Hilary Black, the long-time cannabis activist still, at the time, making hay at Canopy, confirmed this with her own metrics. “In 2014, two hundred and fifty thousand people were arrested in Canada for marijuana, and we know that number is at least eight times higher amongst people of colour,” Black said. “How’s legalization working? By 2018, that number dropped down to five hundred souls.”
At Nova Cannabis, on Queen Street West, in the spring of 2019, Aurora, Canopy, and Aphria products commanded the most shelf space. The customers reflected the neighbourhood’s dynamic: a mix of groups of girls wearing Lululemon, a gaggle of talking-on-their-cellphone young men, some businesspeople, a few legacy hippies.
“What’s the highest strain of THC?” was the most popular question. Also, “What’s the cheapest pre-roll you’ve got?”
Customers wanted cheap, customers wanted strong, and customers felt like they were making history. “You can’t minimize what this means to a lot of us who spent our lives outside the law,” says Alison Gordon. “It’s not that you need the government to condone your actions to feel good about yourself, but think about that — everything you do, every day, you put yourself at risk and then, suddenly, the persecution stops.”
While stores opened in Ontario, spring was a land grab for Aurora’s Terry Booth. “It’s a no-brainer. You just keep buying shit,” says Terry, who adds that when your market cap is $14 billion and Nelson Peltz is looking for growth, if something costs $10 million, you buy it, whatever it is. “You’re trading super fucking hot and it’s like, I don’t need due diligence — it’s done.”
Like all the Canadian executives, Booth was spending his time in the U.S. and dreaming of owning their CBD market. On April 18, 2019, the Horizons Marijuana Index began trading in the States — an ETF, or exchange-traded fund, a basket of cannabis stocks mirroring the markets — and it started with a billion-dollar valuation. Terry Booth believed in the valuations and tells me he was working joyfully around the clock. He cut a deal to be the UFC’s official provider of CBD products. He wasn’t nervous, reflective, or slowing down. Up all night, firing off emails — driving his executive vice-president, Cam Battley, crazy — having a ball. “Risk-takers having the time of our life” is how one cannabis executive described it. (That executive was Matei Olaru, then twenty-eight, who was the CEO of Lift & Co., a public company that hosted those first cannabis Oscars way back when in 2014. Lift filed for bankruptcy in 2020, and are now an American brand.)
Like at Canopy, however, Aurora’s new partners didn’t see the world through Terry’s eyes. Booth had been getting pushback from his board. Nelson Peltz, the activist investor, didn’t want the company sending out press releases or investor guidance. He thought it was wise to pipe down. But Booth wasn’t having it. “If you don’t have liquidity, you don’t have value,” he says, referring to volatility, and the press releases stoked movement: you had to have a story to get investors to pay attention to you, to make your stock move. Since the story at Aurora wasn’t going to be profitability, the story Booth sold in the spring of 2019 was growth.
Of the race to acquire new brands, Booth says, “Buying something, we can get a definitive agreement and exchange ratio [the number of shares stockholders of an acquired company will receive after the deal], and it’s just, show me your financials and I’ll have an auditor look at it. But we don’t need an audit. We just want it done.”
What got done in the cannabis industry is often described as an arms race. The Canadian cannabis producers were trying to keep the market’s attention and expand their revenue streams, through acquisition and partnerships — diluting their shares — with meagre revenue relative to expenditures. With pot companies unable to advertise or make medical claims, having a high-profile partnership, like the one Booth courted from the Professional Bull Riders or the UFC, an international brand, could keep a cannabis stock liquid. But it was expensive. “Of course you want to be first and do the next thing,” Booth says. “If you don’t do it, you know Linton will.”
