Constellation Brands Inc.’s Canadian cannabis affiliate, Canopy Growth Corp., plans to establish a $100 million to $150 million hemp-processing industrial park in the Southern Tier.
Based in Smith Falls Ontario, Canopy is a medical cannabis firm that shortly after Canada’s recent legalization of recreational marijuana secured multiyear distribution licenses in all of Canada’s provinces. It also scored retail licenses in Manitoba, Newfoundland, Labrador and Saskatchewan. Canopy has cannabis operations in 15 countries in Europe, Scandinavia, South America and Australia.
In November, Victor-based Constellation Brands invested $4 billion in Canopy, buying a 37 percent stake in the Canadian firm and securing two Canopy board seats for top Constellation Brands officials.
Canopy is currently scouting locations for the planned Southern Tier facility. It expects to have a better line on where the industrial park might rise within the next three months, Canopy spokeswoman Caitlin O’Hara says.
The company plans to process locally grown product, enlisting U.S. farmers to plant hemp, she adds. Initially it will only process hemp or products like cloth and seeds as a food and will stay out of the U.S. medical and recreational cannabis markets. That stance might not be permanent but will remain the Canadian firm’s position until national marijuana laws change, O’Hara says.
Even so, in light of Gov. Andrew Cuomo’s announced intention to legalize adult recreational use of marijuana in New York this year, Canopy sees establishment of a New York facility as a possible “first step” into a yet-to-be-established U.S. recreational market, O’Hara says.
Hemp and marijuana are both varieties the cannabis sativa plant. But hemp contains only minute amounts of tetrahydrocannabinol or THC, the chemical responsible for marijuana’s psychoactive effects. The planned Southern Tier facility would concentrate on extracting cannabidiol, known as CBD, a substance that has medical uses and is thought to be calming but does not produce the high associated with THC.
Canopy decided to locate a hemp processing operation in Upstate New York—its first U.S. operation—partly to be near Constellation Brands’ Ontario County home base, O’Hara says. But Congress’ Dec. 14 passage of the U.S. Farm Bill was the key factor in the Canadian firm’s decision to move into the U.S. market.
How quickly Canopy begins medical and recreational cannabis operations in the U.S. or if it does at all depends entirely on cannabis’ status on the federal level, O’Hara says.
Despite its relatively benign effects and the legalization of hemp in the Farm Bill, hemp’s main medical product, CBD oil, is not completely legal in the United States. The Food and Drug Administration approved a drug containing CBD for treatment of epilepsy last June. But the Drug Enforcement Agency still classifies CBD as an illegal drug. Hence Canopy’s decision to for now stay out of U.S. medical and recreational markets, O’Hara says.
In addition to the Farm Bill and Cuomo’s progressive stance on cannabis, encouragement by the state’s senior U.S. senator, Chuck Schumer, also helped Canopy decide on New York’s Southern Tier its U.S. point of entry, she says.
The recently passed Farm Bill declared hemp legal in the United States for the first time since 1970, when the DEA classed hemp along with marijuana as a schedule I substance, lumping cannabis in with highly addictive drugs like cocaine, heroin, methamphetamines and various opioids.
In addition to its own processing operation, Canopy plans to court other hemp processors as tenants as part of what the Canadian firm called in a Jan. 14 statement its “objective of anchoring a broader hemp ecosystem, maximizing long-term economic benefits for the region and its communities.”
In its most recent fiscal year, ended Mar. 31, 2018, Canopy posted revenues of $58.8 million but in the same year ran $53.1 million in red ink. Still, investors, buoyed by the cash Constellation Brands has pumped into the firm and Canopy’s prospects in the recently established Canadian recreational market, have pushed its stock price up. The first cannabis firm to trade on the New York Stock exchange, Canopy (NYSE: CBG) saw its stock price soar from $30.24 on Jan. 17, 2018, to $42.10 on Jan. 16.