Big Fish in an Expanding Pond

Features - Cover Story

How Bruce Linton and Canadian cannabis giant Canopy Growth Corp., parent company of Tweed, built the world’s largest cannabis business.

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Photos by Stacey Lyon

If you’re a cannabis industry professional, odds are you’ve heard of Tweed, the Canadian medical marijuana Goliath. Based in Smiths Falls, Ontario, in a retro-fitted Hershey factory (yes, of Hershey’s chocolates), the company has been making some of the year’s biggest industry headlines.

In June 2015, Tweed merged with fellow Canadian medical marijuana producer Bedrocan Canada in a $58 million deal, forming the world’s largest publicly listed medical marijuana company (according to data from Bloomberg) called Canopy Growth Corp. In February the company inked an exclusive partnership deal with Calvin Broadus Jr., better known as the rapper Snoop Dogg. In July, Canopy Growth Corp. became the first marijuana growing company to be listed on a major North American stock exchange, the TSX (Toronto Stock Exchange).

And the man behind it all, Bruce Linton, is not your typical cannabis business owner. A career board member, Linton is a bit of a black sheep in an industry filled with reformed-underground-growers-turned-business-moguls.

Prior to launching Tweed, Linton sat on boards of groups like Clearford Industries, which looks to bring sewage solutions to regions without any sanitary waste disposal infrastructure; Sitebrand, an online marketing company; and Cleantech, a company which supports the development of clean technologies.

Managing 500,000 Square Feet

While cultivation may not be his strongest skill, Linton brings other expertise to the table.

“So, what we’re very good at is if you tell me that it must be this color on a Tuesday, and this quantity, we can then invert that and tell you how all the steps will be taken [to get there],” he says. And in Canada’s very restrictive regulatory framework, that’s a very important skill to have.

In legalizing the medical use of marijuana nationally, the Canadian government handed over the reins to Health Canada, which manages the program. And since cannabis is classified as a medicine, the Canadian health agency keeps a close watch on everything Licensed Producers (LPs) do and put into the growing of the plant. For example, LPs weren’t allowed to use predatory insects as pest control. Canopy Growth submitted an application to allow their use and was able to incorporate them into its pest control processes.

After Tweed’s merger with Bedrocan Canada, Canopy Growth can boast of 16,000 actively enrolled patients representing roughly 25 percent of the current Canadian market.

Canopy Growth was able to implement that change because, as Linton puts it, “the regulations don’t tell you what to do, they tell you how it should turn out.”

“Everybody who’s gotten in trouble with recalls and product issues is because they actually grew product before, and they add methods from their prior private grows … to the process under Health Canada,” he says.

Developing detailed standard operating procedures (SOPs) is also what allows Canopy Growth to manage three facilities with over 500,000 square feet of production space.

In addition to its flagship Hershey retro-fit operation in Smiths Falls (168,000 square feet), Linton also oversees the Bedrocan facility in Toronto (50,000 square feet) and the Tweed Farms greenhouse operation in Niagara-on-the-Lake, which is the world’s largest greenhouse marijuana operation (350,000 square feet). But that’s only a fraction of its potential, as the former Hershey factory can accommodate between 500,000 and 600,000 square feet of growing space, according to Linton.

“500,000 square feet of production means that you have to have identified trackable processes, or you can’t actually have consistency, and you can’t have consistency of quality,” Linton explains.

This diligence has been with Linton from the start. As part of their original Tweed application, Linton says he and his team wrote over 600 pages of SOPs. But today’s document needs to account for the company’s patented terpene analysis system, concentrate production, recently announced breeding facility and in-house lab testing. (“Running in-house tests in an approved lab, which we hope to be able to do soon, will make us a leaner and more efficient business without losing any of the trust associated with third-party validation,” Linton says.)

“Now … if we hit print on all of our current SOPs – because we now have oils extraction, we have all kinds of [other procedures] … I would say our stack of SOPs, as they exist now, for [the] fully compliant operation, are probably somewhere north of 1,200 pages,” Linton says.