Meanwhile, Sébastien St-Louis was trying to keep Hexo part of the conversation. He wanted to spend in tandem with Terry and Bruce. “It’s a steel cage match,” he says. St-Louis says the idea is to use your market cap to keep growing. “There’s tons of opportunity, so the job is to leverage that and go faster,” he tells me. “To go faster, you need to start acquiring — start consuming — other companies.” St-Louis had targets. All of the companies did. Brands you could purchase for market share, for funded capacity, and for the press release. St-Louis says that he nearly purchased three different medium-sized cannabis companies but, even after having definitive agreements drawn up, the deals fell through.
The deal he landed was for Newstrike, Jay Wilgar’s company that partnered with the Tragically Hip. Wilgar had seen the CanniMed deal fall apart because of Terry Booth, back when he was almost partnered with Brent Zettl, and begun to grow sick and tired of weed. He liked hanging with the Tragically Hip, but Gord Downie had died in 2017, and toward the end of 2018, Wilgar was looking for an exit. “Even with $110 million, the fact was that Canopy was partnered up with Constellation. How do you compete against that? And Hexo [was working] with Molson Coors. Unless you want to be an ultra-niche brand — and I don’t see that working — I don’t know how you compete,” he says.
The valuations made cannabis a smoke-and-mirrors industry that attracted a certain type: tech bros. And even the people who didn’t smoke weed had a certain personality type. Wilgar says he loved his time in marijuana, but even though he was CEO of a weed brand worth nearly $400 million, he was naive about the product. One night in Kingston, Wilgar was with the Tragically Hip at a restaurant they liked, where they had a private room with a door onto the roof. The guys smoked “hashers,” little hash joints, and usually Wilgar refrained. However, after some drinks, Jay lit up.
“I take a few hauls at about ten p.m., and everything’s spinning so I go out on the roof,” Wilgar said. He tried to regain his composure. To be less stoned. But that’s impossible once the train’s left the station. “I take my suit jacket and put it between the air conditioners and lie down.” But Wilgar got too comfortable. He began to snooze. “I wake up at one a.m. and the door’s locked. I’m on the roof of this restaurant, and I can’t get back in.”
Nobody realized that the Newstrike CEO had gone missing or knew Wilgar was stuck on the roof. “I end up shimmying down the drain pipe between this place and a Vietnamese restaurant and jumping onto the recycling bin.”
It was a strange time in a new, rich industry, bleeding cash. For St-Louis, who began consuming cannabis more frequently in the middle of 2018, pot was also a substance different from alcohol for him to consume. He was hosting an end-of-the-year work event with 350 Hexo employees at the Canadian War Museum in Ottawa when his vice-president of business development wanted to show him a new product. He had a prototype of a vape. “It was a work event, but I work in weed and it was a party, so I said, ‘Okay, I’ll try it.’”
Cannabis isn’t Chardonnay. It’s different for everyone, but it rarely makes people aggressive. A high person is more likely to become introspective or self-conscious — energized, maybe. It stimulates the endocannabinoid system and sends the mind on a different track. A stoned person might take twenty tries to find the keys that are in their pocket. “I was high on my way to the event, and I don’t really consume. But then a speaker cancelled. I was told ‘We need you to address everybody!’”
St-Louis says that this was his come-to-Jesus moment with weed. He knew people liked it. His co-founder was Adam Miron; it was Adam’s dad who bought the first gram of Hydropothecary medicinal product. He used it as a pain relief while he struggled with chemotherapy to fight his cancer. But the way Sébastien felt wasn’t quite bliss. He wasn’t using it as medicine, but it also wasn’t booze. He felt lucid, creative, and free. “I get up onstage and give a beautiful speech. I wasn’t self-conscious. I told everyone I appreciated them and wanted them to really, truly have a great time. I meant it,” St-Louis says. “Not something you’d do if you were drunk off your ass.”
St-Louis had distribution where he was based in Quebec, and his company was valued at $1.6 billion. Wilgar had distribution everywhere but in Quebec and had the Tragically Hip to promote his recreational marijuana brand. The deal to buy Newstrike was for $260 million in an all-stock transaction. Jay Wilgar was out of weed, but says he’s never going to forget those memories (at least the ones he can remember).
