What edge does weed giant Canopy Growth have over its rivals? Hint:Constellation as its Fairy Godmother   

17 October 2018 : With the legalization of marijuana all set to take place in Canada today, the investment by Corona parent Constellation Brands is setting Canopy Growth apart from its peers.

Smith Falls, Ontario–based Canopy Growth Corp.’s stocks skyrocketed through the roof during the summer when the announcement was made that Corona brewer Constellation Brands Inc. was willing to invest an additional $4 billion in the company.

Constellation has already bought 9.9% stake in October last year, and this additional investment of $4 billion investment leads the path to two possible scenarios : the company could either be bought outright by Constellation through warrants that could surge its stake to more than 50% or continue to partner with the beverage company in order to manufacture a range of consumer-focused cannabis products and diversify both their portfolios expanding in different markets.

Obviously, the massive influx of cash provides Canopy CGC, -4.21% WEED, -2.90% with an advantage over its rivals which in comparison have far less cash on their balance sheets, moreover do not have the global resources or research expertise that Constellation STZ, +0.02% can boast of.

Even if we put the constellation investment aside, amongst its rivals Canopy is steamrolling its peers, fueled by possessing the largest available area to cultivate pot,  smart agreements with every Canadian province to sell its various products and an even smarter story for the non-invested public: that the company’s outsize growth has revitalized Smith Falls — destroyed when Hershey Co. HSY, -0.14% pulled its factory from the eastern Ontario town — where it continues to have its corporate headquarters and a massive cultivation and processing facility. Canopy, bought out the old Hershey Building and with its exponentially growing workforce is making a significant contribution to the local economy through generation of employment. 

Canopy’s Business model: recreational or medical?

Canopy boasts of an annual revenue of a whopping C$77.9 million ($60.1 million). A major chunk of this comes from medical sales alone.Although the Constellation investment is quite a bold bet, that the company is undertaking in terms of recreational adult use, in Canada. 

The edge.

Canopy claims to have filed 82 patents around the world and is mighty proud of its state-of-the-art cultivation and processing facilities across the country. Canopy Rivers Inc., is a venture-capital firm where Canopy Growth retains corporate control and will look to leverage what it can from its investments.

Supply agreements

Canopy has signed a deal with 10 provinces in Canada, in addition to an agreement with the Yukon territory.

Canopy is trying really hard to expand its international roots.Besides Canada, Canopy has distribution agreements in three countries — Germany, the Czech Republic and Australia, along with research centers in Brazil and Australia. It also is building cultivation facilities or applying for licenses or already operating in seven countries outside of Canada. It is presently exporting weed to five countries, including the U.S. for a clinical trial. Overall, the company operates in 11 countries on five continents.

Divulging into production and costs

In fiscal 2018, Canopy sold 8,708 kg of cannabis and equivalents and harvested 22,513 kgs. Canopy increased its prices from C$7.40 per gram C$8.24 per gram in the same period. 

According to its annual report, the company currently possess 15,726 kilograms of dry pot, 6,696 liters of cannabis oils and 356 kilograms of softgel capsules. As of October, Canopy boasts of having 5.6 million square feet of facilities for cultivation, processing, extraction and manufacturing across 10 different sites.

The company is seeking to expand its capacity by adding 3.2 million square feet additional production capacity.

Canopy Growth shares have soared and reached the stratosphere, gaining 131% in 2018, while the S&P 500 SPX, -0.24% has in comparison merely risen by 3.5% and the Dow Jones Industrial Average DJIA, -0.41% has edged higher by 2.7%.

Reporting for EasyKobo on Wednesday ,17 October 2018 in Lagos, Nigeria

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