Canopy Growth could become bigger than Constellation Brands, Bruce Linton says

At this year’s Cantech Investment Conference, Canopy Growth CEO and co-founder Bruce Linton sat down with Globe and Mail reporter Jameson Berkow and held forth on all things cannabis. There were multiple highlights from the affable and effusive Linton.

On the October 17 rollout of recreational marijuana across Canada: “There was a little bit of turbulence but it’s going better. It feels like it’s smoothing out. I don’t think any other country could have done better, but because we’re Canadians we, of course, said, ‘Man, we could’ve done better.”

On the different retail models being adopted by the various provinces: “I think Ontario is going to work great over time and I think that that amount of time will be much less than if it was a public sector model. The two provinces that really killed it [at the rec opening] were Nova Scotia and New Brunswick; they led the country in terms of having infrastructure in place. But talk to me in five years and it won’t be a topic.”

On taxation: “Our taxation rates on cannabis are actually really unbelievably reasonable. If you look at anything else that you do that’s viewed as sinful, it multiples of the cannabis excise tax.”

On the industry being a race to the bottom in terms of commoditization of dried cannabis: “Ingredients always go down in price but that doesn’t mean that the products you make with those ingredients don’t go on to have a sustained higher value. I think that dried flower is actually going to be a bespoke, ceremonial, high-price component of the market over time. There might be some cheap dried product out there but if people really want to have something that they can show friends when they come over and that they’re actually going to be proud of what they have, they’re going to be looking for a premium quality
product.”

On Canada’s leadership in the cannabis space: “Canada legalized this in 2001 — all we did in October was we quit ignoring cannabis as a recreational item and we did what governments around the world should do which is regulate, monetize and educate.”

On Canada’s first-mover advantage: “This is the most ripe IP-creating platform on the planet and the number one thing that our government should do is recognize that we probably haven’t had as unique an opportunity for creating globally-affecting IP since Graham Bell did a phone call. It’s that big. What we need to do is continue to see this as an advantage at a federal level and support the creation of IP, which is what you’re going to export —you’re not going to export truckloads of cannabis, you’re going to export intellectual property and that’s a sustainable advantage.”

On the big Canadian banks being slow to open up to the cannabis sector: “It’s been kind of weird. People point to reputational risk, but whatever. We’re now getting coverage out of the US and we’ve got banks there, entities like Goldman Sacks, JP Morgan, Morgan Stanley … all of those global players are begging for us to work with them, so we would say, ‘You Canadian banks are okay, we’ll work with you a bit,’ but it’s not like, ‘Thank god you’ll work with me now.”

If and when Constellation Brands takes up majority ownership in Canopy Growth, what happens to Bruce Linton?

“I’m not super-employable,” he said. “I like listening but I don’t like being told. [Constellation] has a phenomenal business and people love their products. But I think what we have is a global business with medical and rec, so my goal is — and for shareholders to get the most value is — that I should make our business quite a lot larger and more successful than theirs. And then maybe I become the chairman. It’s the potential for Constellation’s 37 per cent [of Canopy] to be massively, massively valuable and for us to be such a disruptor that it’s not completely unrealistic to think that we could
become the larger business.”