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Jun 27, 2018

'It's show time': Canopy challenges rivals as legalization looms

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The CEO of Canada’s largest cannabis producer says it will soon be time for his competition to show their cards.

With the clock ticking towards the Oct. 17 recreational cannabis legalization date, Canopy Growth Corp. (WEED.TO) chief executive Bruce Linton says the focus will shift to which companies can produce at the highest rate.

“What’s going to happen over the next 12 months is, unless you’ve actually got assets producing, you have no inventory, which means you have no income and you can’t lock the provinces up,” Linton told BNN Bloomberg on Wednesday.

“Whatever we do, we drive the market,” Linton continued. “What’s going to happen over the next 12 months is the stocks are going to break, and they’re going to break based on: ‘What is your percentage of revenue, compared to Canopy?’ And, I think that’s fine, because it’s show time, and we’re good with that.”

Canopy released fiscal fourth-quarter results on Wednesday showing sales and marketing expenses surged to $14.8 million in the period, but added that it’s banking on “significantly” higher sales.

Linton said he’s not fazed by what other companies are doing or planning in the lead-up to Oct. 17.

“My goal is not to win the warm-up,” he said. “The warm-up ends Oct. 17, then we win.”

One area where Canopy’s competition is looking to follow its lead is in beverage partnerships. Canopy announced a deal with Constellation Brands last October, and last week BNN Bloomberg learned Molson Coors is pursuing cannabis partnerships and could be eyeing a deal with Aphria (APH.TO) or Aurora Cannabis (ACB.TO).

Linton shed some light on Canopy’s beverage strategy on Wednesday, saying the company is looking beyond simply a cannabis-infused beer.

“A lot of people are just trying to make a beer with inputs of cannabis in it and brew it,” Linton said. “Where we want to take people is more to a new category. Like, if you said: ‘What’s Red Bull?’ Red Bull is Red Bull.”

“I don’t understand why we have an obligation to pirate a beverage called beer... We can actually just do something better and different.”

Linton also said he’s looking to add more diversity to his company’s board, telling BNN Bloomberg it was his plan from the outset

“The first person I asked to be on my board was a woman, and she is on a variety of other very nice boards who all told her – four and a half years ago – ‘You can join that board, but you must step off ours,’” he said. “That was very pleasant of them, wasn’t it?”

Linton said the current make-up of Canopy’s board is tilted by “late-middle-aged men in their 60s and 70s” he inherited through acquiring other companies.

“We’ve been on a board search. I think we’ve found the right candidate, who is both a phenomenal candidate, knows quite a lot about U.S. stock exchanges, and is female,” he added. “I think good governance comes from a diversity of ideas and I generally I listen to women, I think, better than I do men.”