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Canopy is Quickly Ramping up Cannabis Production Preparing for Adult-Use

Constellation Brands has Purchased $200 Million CAD Worth of their Convertible Bonds Too

We have reviewed Canopy Growth Corporation quite a bit, but as the largest cannabis company in the world by market share, it only makes sense they would garner attention. While Aphria and Aurora remain very large players in the market and are likely to provide a lot of adult-use cannabis come this October, Canopy dwarfs them. Of the estimated $4 billion extra Canada is supposed to sell next year in cannabis products, Canopy is likely to represent a very large portion of it.

Canopy Growth Corporation, Cannabis Act, Cannabis Act, Canada marijuanaFrom the roughly 750,000 square feet of growing space Canopy had last year, the cannabis giant now has over 2.4 million square feet and is planning on having over 5 million square feet by the end of 2019. Market estimates suggest that Canopy will be capable of producing over 750,000 kgs of marijuana by the time they are done developing space next year. The demand for cannabis in Canada is likely to consume all of that easily and then some, but then that is why there are many players in the Canadian cannabis market.

As of March of this year, Canopy had in its inventory $101.6 million worth of cannabis product. That represents 15,726 kilograms of marijuana flower, 356 kgs of capsules containing cannabis and 6,969 liters of cannabis oil. It is not enough, but much more than they had last year in inventory. To be able to meet the demand coming for adult-use cannabis they will need all of that additional cultivating space and probably more if they want to continue to dominate the market.

Big alcohol’s interest in what has become its biggest competitor in the cannabis industry is obvious. Last year we reported that Constellations Brands, the wholesale distributor of beer brands like Corona and Modelo, Svedka Vodka and Mark West wine purchased nearly 10% of Canopy Growth Corporation. Plainly their interest in Canopy is still strong as they just purchased over $152.5 million USD in Canopy’s convertible bonds. How involved Constellation brands is with operations at Canopy is challenging to tell. Common sense suggests that their network is the biggest advantage they bring to a company like Canopy.

It could simply be that Canopy is happy to take their money and have little interest in them otherwise. Alcohol sales have been dropping with the spread of the marijuana legalization and alcohol companies have even warned shareholders of the potential of further revenue loss. Between the health craze spreading throughout Canada, the U.S. and Europe, as well as awareness spreading about addiction, cannabis is a welcome alternative for consumers. Especially as all of the myths about the dangers of consuming cannabis continue to get debunked, more people will be drawn to try marijuana products.

Last month Canada’s Senate approved the Cannabis Act making Canada the first G7 country to legalize marijuana nationally. Canada’s newly elected Prime Minister Justin Trudeau is young at 46 and campaigned hard on legalizing adult-use marijuana. Companies like Canopy and Aphria have taken full advantage of Canada’s new perspective on cannabis by establishing export relationships with European countries like Germany and even in Australia for medical marijuana, which may represent an even larger market for these companies than Canada.

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Richard Lowe

Richard Lowe, RIA, is a 14-year veteran of the financial sector with licenses as a commodity broker and investment advisor representative. Along with a focus on raising capital for the firms he was employed with, he also wrote and edited much of the content published by them. He holds a BA in Journalism from the University of Massachusetts. He has been a longtime advocate for marijuana legalization due to the social injustices associated with marijuana prohibition and the strong potential for the medicinal benefits of cannabis.

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