There’s been a lot of speculation surrounding the future of CBD and marijuana. Legislation in many states is changing, with many choosing to either decriminalize marijuana or legalize it altogether. Federal laws may be changing soon as well. Although marijuana is currently classed as a Schedule I drug, last year the Farm Bill was signed into law, making it legal to sell CBD-based products.
Users are hoping that marijuana, with its possible whole-plant benefits, will be soon to follow. To that end, marijuana is becoming very big business. As with most enterprises, there stands to be a lot of profit. However, marijuana insiders have become concerned. Smaller, lesser-known entities may become sidelined as a result of corporate honchos with deeper pockets and better PR reach.
As companies rush to get in on the ground floor, marijuana proponents are wondering just how the incipient march of the more monied and well-connected businesses will do when stacked against mom and pop shops. Many individuals feel that those with little money and clout will be the ones to lose out.
Entering the nation-wide discussion is Canopy Growth, a company originally founded by Mark Zekulin and finance maverick and media darling Bruce Linton. Linton was ousted after executives from the Fortune 500 company Constellation Brands found his performance in terms of return on investment to be lacking. Constellation Brands is a premier agency dedicated to the strategic marketing and distribution of beer, wine, and spirits.
Canopy Growth has been poised to make a splash in the deep waters of cannabis. How will this company’s growth affect smaller companies? Will Canopy’s continued proliferation have a larger effect on the world of cannabis? Answering these questions requires a deeper understanding of Canopy Growth and who they are. In this article, we’ll uncover Canopy Growth’s ascent, who they are and how they may impact the future of cannabis.
Behind the Scenes of Canopy Growth
Canopy Growth began in 2013 as a joint venture between Bruce Linton and Chuck Rifici as Tweed Marijuana Inc. Mark Zekulin also signed on, and he, along with Rifici and Linton, began the company in an abandoned Hershey’s chocolate plant right outside Smiths Town, Ontario. Rifici was then dubbed “The Willy Wonka of Weed” for his role in pioneering the company early on.
The company went public in 2014, and later Rifici either stepped down or was ousted. Either way, he was no longer in an executive leadership role. After his separation from the company, it was renamed “Canopy Growth Corporation,” and Rifici was able to retain majority stock.
Rifici’s relationship with certain government interests suggests that one hand washes the other, with his deep ties to Canada’s Liberal Party as a board member and his continued prospects with the cannabis company. Legislation has proved favorable to Canopy Growth and there is some speculation that Rifici’s membership in the party may be a conflict of interests.
Linton had the idea that a cannabis company should be a one-stop-shop. He integrated all aspects of processing into the company’s infrastructure, including growth, packaging, and shipping, rather than using a third-party.
This move boded well for the burgeoning company as they saved on costs and reaped the profits. It helped that Canada has a much more relaxed stance on medical marijuana. In fact, in 2001, medical cannabis was legalized nationally under the Marihuana for Medical Purposes Regulations. Canada has since become one of only a few industrialized nations to completely legalize marijuana for both medical and recreational purposes with the passage of the Cannabis Act.
Linton has served on the boards of many other executive firms and in industries far more disparate than cannabis. He is the co-chairman of Newbridge Networks, a telecom company, and has a track record of working in tech. Mark Zekulin, on the other hand, landed the position of co-CEO from his prior experience as a lawyer and political advisor. He studied mathematics as well.
The two founding members come from wildly different backgrounds and skillsets. Despite this, theirs was a collaboration that made not only dollars but logistical sense. The two hit the mother lode by publicly trading the company sometime in 2018 when the company saw its potentially dramatic rise from a valuation of $100 million to an explosive 15 billion dollars in under a few years.
However, the company missed its earnings mark, prompting shareholders to call for a change in leadership; namely Linton’s separation from the company. Though they have named Zekulin as the sole CEO, Zekulin states that he plans on stepping down amidst dropping stock prices and speculation that growth could be slowing.
