Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) CEO Bruce Linton discusses Canopy’s position and strategy in the global cannabis market. Bruce also talks about their branding strategy and the evolution of the sector in general.
James West: So, Canopy River, how much of Canopy Rivers does Canopy Growth own?
Bruce Linton: We’re about a third.
James West: One third?
James West: Right.
Bruce Linton: It means that we can really accelerate it and then the relationship I like is further if you get working with Canopy Rivers you have the chance to make a great business but you also have an option that if it turns out in the right geography you have a good next home and that could be Canopy. I think a lot of entrepreneurs want to build a business, grow a business and sell a business, so we’ve become a one stop shop for that.
James West: Okay, so I want to go back to something you just said there, you said “If some big tobacco company comes in and starts buying up all the shares”, is this something you’ve experienced recently?
Bruce Linton: No, I just you know I think I speak pretty positively of at least one player in the alcohol sector obviously.
James West: Good beer. (Laughter)
Bruce Linton: Yeah. Well we think as Pharma gets more and more advanced and you saw our announcement today with Dr. Ware joining as our Chief Medical Officer. We’re really pushing the pace on that. It’s kind of all tied together, you start with patients, you build out a platform that platform then can supply the party market, the party market gets sophisticated which turns into advanced product that can then be branded.
Behind that you’re doing all this work so you can have a great medical portfolio. If you do that right then you have this global thing and it just keeps going. You know, I kind of, there was a reason we bought back Canopy Health, the portion we didn’t own. Then we can put big actors across the whole thing and so it kind of, you know I bet from the outside almost looks like a plan.
James West: Yeah. (Laughter) Well that’s just it. There’s a common discussion going on in the cannabis space from observers and participants who say they look at certain acquisition strategies and say this doesn’t make a lot of sense to us, then they look at Canopy Growth and say this is making perfect sense.
I think in large part that suggest why you have the valuation you do, why you have the steady sort of pricing incline with a lack of volatility. Now, is the rate of acquisitions going to slow down at all now? Have you filled your boots and your boat with everything you need or is there more out there?
Bruce Linton: No, I just think because from the time I started the idea of raising cash was to spend the money on assets and there was a stage maybe two years ago, three years ago where buying tangible assets to make into bigger licensed things made sense for us.
We’ve moved through that and as you saw may Sunday, we put the press release about being licensed so we have now three greenhouse locations. We have a handful of licensed or about to be licensed we think are being built out to be licensed indoor places in Canada. What we’re thinking about on top of that is a whole bunch of the steps that result from having your capacity production figured out.
So, then you start thinking about medical, you start thinking about the evolution of adult choice.
James West: Sure.
Bruce Linton: I’m not really in the market to buy other things and we’ve probably have made more mistakes trying more things than any other company in the sector for sure. Once you’ve figured it out; if I buy somebody else’s assets and they’ve made the mistakes we’ve made four years ago and I paid full price for them what I’m going to do is walk in and rip everything out and put it back again the way I want it.
James West: Right.
Bruce Linton: That gets to be pretty hard to swallow at high premiums and I think we’ve just now at the stage where we can keep executing our own way.
James West: Yeah you bet. Look at the map back there. There’s all of your locations around the world currently and there’s been a couple of companies making some moves in Africa but I don’t see a little dot on Africa yet and I don’t see a dot in anywhere around China. Is China never going to be part of the medical marijuana community?
Bruce Linton: Well in order I think southern Africa is interesting. We are fairly careful because we have a business model. I’m not looking at saying that I’ve given somebody five bucks for and now in a minority position. Really our business is to run global businesses which means we have to have control or enter an agreement by which we will be able to take control.
The simple reason is there’s too much friction and inefficiency in being a participant in something if you’re not driving it or controlling is. That’s just not for us, so that’s how we do it. Southern Africa I think is going to be interesting and you know we cover off on a bunch of places. Asia at large and China specifically obviously there’s a lot of hemp. I think its category officially is bird seed grown in China.
There’s some potential, something going on there. You know people talk about China, India and other markets, they’re coming along but we’re not seeing this aggressive march and given the whole UN structure I don’t know transiting cannabis around is a big or likely thing for a long term.
You have to say is the domestic market going to generate significant demand for the amount I’m going to invest? If you can tell me that the domestic market in China is going to open up and be completely receptive to THC medicines we’re all over it. I’m just not sure that’s the case yet.
James West: Yeah that’s an interesting contemplation. 1.8 billion high people (Laughter)
Bruce Linton: We should start with North Korea maybe.
James West: Yeah actually.
Bruce Linton: Take the edge off all that marching.
James West: The political class in general I think should try it out.
Bruce Linton: Yeah. Yeah.
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