GROWING LIKE A WEED
Canopy Growth, Bruce Linton have come long way
Long before he launched the medical marijuana company now known as Canopy Growth, Bruce Linton took at least 16 business trips to India. Most times, he planned to visit the Taj Mahal mausoleum in Agra, one of that country’s most famous tourist sites.
“I never got there,” he said. “Business,” he added somewhat ruefully by way of explanation. It’s scarcely any different now. His last few months running Canopy Growth have been a blur of hotel rooms, taxicabs and airports as he frantically prepares his company to serve two major new opportunities. One is emerging from the anticipated legalization on Oct. 17 of the Canadian market for recreational marijuana. The second involves more than 20 countries that have recently legalized the use of medical marijuana.
Most of Linton’s attention lately has been beyond Canada’s borders. Recent trips have included Italy and Jamaica. Next month, four more countries are on his list. He wants to get to Lesotho in southern Africa.
Linton, 51, is a member of Air Canada’s million-mile club. He splits his time between meetings with investment bankers, customers and prospective employees. Linton is also a frequent guest on the Business News Network, enthusiastically explaining the latest moves by his company, which is based in Smiths Falls in a former chocolate factory.
The most dramatic development unfolded earlier this week when he revealed that America’s largest beer, wine and spirits company, Constellation Brands, had agreed to invest $5.1 billion in Canopy Growth, with the prospect of more to come, in exchange for a majority share of the firm.
Linton’s had little time to absorb the enormity of the deal, which is aimed at creating a family of cannabis-infused drinks and foods for global markets wherever these become legal. In Canada, this is expected to occur in the fall of 2019.
The Constellation news pushed Canopy Growth’s share price to $42.20 on Wednesday, up $10.05 in one day, or more than $2 billion. The Smiths Falls firm is now worth more than $9 billion.
That’s a huge valuation considering the company is expected to generate little more than $300 million in sales in the current fiscal year (which ends next March 31). Consider that fast-growing e-commerce star Shopify has roughly 4.4 times the revenue of Canopy Growth but just twice the market value.
Linton, who owns about 2.7 million shares, recalls the day Canopy Growth first began trading on the TSX Venture exchange four years ago at less than $3 per share. There were a lot fewer shares at the time, so the firm was valued at just $91 million.
“What did we have back then?” Linton asks rhetorically. “A building with three rooms in it and a big plan.”
So, yes, the value of Canopy has exploded 100 to one. But this has been because of what Linton and his managers have put in place. You can argue legitimately about whether this company has the right stuff to take advantage of the glittering opportunity that lies before it, but there’s no doubt this corporate project, which has consumed Linton, at least has a shot at greatness.
On his watch, Canopy Growth has grabbed a 27-per-cent share of the national market for medical marijuana, stitched together a pan-Canadian network of production facilities and signed agreements to supply the recreational market when it launches in less than two months. Canopy Growth has also invested heavily in international affiliates, primarily involving medical marijuana.
Canopy Growth now controls 21 subsidiaries and has invested in 13 affiliates. This encompasses a wide range of activity, from production to research into new uses for marijuana’s active ingredients.
Among Canopy Growth’s recent purchases, for instance, is a firm recently approved for research into the effectiveness of a marijuana chemical, cannabidiol, for treatment of anxiety in certain animals.
Sales from abroad are already having an impact. Canopy Growth supplies more than 1,200 pharmacies across Germany through its subsidiary Spektrum Cannabis. The result: Revenue from Germany contributed 14 per cent of Canopy Growth’s first-quarter sales, up from just two per cent during the same period a year earlier.
Smiths Falls remains Canopy Growth’s core. Not only is the former Hershey plant the headquarters for roughly 500 staff — about 35 per cent of the company’s total — but the facility touches all aspects of the operation. Among its activities: cultivation and oil extraction, distribution, advanced manufacturing, licensing, call centre and administration.
The company’s staff overall has more than doubled in the past year.
Linton, of course, has seen this sort of growth before.
He was a senior executive at CrossKeys Systems and founded Webhancer during the height of the tech boom. Both firms started with exceptional promise, then faltered.
In his next corporate efforts, Linton experienced the peculiar heartache of evangelizing clean technology that few customers seemed willing to pay for, though it did bring him to India many times.
Indeed, he had five companies on his resumé before 2013, when he began studying the draft regulations of a new medical marijuana regime in Canada. By then, Linton had developed heavy scar tissue when it came to business expectations.
“The key is, you never stop trying,” he says. “Everything that’s resulted today reflects what you did along the way.”
When he launched Canopy Growth, there was no guarantee Health Canada would grant him a licence to produce. That was also long before the 2015 federal election that unexpectedly catapulted the marijuana-friendly Liberals into power.
Now, in Canada alone, Canopy Growth is contemplating a recreational marijuana market that CIBC World Markets forecasts will top $5 billion a year. Even if Canopy Growth doesn’t manage to secure a 20-per-cent slice of that market, its sales of medical marijuana, especially internationally, make it more likely it will eventually top $1 billion in combined revenue.
Among the countries in the process of legalizing medical marijuana or exploring the idea is India. Perhaps Linton will find time to make it to the Taj Mahal next year.
But no doubt something else will distract him along the way.