Canopy Growth Corporation

Origins as a Medical Cannabis Producer

Canopy Growth Corp. has its roots in MABH Ontario Inc., a company founded in 2010 by Bruce Linton and Chuck Rifici. Linton is an experienced business executive; Rifici is former chief financial officer of the Liberal Party of Canada. Both men had held senior positions with high-technology firms in Ottawa, including online marketing company Sitebrand.

In December 2012, Stephen Harper’s Conservative federal government announced that it would privatize Canada’s medical cannabis industry. In 2013, MABH Ontario changed its name to Tweed Marijuana Inc. By the end of the year, the five-person company was one of the first in line to sell licensed cannabis in Canada. On 27 January 2014, it received its licence to sell to patients.

Did you know?
Beginning in 2001, Canadians with prescriptions for medical cannabis could legally grow the plant for themselves, designate someone to grow it for them, or obtain it from Health Canada. In June 2013, Health Canada announced that it would replace this system with a new commercial industry in which licensed producers would assume medical cannabis production. The new Marihuana for Medical Purposes Regulations, which came into effect in April 2014, created a market for large-scale industrial medical cannabis producers.

In April 2014, Tweed became the first cannabis producer to be publicly traded on the TSX Venture Exchange, a Canadian stock exchange headquartered in Calgary, Alberta. It made its first cannabis sale the next month, and by year’s end, it was selling 13 different products. Rifici was fired soon after the company went public, and he has since sued Canopy for wrongful dismissal. The company counter-sued, and their claims are still before the courts.

At the outset of 2015, the company had fewer than 3,000 customers. By the end of year, that number had climbed to 8,000. Tweed Marijuana Inc. had also changed its name to Canopy Growth Corporation, with the name Tweed staying on as a Canopy brand. The company’s medical cannabis business would grow exponentially in the subsequent years (as of 31 March 2018, it served 74,000 customers).

Early Acquisitions and Partnerships

Canopy Growth Corp. is built on partnerships. A key part of its strength is its pointed series of acquisitions, which have allowed the company to diversify into various geographic regions and aspects of the cannabis and hemp markets. Canopy is not a singular entity but several smaller cannabis companies living under the same umbrella, hence the company’s name.

In August 2015, while it was still Tweed Marijuana Inc., it bought medical cannabis companies operating under the Bedrocan Canada brand. Although a licensing deal with Bedrocan International BV subsequently fell apart, Canopy still includes Bedrocan Canada as a subsidiary. By September 2015, Tweed Marijuana Inc. had become Canopy Growth Corporation, and weeks later it signed an exclusive Canadian partnership with DNA Genetics, an award-winning cannabis breeding company based in the Netherlands. By the end of January 2016, it had snatched up another major competitor, Toronto-based Mettrum, for $430 million.

At that point, Canopy was serving half of all licensed cannabis users in Canada. Public perception of cannabis use for both pleasure and medicine was changing. And since the 2015 election of Liberal prime minister Justin Trudeau, who had campaigned on a promise to legalize, conversations about national legalization had turned more serious (see Cannabis Legalization in Canada).

In October 2016, Canopy unveiled a line of cannabis products with rapper Snoop Dogg. The following month, it bought Quebec-based Vert Médical, which was applying to become a federally licensed cannabis producer. Also in November, it bought Germany-based medical distributor MedCann GmbH (later renamed Spektrum Cannabis), which was already selling Tweed products in German pharmacies. Spektrum, in turn, was the first German company to obtain a licence to import medical cannabis. It sourced its products from Canopy’s Canadian facilities.

Further Expansion ahead of Cannabis Legalization

In January 2017, Canopy Growth Corp. purchased the 472,000 square-foot production facility it had been leasing in Smiths Falls, Ontario, for $6.6 million in cash and shares. This space, a former Hershey chocolate factory, nearly tripled Canopy’s production and processing potential. In addition to this headquarters, Canopy has acquired several other large production sites across the country.

Did you know?
The closure of the Hershey plant in Smiths Falls in 2009 came at a time of economic hardship for the town of about 9,000 people, which lost its three largest employers in the span of three years. Canopy Growth Corp.’s arrival in the community has replaced hundreds of jobs, and the company seeks to revitalize the town’s tourism industry with the cannabis-focused Tweed Visitor Centre. The Smiths Falls facility is now the world’s largest legal grow op.

