The Staggering Growth of a Clean Cannabis Industry

Dressed in white lab coats and equipped with hair nets and latex gloves, employees of Canopy Growth, one of the largest cannabis producers in the world, are cloning cannabis plants . Concentrated, they work in a former chocolate factory in Smiths Falls, an hour's drive from the Canadian capital, Ottawa. In a very bright room, they put marijuana plant cuttings in mini-trays. At high temperatures, they become cannabis plants in bloom, full parts. "We feed factories during the summer phases," says spokesman Jordan Sinclair during a tour of the complex, where strict safety and hygiene requirements are met. 39; apply.

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The scented odor harvest is for the nascent Canadian market, where recreational marijuana is used has been legalized this week. This makes Canada the first major industrialized country to take this step, at the initiative of the Prime Minister Justin Trudeau . The goal is to eliminate the black market. The regulated production of medicinal cannabis in Canada, which has been legal for some time, is the basis of the new market.

Recreational weeds represent a potential for billions of dollars. According to the Canadian Bureau of Statistics, Canadians – among the most active blowers in the world – spent about C $ 5.7 billion (€ 3.8 billion) in cannabis last year, mostly in the market. black. Accountant Deloitte estimates the size of the cannabis sector, including support services, at $ 23 billion. "We are at the beginning of a whole new industry," said Greg McLeish, Cannabis Industry Analyst at Mackie Research Capital in Toronto. He estimates the demand for recreational cannabis at 700 tonnes and for medical purposes at more than 200 tonnes per year.

Investing in Cannabis

Legalization has led to a rush of green gold. Producers licensed for medicinal cannabis have increased their production capacity in recent years to meet the demand for legal marijuana. Investors have invested billions of dollars in Canadian weed producers, including Canopy Growth, Aurora and Aphria. As a result, they were immediately promoted among the world leaders in the cannabis industry, with huge and modern production facilities.

A Canopy Growth employee supplies cannabis plants in a plant room in Smiths Falls, Ontario, in December 2016. Photo by Lars Hagberg / AFP

I've created a marijuana business, it's a bad idea, "said Bruce Linton, founder and CEO of Canopy Growth. But because of its decision to produce marijuana for medical purposes four years ago, the multinational now has a multi-billion dollar stock market value and is well positioned for the new Canadian market and the demand for high-end drugs. quality abroad. "Canada is not considered radical," he says with a laugh. "But a lot of things are happening now because we have done a good job."

Customers Online

At a cannabis store in Newfoundland, Linton personally sold the first legal recreational herb in Canada this week, under the brand name Tweed. Canopy and other major producers supply provincial distributors. In Canada, the retail sector has been established by province, through public stores or the private sector. Adult Canadians can also order online and receive their cannabis products by mail. In new stores, customers had been queuing for a few days. the offer is still short.

Bruce Linton (left), founder and CEO of Canopy Growth, will sell the first legal marijuana under the Tweed brand in Newfoundland on the east coast of Canada shortly after midnight. Photo Paul Daly / The Canadian Press via AP

The growth of Canopy Growth is staggering. Since Trudeau came to power, the Smiths Falls mill complex has nearly grown sixfold to about 90,000 square meters. In British Columbia, a brand new 16-hectare facility has arrived. Over the past 18 months, Canopy has increased its production area tenfold to 52 hectares. "We had to evolve very quickly," says Sinclair. "Production capacity has been added throughout the country."

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With large Canadian banks being cautious, extensions and acquisitions in the sector are largely financed through equity issuance. The twelve largest cannabis producers, led by Canopy and Aurora, already have a market value of over C $ 50 billion (€ 33.3 billion). Investors increased the market value of Canopy Growth (listed in Toronto under the name "WEED") to $ 14.3 billion. That's more than the well-known Canadian manufacturer of Bombardier aircraft and trains.

For a start-up company that had a turnover of just $ 78 million in its last fiscal year, this market value is extremely high. Canada's "green fever" is a reminder of the dotcom craze of the nineties. Watch the observers for a bubble. "The appreciation of a number of producers has exploded," says Mackie analyst McLeish. This does not prevent reputable companies from investing in it. US Beverage Group Constellation Brands invested $ 5 billion in Canopy in August, a potential partner.