Despite these developments, Linton has stated that he has continued to buy shares of Canopy Growth. He projected that stocks would double in price and that it was worth it to be a part of the enterprise.
What Does Canopy Growth Do?
Canopy Growth’s fundamental function has been cannabis. However, their approach has been a vertical one, with little room for middlemen and others. Canopy Growth’s factory houses all of the cannabis that they produce. Canopy Growth employs master growers and cultivators and has onsite customer support, as well as a system of processing and packaging medical marijuana to well over 270,000 clients across Canada.
Canopy Growth is intent on cornering the market in growing niches of the marijuana market while leveraging their growth with onsite operations. Their company states that they ship from their distribution centers at least half a million products per day. They also employ several distribution specialists, logistical experts, packers, and drivers.
Who Does Canopy Growth Own?
Canopy Growth makes a variety of products under several product brand lines. These product lines include:
- DNA Genetics
- Van Der Pop
- Tokyo Smoke
Many of these brands feature not only cannabis products such as capsules, oils and concentrates, but containers for loose herbs, pipes, and even a line of t-shirts, hats, lighters, and skateboards.
Since partnering with Constellation brands for a cool, $4 billion-dollar stake, Canopy is intent on acquiring more capital and more space. Earlier this year, Canopy Growth acquired the American-based company Acreage Holdings LTD. on the basis that legalization will be imminent in the United States. This move will allow Canopy Growth to move more into the American market.
Canopy Growth’s Impact on the Small Grower
Some may think that it’s game over for small growers, and for many, it may be. Big businesses like Canopy Growth have not only the manpower but also the financial backing to move large amounts of product, test and implement the latest innovations, and they may even be able to influence laws and other legislation to their benefit. For small growers hoping to capture even a fraction of the ever-expanding market, this can spell sudden death. Large companies can become valued at a higher price on the stock market and in board rooms, driving up prices and effectively shutting out the reach of small shops, businesses and organizations.
The problem is that many of the valuations of companies such as Canopy Growth are based on speculation and projections, not real-time revenue. Former NFL legend and current cannabis investor Tiki Barber states, “…these valuations that just didn’t make sense. I mean, right, it was, [Canopy Growth]’s an $8 billion company and you’d have $10 million of revenue.”
As valuations soar, investors are often set to do exactly as Brue Linton has done in his tenure at Canopy Growth – acquire. The company has been quickly gobbling up shares of companies across Canada and have begun their march onto U.S. soil.
This can feel a bit monopolistic to those smaller entities hoping for a fair shake in a system built for robust competition. There is also worry that companies with the buying power could purchase patents and licenses and severely limit burgeoning research on weed and its benefits.
The Future of Marijuana with Canopy Growth
Canopy Growth is well poised to become a gargantuan force in cannabis. It has the backing of powerful entities like Constellation Brands and is set to acquire a large share of companies as the year drags on. However, this mode of growth has investors worried, and many of them are redesigning their business model after the ousting of CEO Bruce Linton.
Whichever way you slice it, Canopy Growth’s valuation is high and is on the fast-track to taking up more space on the marijuana scene. This could easily eclipse the efforts of smaller companies and many are worried – and quite rightly – that Canopy Growth’s expansion, if left unchecked, could lead to a blueprint of the future where those with deep pockets and connection can control cannabis.
As legalization looms in the U.S. it’s yet to be seen how Canopy Growth will fare. They have been setting up shop in New York, and pending favorable legislation, may extend that reach to other states. Canopy Growth’s shares have become unstable lately with gains and losses fluctuating heavily in the last few weeks.
Investors and analysts are remaining hopeful, as marijuana is projected to continue its upward trajectory. Canopy Growth is expected to also continue its ascent and their revenue may rise to the tune of nearly 650 million Canadian dollars in 2020. This could translate to a proliferation of diverse marijuana and CBD-based products on the market – but all under one corporate umbrella.