Canopy growing pains should even out in a couple of weeks, CEO says

Sales have exceeded expectations in the first few days of legalized cannabis, but the gap between supply and demand should lessen in the coming weeks, says the CEO of the country's largest cannabis company.

"I think everybody anticipated that the end of 90-plus years of prohibition would result in quite a lot of demand, but Idon't know that anybody in this country expected these demand levels or frankly, the staying demand," said Bruce Linton, the CEO of Canopy Growth.

Cannabis retailers in Newfoundland and Labrador where one of the first legal sales of recreational cannabis was made by Linton at a Tweed store, owned by Canopy Growth, just after midnight on Oct. 17 and across the country are low on stock, or simply sold out, within a week of legalization.

That's despite the large volumes of product Linton said Canopy has shipped out and is preparing to get on trucks and planes. Prior to Oct. 17, 300,000 containers of varying types were shipped to physical and online retailers, Linton said. Another 200,000 containers have gone out since then, he said, and another 600,000 are getting ready to be shipped.

"That seems like it will catch us up but when you think about all of that, you know, you're talking about more than a million containers of cannabis," he said.

Catching up with orders

When those remaining hundreds of thousands of containers of cannabis in sizes from a single gram to 15 grams of product go out the door, Linton said, the company will be largely caught up with the early demand.

Small and independent retailers in N.L. have complained of waiting on tens of thousands of dollars of cannabis ordered from Canopy, and Linton said the company is working to get those out.

"We have another 100,000 units shipping out over the next 12-24 hours," he said.

"The orders are getting caught up, but this is a Canada thing more than a single province thing."

By next Wednesday things will be tidied up, he said, and another week will improve things further. Soonproducts like gel caps and more pre-rolls should start going out, he said, and in another six months options like beverages should be among the new offerings that will bring customers in the door.

"This startup growing pain, Ithink, will be put in the context of a bigger window over the next week and month and year."

N.L. government agreement

The Newfoundland and Labrador government's agreement with Canopy Growth ensures a specific amount of supply, but doesn't give the province first crack at cannabis when it becomes available.

"Canopy is producing about half of all of the supply that came into this province in Week 1," said Tom Osborne, N.L.'s finance minister, outside the House of Assembly on Tuesday.

"Without the deal with Canopy, imagine where we'd be."

Under the two-year agreement, announced in December with an optional one-year extension, the company will provide up to 8,000 kilograms of cannabis and related products to the province annually. That supply is currently being imported into the province, but the company is in the process of building a production facility in the White Hills area of St. John's.

As part of that deal, the province provided Canopy with a break on sales remittances to the Newfoundland and Labrador Liquor Corporation until the company recovers its investment, up to a maximum of $40 million.

There has been some controversy around the deal, and provincial NDP Leader Gerry Rogers brought it up in the House of Assembly on Tuesday, saying the supply had not been secure despite the Canopy agreement.

Premier Dwight Ball replied that Newfoundland and Labrador opted to set up a cannabis production industry here instead of importing one, and that other provinces have put programs in place to attract investment in the industry.

"There's no government cheque going out to any cannabis producer," Ball said.

The $100-million facility Canopy is currently under construction, with the hopes of being ready for inspection as early as June, should create 400 local jobs, Linton said, and producemore cannabis than N.L. needs.

"I have no doubt that once Canopy gets their plant up and running we'll be not only able to supply the need for the province, but export," said Osborne, pointing out that having a facility in N.L. means Canopy will provide jobs and pay property taxes and business taxes.

While $40 million is a lot of money, Linton said, he pointed out that Canopy Growth currently has $5.5 billion available in resources. The real appeal of Newfoundland and Labrador for Canopy, he said, was the branding opportunities for the cannabis that will be sold here and elsewhere in Canada.

Packaging concerns

Supply issues are the more immediate concern, but Linton also addressed the complaints some consumers have had about the product's packaging.

"What you do now is you get out of the gate, and then you optimize," he said. The company is required to have a certain amount of space for federally mandated labelling, and to ensure same shipping, but there are likely options to make the container that holds the cannabis lighter and more easily recyclable in the future.

Also, Canopy Growth has partnered with TerraCycle, which focuses on hard-to-recycle materials, to create a national recycling program. Tweed stores, or partner retail locations, will collect materials including tin containers, plastic bottles, plastic caps, plastic bags and joint tubes and send them to TerraCycle.

According to the Tweed website, the company will also accept discarded packaging from other licensed cannabis brands.

With files from Jeremy Eaton

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