Euphoria

Is euphoria fair? For many, optimism is appropriate. Because Canada has taken the lead in the cannabis industry in a short time. This is not only due to the rich history of cannabis in British Columbia, but also to the regulated system of cannabis use for medical purposes. In 2014, the previous Conservative government put in place a national system for the distribution of licit legumes by commercial growers. The cornerstone of this approach is stringent regulation by the Canadian Department of Health, coupled with a strict licensing process, stringent quality requirements, and product inspection.

Current weed production in Canada was constructed on this basis. About 120 producers now have a license. All of their products are tested, among other things, for THC and CBD (active substance) levels and pesticides; it must be clear exactly what is in it. "This leads to very safe and consistent quality products that consumers can count on," said McLeish. "The black market can not offer that so well."

In addition, the production process in Canada has reached an unprecedented scale. "In terms of size and capital, Canadian companies have undisputed leadership," said Canopy spokesperson Sinclair. "No other country can provide such large quantities of reliable products."

This is not of interest to Canadian consumers; It is also attractive to international buyers of mediwiet. Canopy Growth supplies Canadian cannabis for medical use in a variety of countries, including Germany. Seven Canadian producers are allowed to export marijuana for medical purposes. For example, the Canadian weewever giants struggle for world domination: they serve a country with a reliable mediwiet, and then start when they legalize marijuana for recreational purposes. "Canada is leading the way in the world," said Linton.

Visitor Reception Center

For Smiths Falls, the legalization of cannabis is a gift from heaven. The gay atmosphere in Canopy's factory hallways contrasts sharply with the drop in 2009, when chocolate maker Hershey decided to move his production to the same building in Mexico. It was a blow for the industrial city of less than 10,000 inhabitants. But now, the local economy has returned to its feet. The plant employs 800 people, home prices rise, the restaurant business on the main street is booming. It is hoped that a trendy docking center with a Tweed Tourist Weed Shop will attract.

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Greenhouses and production facilities are also emerging elsewhere in Canada – sometimes with Dutch inputs. Green Organic Dutchman, a licensed cannabis grower, has hired Dutch greenhouse builder Kubo to build a 10-hectare modern greenhouse complex near Montreal. Organic marijuana production is scheduled to begin next spring.

"This is an excellent opportunity, especially for a specialized product such as organic cannabis," said David Bernard-Perron, vice president of The Green Organic Dutchman. He sees a role for Dutch horticultural expertise. Where cannabis cultivation now takes place in factory halls and in bright light, the sun will soon have a role to play. "Anyone who grows crops will end up having trouble competing with successful greenhouses of Dutch origin."

Cannabis sector in Canada sees Dutch horticultural expertise playing a role

Suppliers also respond to construction. Master, a manufacturer of ventilation systems, actively recruits customers from cannabis producers. "It's a great opportunity for everyone," said Rep. Jonathan Hackett. "We sold several million products that we would not have sold without legalization, we can earn a lot of money."

Various small entrepreneurs also see the prospect. There is Phil Dépault, with his marijuana company Hiku-Maitri. He hopes that edible cannabis products could also come out of illegality, but considers that the latest developments constitute "a huge step forward". He is proud, he says, that Canada is leading the way. "We are a big testing ground for the rest of the world, everyone is watching us."

New Complex

And then there is Aurora, Canopy Growth's main rival in the fight for market leadership. Last summer, Aurora competed with MedReleaf in Ontario for $ 2.5 billion. This acquisition put the Alberta Cannabis Society on a par with Canopy. Aurora has a brand new 7.5 acre complex at the Edmonton Airport. A one and a half times larger facility is under construction, also in Alberta. It will be commissioned in 2019. The company will open a complex in Quebec in November

Aurora is also active in countries such as Brazil and Italy. In Germany, she acquired the largest distributor of mediwite and thus had direct access to pharmacists in the large German market for medical marijuana

Andrea Paine, Director of Government Relations at Aurora, did not never thought of ending up in the cannabis business, she says. . But there is now a more than serious sector, where producers have been joined by business people, pharmacy experts, marketers and professionals. "It's not often that you get a unique opportunity," she says about all the new possibilities. "Canada has been courageous in legalizing, we are in the cradle of a new and very big industry, we are writing history here."

A woman holds up a Canadian flag, with a sheet of cannabis instead of a maple leaf, in front of the Canadian Parliament in Ottawa on April 20, 2016. Last Wednesday, Canada legalized marijuana for recreational purposes. use. Photo by Chris Roussakis / AFP