By MAGGIE M, Editor, Wedgee-in-Chief, theWedge.LIVE
It was moments before midnight on Valentine’s Day when the widely awaited earnings missive from Canopy Growth arrived in our mailboxes–all sixteen pages.
I read the good news. Top line revenues were impressive with the lion’s share coming from domestic recreational buyers. Canopy’s third quarter sales exceeded expectations–by 282%.
Then WAP! a week later a revenue correction caused the stock to drop 2% on NYSE. Canopy did not cover itself in sackcloth and ashes. The company shrugged and plowed forward.
On the same day, Smiths Falls Council endorsed turning the town into a cannabis “laboratory.” (The town is headquarters to Canopy.) This pilot spearheaded by Nathan Morris, a researcher of rare cannabinoids, must receive approval from Health Canada. Specifically, retail businesses in the town, bakeries, restaurants, spas, for example, would be public testing ground for cannabis by-products, edibles, beverages and topicals.
On the heels of Health Canada regulations constraining branding to white label and limiting THC content, and the province of Ontario’s cannabis-retail-by-lottery scheme, Canopy zigzagged unfettered.
Our collective jaws hit the floor on the regulation news. We lead in the world in cannabis as a “first mover”; but, Canada risks falling behind if those who govern hamstring industry with redtape. Let’s not forget cannabis can end the opioid epidemic among other addictions.
Canopy zigzagged, announcing investment south of our borders.
The Farming Bill just passed with the legalization of hemp in U.S. opened another avenue for growth. Chairman Bruce Linton was quick to announce an investment of $100 to $150M in the State of New York. CBD oil from hemp has not been legalized federally; so, Canopy deals with U.S. on a state-by-state basis.
Days ago Canopy announced a trademark licensing agreement with one of Ontario’s cannabis retail lottery winners located in London. The store will be first of its kind bolstered by a “mutli-year” licensing agreement with Alimentation Couche-Tard of Quebec, the world’s largest convenience store chain. It will be licensed as a Tweed branded shop– the first in Ontario.
The Tweed store will open in April and feature oils, softgels, dried flower products and accessories. Ontario now joins three other provinces with Tweed branded stores: Manitoba, Saskatchewan and Newfoundland-Labrador.
Studies show that customers prefer to buy from a shop and not from a government run website. Retail operations are important to quell illicit sellers.
Canopy are zigzag artists navigating the nascent waters of a soon to be multi-billion dollar industry. It isn’t just their deep pockets that places them leaps ahead of all others.
CANOPY MOVING ON THE WORLD STAGE
Analysts predict Canopy’s market capitalization reaching $100 billion U.S. within ten years; its market cap already wobbles around $15+ billion.
In an earnings call Linton stated Canopy’s priorities regarding allocation of its supply of cannabis: “The first is science (R&D), the second is patient, third is export and fourth is recreational.” His focus on export above recreational is noteworthy.
Legalization of edibles this October 2019 may change these priorities; but, clearly the medicinal market here and abroad is critical to scaling its enterprise in the short-run.
The company seems to shrug off the vagaries of regulations, bureaucracy–and lobbies that may be stirring the pot. Canopy always seems to have a Plan B. That bodes well for investors–and consumers pining for ease of access.
Canada and provinces like Ontario are exceedingly skittish and piecemeal in their regulations. It’s anathema to legalization. The lyrics, “Should I stay or should I go?,” jingle in my mind.
History proves this will ease as did alcohol and beer sectors.
If stymied, Canopy will increasingly invest elsewhere. Each day, Canada gnaws at its GDP losing cannabis related investment to other more welcoming nations. U.S., Peru and UK are among Canopy’s recent forays. Just sayin’.
THE CANNABIS BELLWEATHER
Ostensibly, Canopy is the bellweather to the cannabis industry. Its health reflects on all other players. Case in point, cannabis stocks rose on their earnings news.
Licensed producers in Canada can’t realize the price point Europe offers for their entire product suite. One gram of medicinal cannabis in Canada markets for around $9 CDN while Europe renders $13. A recreational gram hovers around $6 in Canada–not a challenge to the illicit market in the absence of access in a safe, reliable retail environment.
Canopy is nimble, swerving left and right, sniffing out opportunities globally, zigzaging toward record growth.
VIDEO : Get familiar with Canopy in the following video produced in 2018. Witness the scale and depth of its operations and leaders.