How the CEOs of Canada’s four biggest cannabis companies are gearing up for legalization
As the clock ticks down to legalization of recreational marijuana, the Financial Post’s Mark Rendell spoke to the CEOs of Canada’s four largest publicly traded licensed producers about how they’re preparing their businesses for the new regime. The following interviews happened in March and have been edited for space.
Vic Neufeld, CEO of Aphria.
1. Vic Neufeld – Aphria Inc. — Approx. Market Cap.: $2.1 billion
Q. Are you going to have enough product to meet your supply commitments?
A. Short term answer: no. Long term answer: absolutely. With the approval of part three of our Leamington, Ont., facility, we have an annualized run rate of 30,000 kilos of harvest. When part four is completed and we get plants in there that will add another 70,000 kilos. That harvest should come in a saleable form in February or March of 2019.
Q. How’s your facility build-out going?
A. Part three in Leamington has been approved, so today we’re sitting on 300,000 square feet of greenhouse grow. Part four, it’s all built in. In other words it’s covered in glass already, and the underground services are being laid as we speak. We heat and we fertigate from the floor up. So we’ve laid all the piping down, and as soon as the weather breaks we’ll start cement pours. 700,000 square feet of greenhouse: it’s going to take 62 days of cement pour, two months of trucks coming daily.
Q. How are you finding the process of staffing up?
A. When we designed part four, we learned from the Dutch how they grow and move plants inside a greenhouse. Whether it’s Easter lilies or orchids, it’s all industrialized, robotic, computerization of movement. It’s costing me about $22 million just for the automation. But if we didn’t do that our workforce at the completion of part four, all in, would have been about 800 employees. Now with this automation we’re down to 400. So we’re really squeezing out as many cash costs as possible by doing this.
Q. Are you concerned about the first day of sales being delayed until the end of summer or later?
A. This delay helps us out immensely. It helps out the entire industry, quite frankly, because the last thing the SAQ and LCBO want to see is empty shelves. Selfishly it gives me more time to bank more in inventory, to get our new genetics up and running. I think the launch date will be Nov. 1.
Terry Booth, CEO, Aurora Cannabis.
2. Terry Booth – Aurora Cannabis Inc. — Approx. Market Cap. — $4.8 billion
Q. Are you going to have enough product to meet your supply commitments?
A. If every province required six months of product in advance, then there’s nobody who could supply that. If they all go with the one month, or two months — that’s what we had planned on, and had banked on — we’re in pretty good shape.
Q. How’s your facility build-out going?
A. The Vie project (in Pointe-Claire, Que.) is fully in production. The Sky project (in Edmonton) is on schedule, probably a little bit later into the spring. 800,000 square feet of structure is up, 600,000 square feet of glass is up. Three or four bays are now poured and lit, and the automation is going in. The H2 project in Lachute, Que., is finishing off construction in the next couple of weeks, and we expect to have it licensed for production shortly.
Q. What are the big regulatory unknowns you’re waiting to hear more about?
A. We want to see more product availability. If we’re going to truly compete with the grey market and the black market as per Trudeau and the Liberal government’s mandate, then we need to be able to provide some more products, and that includes your vapable oil and your edibles.
Q. Are you concerned about the first day of sales being delayed until the end of summer or later?
A. We’re not concerned because of our international demand. With more countries coming on board in Europe — an aging market of 500 million people, with Germany covering the cost of cannabis — we’re not too concerned about recreational use being delayed a bit. I think any delays will largely be a result of provincial pressure more than Senate pressure. If I had to guess at a date, I would guess Sept. 1.
Bruce Linton, CEO, Canopy Growth Corp.
3. Bruce Linton – Canopy Growth Corp. — Approx. Market Cap. — $6.3 billion
Q. Are you going to have enough product to meet your supply commitments?
A. If you look at our last quarter, we produced more cannabis than almost all of the companies in the sector have in their operating history. That means our ability to have inventory and supply the agreements is not something we’re going, ‘Oh my god.’ We’re saying, ‘Execute, organize, logistics, supply chain,’ those kinds of words.
Q. What are you doing to secure supply?
A. We have about $100 million of inventory and we’re ramping up our production. About three weeks ago we took an aircraft full of baby plants to our 1.3 million square foot greenhouse in British Columbia. Our other greenhouse is now getting closer to being 1 million square feet and we have 650,000 square feet of other stuff. Our production assets have been running, some of them for four years, so we have inventory and the ability to expand inventory.
Q. How are you finding the process of staffing up?
A. We were about 500 people probably a year ago, and we’ve added another 200 or 250 over the last year. It’s big growth but not huge. We’ll add another third to half again over the next year. And they aren’t just in Canada. With our international expansion, now we’re operating in seven or eight countries in addition to Canada.
Q. What are you doing to create brand recognition for the recreational retail market?
A. Your first move is to occupy the Hershey’s factory, and get international media coverage. You have a name that’s a good name: Tweed. You bring in people who reach out to you, for example Snoop. Brand isn’t a name, it’s a bunch of actions that support something where you can say, ‘I like that.’ Whether it’s resurrecting a town, saving a building, distributing economic opportunity across the country. When people walk in the door and want Tweed, it could be for half a dozen reasons.
Neil Closner, CEO, MedReleaf.
4. Neil Closner – MedReleaf Corp. — Approx. Market Cap. — $1.8 billion
Q. Are you going to have enough product to meet your supply commitments?
A. We’ll certainly have enough to initially supply all those retailers that will want to put MedReleaf product on their shelves. The million dollar question is how quickly is it going to sell through? How many stores are they going to have open in July versus October? You look at Ontario for example. They say they’re going to have 40 stores, acknowledging though that in three years they’re going to have 120 stores. Are people going to be willing to stand in line for hours at one of these 40 stores? Or are they just going to say, ‘To heck with it, I’m just going to wait another year before they open up 40 more’? We just don’t know.
Q. How are you finding the process of staffing up?
A. The biggest struggle we’re having right now is just finding desk space and office space for all the people. We’re not just focused on expanding production and cultivation space, we’re focused on expanding office space as well. We definitely need growers, cultivators, horticulturalists, that sort of thing, and associated production people to go along with that. But we certainly have a need for logistics, sales, marketing, business development, IT, every area.
Q. What are you doing to create brand recognition for the recreational retail market?
A. The MedReleaf brand is well recognized by medical professionals and our patients, but we felt it wasn’t a brand that was going to resonate on a recreational level. So we’ve come up with some brands that we believe will perform very well in the recreational space. We’ve launched San Rafael 71 as a beer so we can get the brand in front of consumer’s eyes, because we have a challenge: How do you launch a brand without the product? Doing a licensing deal on Woodstock was another. That’s a brand that many people, certainly baby boomers, already recognize and by and large already associate with cannabis.
Q. Are you concerned about the first day of sales being delayed until the end of summer or later?
A. Not really. The fact that we don’t have as many answers as most of us would like to have at this point, that just gives us a little more time to be more prepared. The customers for this are there, they’re not going anywhere.
Financial Post