Canadian pot producer expands abroad
A Canadian licensed marijuana producer has been allowed to take a stake in a foreign company for the first time.
Thomas Shipley prunes dry marijuana buds before they are processed for shipping at Tweed Marijuana in Smith falls, Ontario, April 22, 2014. (BLAIR GABLE /REUTERS)
By SUNNY FREEMANBusiness Reporter
Mon., May 9, 2016
Canopy Growth Corp. is the first Canadian licensed medical marijuana producer to expand internationally, buying a stake in Australia’s AusCann International with its pot-growing expertise, rather than cash.
The company — based in a converted chocolate factory in Smiths Falls, Ont. — said Monday it will provide advice in production, quality assurance and operations in exchange for a 15 per cent stake in AusCann, with options for a bigger share.
AusCann is an early entrant into Australia’s nascent medical cannabis industry as the country, like many others, works out a framework for legal medical marijuana.
Canopy CEO Bruce Linton will join the Australian company’s board. He said his company can provide lessons about the opportunities and challenges AusCann faces, as they are very similar to those Canada’s licensed producers went through when they started up a few years ago.
Linton expects to make more announcements about international partnerships in the coming weeks as Canada’s commercial medical marijuana program becomes a model for a host of countries liberalizing their policies.
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“Why would you become really capable in the first country in the world to create the framework and then sit back and watch the rest of the world figure it out, when you could go out and be a big player?” he said.
“We’re actually probably being viewed by no less than seven or eight countries as they roll out the medical step and the recreational step.”
Khurram Malik, head of research at Jacob Capital Management Inc., said he expects more Canadian marijuana companies to jump on international expansion opportunities.
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“Canada was the first to license large industrial-scale growing of cannabis at a pharmaceutical grade. It took the licensed producers a long time to grow it at scale and there were a lot of mistakes made along the way,” he said.
“We had to invent it as we went along and now we have the authority and expertise to grow it at scale. If other companies want to do it, this is the first place they’re going to look.”
AusCann toured Canadian facilities for about a year before approaching Canopy Growth with the proposition.
“We chose to work with Canopy Growth because they’ve established themselves as leaders in the Canadian and global industry. We are excited to establish the same success here in Australia,” said Elaine Darby, managing director of AusCann.
Canopy Growth owns the Tweed and Bedrocan brands.
Canopy is readying itself to become a leading player in the legal recreational marijuana market, especially after the Canadian government’s 4/20 announcement that it plans to legalize the drug next year.
A Supreme Court decision forced the Conservative government to make medical marijuana accessible to patients in 2014. They opted to create an industry based on large-scale commercial producers that it said could be worth $1.3 billion. There are currently about 30 licensed producers.
There are fewer than 40,000 Canadian medical marijuana patients, but the University of Ottawa estimates there are some 2.3 million recreational pot users.
Bay Street is suddenly very interested in the marijuana sector, Linton said.
“The combination of rapid growth, full coverage from a political perspective and the need to make money for your clients, you need to look for something that actually has real opportunity in the next 3,4,5 years both domestic and internationally,” he said.
“I’m not feeling like there’s not a lot of other choices that meet that criteria.”
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