bricks and mortar end of recreational cannabis in the province. And why wouldn’t he be? As CEO of Canada’s biggest pot company, Linton is ready to move beyond wholesale crop production and start enjoying the higher profit margins that come with building out his retail cannabis empire.
Yesterday, the government of Ontario confirmed that it will scrap the previous Liberal government’s plan to open up province-run pot shops in favour of a combined public/private dynamic, one which will see the provincially owned Ontario Cannabis Store (OCS) open up online sales as of October 17, as per the federal government’s mandate, while private retail is now slated to begin on April 1 of 2019.
“The government of Ontario will not be in the business of running physical cannabis stores,” said Finance Minister Vic Fedeli. “Instead we will work with private-sector businesses to build a safe, reliable retail system that will divert sales away from the illegal market.”
The government also said that it would be granting municipalities the power to opt out of allowing physical stores within their areas and that $40 million over the next two years would be earmarked for municipalities to help with the costs of cannabis legalization.
For Linton, the news is a step in the right direction. “I think Ontario will see a short blip of its online [exclusive sales], and then by the time they start to see stores, by the first anniversary, I suspect will have eight- or tenfold more stores than we would’ve had, had we stayed in the [previous] government model,” says Linton in conversation with BNN Bloomberg.
Linton seems less than worried about municipalities deciding to exclude pot shops from their regions, saying, “I don’t know who’s going to opt out. I know for sure that Smiths Falls is going to opt in. I think you’re going to find that some municipalities will recognize this as actually an economic driver and you may have some that opt out, but I suspect that will be very infrequent and not very long-term that they stay that way.”
Along with its sector-leading market capitalization and huge production capacity, Canopy Growth’s reach is currently wider than any other cannabis company, having established itself in every province. Linton says that coverage plus their dedication to professionalism are what separates Canopy from the herd in the eyes of provincial governments.
“We’ve been awarded [retail outlets] by Newfoundland, Manitoba, Saskatchewan and they’re just coming down the pipe now in Alberta,” he says. “When you’re deciding who’s going to run your store and you have a bunch of criteria about the law-abiding nature, the capacity to educate — we’ve been to, call it, 50,000 doctor visits and we’ve taken that data set and we’ve turned it into a training module. We’ve trained the retailers at some of the private sector stores … so, it looks like Ontario is going to be a place where we’re going to quit just being wholesale margin and move all the way to retail.”