Capital 10X President Evan Veryard interviews Canopy Growth
While Canopy Growth is in a quiet period leading up to earnings, Kovacevic was able to provide an overview of Canopy’s positioning for the international cannabis market and how big they think the opportunity will be.
He also explains why they believe they can make headway with cannabis beverages and why they aren’t worried about oversupply in the market.
Capital 10X: We’re here right now at Cannabis Europa obviously focused a lot on the European opportunities, so just sticking with that theme do you want to talk us through how Canopy Growth is thinking about their international strategy, whether that’s Europa focused or maybe even LATAM, just how you’re seeing it, exports, acquisitions, the opportunities you like?
Rade Kovacevic: I’d say it’s a very exciting time for us on the international front. Canada as we’ve talked about is getting towards the end of our 72 month build-out. We’ve set up an entire international infrastructure. we have managing directors for each continent. Have the teams in place now, building out the infrastructure — really able to move towards execution now.
I think particularly in Europe it’s been exciting year for us the acquisition of Storz & Bickel. The acquisition of C3 and really being able to bring all those products together so that we can be a leader in the flower vaporization space, a leader in a drinkable or syntactic THC and a leader in broad spectrum cannabis products. I think that our holistic portfolio gives us a good opportunity.
Capital 10X: Absolutely, you’re going to get it right if you have so many different opportunities. I’d like how big do you see international, down the road, not worried about this quarter or whatever, but down the road how big do you see international for Canopy relative to say Canada obviously Acreage is there?
Rade Kovacevic: So I think the rule of thumb in terms of the long term is 1% of the population so if you look at Canada we have a population of 30 million people, 35 million people there’s about 300 350 thousand patients currently in the medical cannabis. So we look internationally at a country like Germany there’s 83 million people or so you should expect to get to around a hundred thousand patients.
You look at Europe as a continent you’re looking at 750 million people so you can do the math but I think a huge opportunity with Europe in the future and I think the approach we’ve taken in Canada being able to leverage those learnings, leverage the destigmatization we’ve done with physicians and take all of that to Europe and apply those best practices will be a great advantage.
Capital 10X: So obviously October 17th passed not too long ago, legalization 2.0. What are you guys most excited for coming this December and January. What products are out there and how do you see that maybe potentially driving sales?
Rade Kovacevic: Yes we have over 50 new SKUs coming to market over the next 12 months and I think everyone knows our most exciting for us is on the beverage front. It’s not known table stakes to the industry but it’s the most disruptive opportunity for us to bring in the years to come. I think what we’ve done well is we’ve been able through our scientific development team to make a product that’s akin to beverage alcohol. So you know you could be used to having two beers instead now you have two tweed and tonics and from that perspective it gives us a great opportunity to disrupt the current market, grow the overall size of the pie of the market and really start bringing our advanced manufacturing intellectual property abilities to market and really start dominating from that perspective and I think as we move toward that end of the value chain there’s a great opportunity for investors.
Capital 10X: And now just just playing devil’s advocate a little bit there’s always push back on the beverage side of things. You look at mature markets beverages in the U.S. aren’t necessarily dominating, so what what do you guys see that you think you can change that or that Canada might be different? Is it is it just the IP?
Rade Kovacevic: It’s a great observation. I think there’s a few parts. One in the United States they tend to be very strong beverages. May be super exciting for a 20 year old, but not for the mass market. It also leads to bad customer experiences. Everyone knows someone that’s had the brownie that had a little too much. All your beverages have way too much that’s the outcome you’re going to have right.
I think the second part is it needs to taste good. And we did a media unveiling last week and we had a tasting panel across all 13 of our beverage SKUs and the results were quite positive. People being it is sparkling water, it has a touch of lime and cucumber, is a very different appeal to a lot of the beverages you see in the United States.
I think the third important part is the IP around making it akin to the beverage alcohol. It’s really a market for new people to the space. Our research shows eighty percent of people new to cannabis are open to trying a beverage so having something where you can titrate your dose where it has the on same onset effect akin to beverage alcohol and same length of duration so you know what to expect.
You can have one, see how you feel and decide if you have two or three. You know the hope is in five years from now you’re going to a backyard party in Canada and some people are having a Tweed and tonic.
Capital 10X: Hopefully you can do it at a restaurant or a lounge at some point too right I mean that’s not where it is right now but I think that’s where a lot of people would like to see it. Now one of the things recent, Aphria, the Double Diamond license came through. You’re starting to hear concerns and talk about oversupply issues in Canada. How are you guys thinking about that you’re one of the largest scale cultivators. I mean you guys have no issues on the liquidity side that a lot of other people do so what are you guys thinking about that?
Rade Kovacevic: Yes we’re really focused on having a strong balance sheet that sets us up to really take advantage of a situation where we are. When legalization launched we launched with about one-third market share and being able to maintain that through and bring these new products to market is a great advantage. We’re always looking at supply and demand side but really from a long-term perspective the important part is having a strong supply chain, strong brands, intellectual property, advanced manufacturing and be able to leverage that altogether to make sure we can continue to dominate our market share.
Capital 10X: Excellent, thank you and so looking forward you mentioned you can’t comment, you’re in the quiet period on the financial quarterlies, you don’t want to talk about any kind of any potential you know write-off anything associated with those, but what about profitability how are you guys thinking about long term, you know any any guidelines or any kind of dates in mind for that or any key milestones you say you know we’re really moving on the right track?
Rade Kovacevic: So tune in on Nov. 14 at 8:30 a.m. to our quarterly conference call and more than happy to discuss our financials then.
Capital 10X: Thank you very much for the time, I really appreciate it.
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