Canopy Growth Corp’s (Canopy Growth Corp Stock Quote, Chart TSX:WEED, NYSE:CGC) new expansion into the US has gotten a lot of attention from investors this week but for CEO and co-founder Bruce Linton, it’s all part of his plan to bring his Canadian-tested business model to the rest of the world.
Shares of Canopy were up again in trading on Wednesday as the markets continue to support the company’s latest move: being granted a license to grow hemp in the state of New York, through which Canopy will invest between US$100 and US$200 million in operations for CBD-based wellness products, a potentially multi-billion-dollar industry in the US and one which has just been opened up with the de-scheduling of hemp as a controlled substance through the passing of the 2018 Farm Bill.
Linton says that Canopy’s ties to US alcohol giant Constellation Brands (namely, a US$4-billion investment by the latter, with Constellation taking on 38 per cent ownership in Canopy) were key to setting up the New York license.
“We’ve been keeping a very close eye on the US for five years and as the Farm Bill was coming through and with Constellation as an investor partner really close to what was going on, we started working on which states would be the optimal locations in which to create a hub of us plus other supporting actors to process and create maximum value from hemp. And so it came together over the holidays,” Linton told BNN Bloomberg recently.
“Because Constellation’s headquarters is in Rochester in upstate New York I would say that their sensitivity and connectedness to the big US states within which they do a lot of their business and this being their home state, it’s very helpful,” he says. “You end up with connectivity and cash and now all you have to do is execute against that opportunity and I think Canopy has generally been recognized as quiet but confident at actually getting things done.”
When asked about the possibility of Canopy picking up assets from beleaguered licensed producer Aphria, Linton was blunt in saying that the Canadian side of Canopy’s business is all filled up.
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In October 2018 AgraFlora’s majority owned subsidiary, AAA Heidelberg, received a license to produce under Health Canada’s Access to Cannabis for Medical Purposes Regulations for its facility in London, ON. AAA is currently preparing for its first crop and is working closely with partner Canopy Growth as the harvested product is to be sold through Tweed Mainstreet’s CraftGrow Collection.
“When Constellation put their money in, one of my statements was that we do not need and do not want and are not buying production assets in Canada because we have our own,” he says. “And so, no, I don’t have any interest in buying anything in Canada. There’s a big world out there. We have about six million square feet in Canada and all we need to do is execute with what we have.”
Not that Linton is down on Canada. In fact, he sees the Canadian experiment —first launched almost two decades ago on the medical side and now three months old on the rec cannabis side— as the key product which, with the help of Constellation Brands, he’ll be taking to rest of the world.
“This is about building out Canada,” Linton says. “I want Canada to become identified as a business and to be able to report and show how well we’re doing on medical, how well we’re doing on rec and what normalized margin will look like. And if that looks like a good business then I’m going to explain that there are 36 million people living in Canada and that there are a lot more people living in Europe, the US and South America.”
“Our intent is to create the intellectual property and that business model and go and deploy it everywhere around the world that it’s federally legal,” he says.