Market Over Profit

After putting all that legwork in before even being licensed, most people would be eager to start making returns on their investment. However, Canopy Growth is taking an approach more similar to Amazon (to which Linton has compared the company’s approach publicly) than most other marijuana producers.

In the same vein as the online retail colossus, quick profits were never part of Canopy Growth’s plan.

“The goal for us is to capture market share,” says Jordan Sinclair, Canopy Growth’s director of communications. “We’re interested in having products and services that appeal to a really wide array of people, so market share is a big priority for us.”

And market share they have captured. After Tweed’s merger with Bedrocan Canada, Canopy Growth can boast of 16,000 actively enrolled patients representing roughly 25 percent of the current Canadian market.

“Our customer care team is exploding to be able to handle the influx, and really we’re growing as fast as we would hope to be growing,” Sinclair says.

What makes this more impressive is the work Canopy Growth has had to put in to reach that market, as Canadian law prevents LPs from marketing their products to patients.

“What you can do is promote the corporation,” Linton explains, “you just can’t promote and create demand for the product.”

In other words, none of Canopy Growth’s brands can advertise flavors, effect or anything else about their products. But Linton has found a workaround: terpene testing.

Canopy Growth has developed its own proprietary terpene testing procedure called Terpography. According to Linton, “[Terpography] is a way to convey the smell of our product in an e-commerce world that’s regulated by the government, who says we can’t tell people a strain smells like lemons. ... It’s a visual mapping tool that doesn’t say anything about lemons, but rather shows how much limonene is in a strain ... then we add that limonene just happens to smell like lemons.”

While currently growing in soil, Linton is considering switching to aeroponics if the conditions are right. “Growing aeroponically looks attractive, but it’s about figuring out the redundancy before we can commit to it. Yields go up, inputs go down, but if the power goes off, you’ve got a lot of thirsty plants and no way to feed them,” he says.

Canopy Growth also focuses its attention on different stakeholders, namely the doctors in charge of prescribing cannabis to their patients.

“A lot of them are driven by evidence-based and others are driven by college recommendations,” Sinclair says. “Then it’s on the company itself to look at that as an opportunity and say, ‘Okay, let’s create our own detailing team that can go out and talk to doctors and create a relationship.’”

According to Sinclair, this is what allowed Canopy Growth to build the company’s credibility and trust with those stakeholders.

“When you’re in … the office talking to them, you can get a sense of what their hesitations are and then you can address it, enhance your education, enhance your outreach and just keep that relationship going,” he says.

For all of its benefits, this scramble for market share has put its strain on the company’s financials. According to financial filings, Canopy Growth has negative cash flow and has yet to post a single profitable quarter.

And while he is hopeful that will change soon, Sinclair also points out that changes to the company’s patient offerings and to Canada’s legislative landscape are coming.

“The need for investment and the need for growing the platform is only increasing now,” he says. “We’ve got oils coming online, we’ve got a whole new legal regime coming. … It’s just up to us to communicate to people that the investments that we’re making in the business we truly do believe that they’re going to pay off in the long term.”

With such large-scale operations, standard operating procedures (SOPs) have been essential to the company’s ability to have “identifiable, trackable processes” to create product consistency, says Linton. “I would say our stack of SOPs ... for [the] fully compliant operation, are probably somewhere north of 1,200 pages,” he says.

Going Global

Part of the hope for long-term success comes from Canopy Growth’s ability to create key strategic partnerships with both foreign governments and businesses to stretch its brand recognition as far as the company can take it.

In one way or another, Canopy Growth has a market share in Australia, Germany and Brazil, and is constantly on the lookout for new markets.

The deals with Brazil and Germany are as straightforward as it can get in this industry: In Germany, Canopy Growth met the conditions set by both the Canadian and German governments to begin exporting medical cannabis from its Tweed brand. Meanwhile, the deal with Brazil sees the creation of Bedrocan Brazil S.A., allowing the Bedrocan Canada brand to export its branded medical cannabis to the South American country.

