Canopy Growth AGM highlights tensions between Big Weed and the black market

“We want Trudeau to look great, and the Liberals to look good, because that’s good for us.”
September 15, 2017, 3:48pm

The CEO of Canada’s biggest licensed marijuana producer faced tough questions from a shareholder today about the company’s approach to those who have been criminally convicted, or still face charges, for marijuana possession.

“I have been in this space for 51 years, and done about $500 million in wholesale business illegally. It’s been people like me that actually built this market, that put their families at risk. So I’m wondering, is there any appetite in the corporate world to lobby to have these records [expunged]?” asked Brian, a shareholder of Canopy Growth Corporation who was one of approximately 200 shareholders, analysts, and executives at the company’s annual general meeting.


The man’s last name was inaudible over the webcast of the meeting. A spokesperson for Canopy Growth declined to provide his last name, even though the proceedings were livestreamed and open to the public.

“There’s no denying the fact of how we got here with these nice suits and shoes. We got here with people who are still sitting in orange jumpsuits behind bars, for this very product that we’re making millions of dollars on,” he continued, to a surprisingly raucous applause from the audience.

Canopy Growth CEO Bruce Linton responded by agreeing with Brian, claiming that he is in fact “very supportive of the people in possession of small quantities who got into trouble, had a disrupted life, who shouldn’t have.”

“We have a good voice in our ear for this issue,” Linton said, referring to Rade Kovacevic, the company’s Senior Vice-President of Sales and Operations, who was one of the founding members of the Canadian Association of Medical Cannabis Dispensaries.

“I don’t disagree with you. We are interacting a lot with the ministers of justice at the provincial level on this,” Linton added.

The frustration of smaller players in the grey market marijuana industry, who have been supplying and consuming weed long before companies like Canopy were even in the picture, reached a boiling point this week over the sale and distribution methods laid out by Ontario and New Brunswick, which essentially shuts them out of the supply chain in favour of Big Weed.


This morning, Canopy announced it had reached an agreement with a newly created provincial authority in New Brunswick to supply four million grams of cannabis and cannabis derivative products for the first year of legalization. Canopy’s only competitor, in terms of supply, at least initially, will be Organigram Holdings, a New Brunswick-based LP that has been the cornerstone of the medical marijuana market in that province.

Canopy’s dealings with New Brunswick, is expected to bring the company a remarkable $40 million in retail revenue, potentially thrusting it into profit territory. “This is quite an impressive ‘entry’ number — as it is just from one smaller province with a population of 758 thousand,” wrote Beacon Securities analyst Vahan Ajamian in a note.

More importantly however, is just how important these agreements are — they represent the first two official deals between a government authority and licensed producers for the supply of weed for adult recreational use, creating a model of supply that could potentially be replicated in other provinces.

In Quebec, for instance, the province’s biggest distributor of alcohol, SAQ, is lobbying the government to allow it to distribute cannabis via a crown corporation. Canopy and Aurora Cannabis Inc. own applicants in Quebec, and have only one domestic competitor in their way — the much-smaller “The Hydropothecary Corporation”.

In Ontario, the province will use an LCBO-type model to dispense weed for recreational use, but it has made it clear that existing dispensaries that dish out weed for medical use will not be allowed to be part of the retail equation, leaving a supply vacuum that Big LPs like Canopy are best-positioned to fill.


“We have got stuff happening all across the country. They are scraping again in Niagara. Has anyone been to Smiths Falls lately? It looks like the front of a building that is ripped — we’re doing that,” boasted Linton to his shareholders.

Canopy is a behemoth — it is not a stretch to say that it will be the biggest supplier of weed in the country, if not the world. The company already owns three farms with a combined production space of almost 700,000 square foot. Canopy’s sister company, Tweed Farms just announced a massive expansion of its Niagara-on-the-Lake site, which will now feature more than one million square feet in greenhouse growing space, making it the the biggest growing facility in Canada.

“None of the big guys are coming close to this,” said Ajamian, referring to other sizeable LPs in the industry like Aphria Inc., Aurora Cannabis and Tilray. Which of course leaves us with the plausible scenario of a monopoly supplier, one that will control the variety of weed — both recreational and medical — that people will get, and eventually, the market price of weed.

“Five years ago, this was such an ugly topic. There’s still a taboo around weed that we got to get over,” said Linton. “But look, this will work. We want Trudeau to look great, and the Liberals to look good, because that’s good for us.”

As of 3 p.m. Friday, Canopy’s stock was up by roughly two percent, valuing it at $10.25 per share.

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Update: “Brian” mentioned above, is in fact, Brian O’Dea, a former drug smuggler, who served a decade in jail in the U.S. for importing 75 tons of marijuana.