In April 2017, the federal government introduced Bill C-45, the Cannabis Act. By the summer, there were 200 people working at the Smiths Falls plant. Canopy Growth signed a continued partnership with DNA Genetics that October. By the end of 2017, Canopy had made agreements to supply Newfoundland and Labrador, as well as New Brunswick, with 12,000 kg of cannabis over a two-year period upon legalization of the recreational market. As legalization rolled out, Canopy would receive supply contracts of various durations from Alberta (15,000 kg), Quebec (12,000 kg), Manitoba (6,500 kg), Prince Edward Island (1,000 kg) and Yukon (900 kg).

Recreational Cannabis Producer

Canopy Growth Corp.’s experience running a highly regulated business as a medical producer poised it to provide much of the country’s cannabis supply by the time the legal market was in place. The Cannabis Act received royal assent on 21 June 2018 and came into force on 17 October 2018 (see Cannabis Legalization in Canada). Possession and cultivation are now legal for adult Canadians who meet the minimum legal age in their province or territory. There are, however, strict laws surrounding the substance, including a prohibition on “illicit” cannabis sold by unlicensed sellers.

Canopy’s products are sold in all Canadian provinces and territories: in jurisdictions where public agencies sell cannabis, as well as in those where sales are privatized. Canopy operates private cannabis shops under the Tweed brand in Newfoundland and Labrador and Manitoba.

As fast-paced as the company’s growth has been, it wasn’t fast enough for Canada’s new cannabis industry, at least in its early days. In the first weeks of legalization, stores couldn’t keep products stocked. Canopy said that it, like other licensed producers and Health Canada, had vastly underestimated the demand. Within two months of legalization, Canopy had sold over one million units of cannabis to recreational consumers. By contrast, its medical cannabis customers had bought approximately the same amount in four years. In the weeks after legalization, all of Canopy’s production departments were staffed 24 hours per day, trying to grow enough product.

As of March 2019, Canopy Growth Corp. was worth more than $20 billion. It operates 10 licensed production sites occupying over 4 million square feet in British Columbia, Ontario and Quebec. In total, 2,700 people work full-time for the company.

Global Outlook

As interest in legal cannabis develops around the world, Canopy Growth Corp. is poised for international expansion in both the recreational and medical and markets.

In August 2018, Canopy formed a $5-billion partnership with Constellation Brands, a major US-owned alcohol company (Bruce Linton had long been planning to create a line of cannabis-infused cocktails). The deal means that Constellation Brands now owns 38 per cent of the company, up from its 9.9 per cent share in 2017. Canopy says it will use the funds to expand into some of the 30 countries currently exploring a legal status for medical cannabis. It exports product and provides expertise for companies in countries where governments are considering allowing domestic medical cannabis production.

In January 2019, on the strength of the Constellation Brands deal and the US’s legalization of hemp and hemp-derived products, Canopy announced it would invest up to US$150 million in a hemp production and processing facility in New York State. The following month, American entrepreneur and TV personality Martha Stewart joined Canopy as an adviser. Stewart will help the company develop hemp-derived cannabidiol (CBD) products for people and pets.

As of late 2018, Canopy contained 27 controlled or jointly controlled subsidiaries (most dealing in cannabis and other hemp products) and had investments in 19 other affiliates. It has operations in 12 different countries spanning five continents.

Firsts

The roots of legitimacy Canopy established in the medical cannabis field prior to legalization of the recreational market helped it achieve a series of firsts in the cannabis industry. It was the first Canadian company to acquire a competing cannabis venture when it bought Bedrocan Canada in 2015. In 2016, as the Canadian government began consultations on recreational legalization, Canopy became the first North American cannabis company to be listed on a major stock exchange (the Toronto Stock Exchange, or TSX). The next year, it was the first to be included on a major stock index. (See also Stock and Bond Markets.)

In May 2018, Canopy became the first cannabis company on the New York Stock Exchange. That October, just over a week before legalization in Canada, it was the first company to legally export cannabis for medical use to the United States (the company says it will be used solely for medical research and development).

Just after legalization, Canopy Growth Corp. became known as WEED on the TSX and CGC on the New York Stock Exchange. It was the first cannabis company whose shares reached a $1-billion trading status.