The deal with Australia’s AusCann, however, is particularly interesting as it involved no cash, nor licensing of any cannabis products. Instead, Canopy Growth is trading its experience and expertise for a share of the Aussie company.

“What we’re doing is we’re providing them some of the lessons that we’ve learned in the past two years in exchange for equity in their company,” Sinclair explains. “When you’re the first big country out of the gate, which Canada is, then you are in a very enviable position around the rest of the world because you’ve got all the expertise.”

On top of grabbing a piece of Australia’s market and increasing brand awareness on a global scale, part of the reason Canopy Growth chose to partner with AusCann was simply people, Sinclair says. “Our partners at AusCann are really great. Their leadership team is fantastic. It’s got the right mix of … people with legislative, law enforcement, health care backgrounds, all at the senior ranks of their company. … So I think that they’re going to be able to really come out of the gate strong.”

… But Feeling Local

For all his traveling across the globe, Linton hasn’t forgotten that he’s in the healthcare industry. As such, Canopy Growth has placed a premium on customer care and hires new customer care representatives every week. That way, no patient ever feels rushed off the phone.

Customer care is extremely important to Canopy Growth’s business, as it receives between 1,000 and 1,200 calls every day. That’s why it takes them six weeks just to train an employee on how to handle calls.

“What we want it to feel like is you are getting a professional experience from somebody you feel comfortable with,” Linton explains. “So, it’s got to be professional, but it’s got to be comfortable.”

A large part of this process has to do with getting new customers used to the idea of cannabis as a medicine. Before turning to medical marijuana, many people have the idea of a street dealer looking to grab their money quickly, Linton says.

“This is about making people feel comfortable, day in and day out, into a transition of having a supplier that knows what they’re supplying, has tested what they’re supplying, and has a variety that’s the same when you order this week, next month, or next year,” he says.

Allowing a patient to get comfortable with you also means you getting comfortable with them, sometimes to a point where the customer care representatives will get emotionally invested in their patients.

When one particular palliative care patient passed in June, “there were people who cried upstairs,” Linton says, “and then went around with a card and prepared it for his wife and sent it to ’em. This is coming from a call center.”

“The culture has to be that you’re making people comfortable, [and getting them] comprehensive information so that they know where they’re going.”

Planting the Recreational Seeds

Canopy Growth is in an enviable position in Canada’s legal cannabis landscape: Bedrocan Canada has the science and technological capabilities to produce quality medical cannabis, while Tweed and Tweed Farms have the cultivation capacity to dominate in Canada’s soon-to-be-legal recreational market.

According to Sinclair, Canopy Growth is going to take the same philosophical approach to recreational cannabis as they do with medical cannabis.

“We know that there’s lots and lots of people that are already using cannabis from a recreational standpoint, so now we just need to make sure that the first time that they have an experience with a Tweed product it’s like nothing else they’ve ever experienced before.”

Again, that experience goes beyond the actual product. Canopy Growth wants to ensure that everything from how the product is flushed (a process designed to help give the buds a non-chemical tasting smoke), presentation at the point-of-sale and, of course, that the customer service is “always on point,” Sinclair says.

“We want to be an approachable company, a transparent company, and somebody that’s really at the forefront of looking at all the different big institutional players that are out there and working with them to try and end any existing stigma that still exists in the industry,” he says.

And as the biggest fish in the expanding pond, Linton and the Canopy Growth team have set themselves up for long-term market share, and profits.

Brian MacIver is associate editor of Cannabis Business Times. Scott Lowry is a licensed medical grower and caregiver in Michigan. He also is the founder and COO of Global Organiks LLC, a Canadian cannabis production company in Tecumseh, Ontario, which is in the application process to become an LP under Canada’s Medical Marijuana Program.