The hub-and-spoke model that Sébastien St-Louis dreamt up and Bruce Linton pioneered was being used throughout the country. The cannabis executives felt like they needed to expand: new territories, new products. Bruce Linton says he felt the breath of the other companies on his neck. He says he hadn’t been thinking about expansion in Canada since the summer of 2017. He didn’t want another recreational marijuana brand. And he knew the pot surplus we have today was coming. In April 2019, to address the lack of product, Health Canada approved the first outdoor grow on Salt Spring Island, British Columbia. The outdoor grows had bigger yields and required less capital. To deal with the supply issue, Health Canada tweaked its policy and made production more cost effective, lowering the barrier of entry and, the plan was, stocking the shelves of weed stores and eliminating the black market.
But Linton, with Constellation Brands behind him, had already moved on from funded capacity. He says cannabis had bad margins in flower, which became the shorthand for actual weed, as opposed to pre-rolls or CBD products. But if you took the flower and added it to other products, everything became worth more money. It’s not grams; it’s milligrams. And milligrams could be added to anything. Linton liked to stay at the Marriott when he travelled. “I started looking at Europe for some of these things and I’m staying at the Marriott and every day I use This Works soap,” Linton says. An idea came to him in the shower. “A sleep company and a cosmetic company? Perfect for CBD,” says Linton. He was interested in the distribution model. This Works was distributed in the Marriott Hotel chain. There were Marriott Hotels all over the world. “Their product had zero value, but when you put CBD into it, you get the premium of our shit — the margins go up.”
The Canopy board was used to quickly putting Linton’s shower thoughts into action. “I kept them up to date anytime I was going to use cash or equity every Monday morning at my nine-fifteen,” Bruce recalls. One Sunday, Mother’s Day, he made two deals and spent $523 million. “You know what? It was fifteen minutes,” he says of the approval process. Things were different after the Constellation investment. Even in November 2018, Bill Newlands, CEO of Constellation, was making his presence felt. “They told me I had to do five things. ‘Guys, this is your first board meeting. You’ve been here for about two seconds and three of those things would cause us to lose our fucking licence. Let me tell you what we’re doing — relax.’”
On March 21, 2019, after being told to slow down, Bruce Linton hit the gas. Canopy acquired AgriNextUSA, a hemp company built to take advantage of the U.S. Farm Bill, which would now allow hemp and hemp-derived CBD products to be transported across state lines. Sizing up the Canadian landscape, the founders were looking for inroads to the States while fighting a price war for shelf space in the Canadian stores. Market share was important for the brands to make claims in their news releases and it was not uncommon for the founders of the cannabis companies to call one another and forcefully ask for help.
For example, one night after legalization, Terry Booth called Alison Gordon at 8:00 p.m. She says he was screaming at her to sell him some weed. Aurora wanted 48North pot in Aurora packaging on the shelves of the Hunny Pot. At the legal licensed cannabis stores, the margins on a gram were brutal. Gordon says she could make six dollars per gram if she sold her weed to the OCS, but ten dollars if she sold it to Aurora and Terry Booth. For Aurora, it was worth losing money to be number one in sales for the press release. And the owners all knew one another. They didn’t exactly like each other, but they were all part of a strange, stoned Canadian business subculture.
Alison tells me she had to disappoint Terry Booth about her marijuana. She couldn’t sell Aurora her weed, she told him, and he was pissed. Booth didn’t work very hard to hide his emotions.
Bruce Linton and Terry Booth never broke bread before our steaks in Las Vegas, but Terry took pains to let Bruce know who he was. At a cannabis conference in Vancouver, Booth took the stage, with Linton in the crowd.
“Knock, knock, Bruce,” Booth said.
“Who’s there?” replied Linton from the audience, always game.
“Aurora, and we’re knocking down your door.”
But it was hard for Terry to keep pace with Bruce Linton. Alison couldn’t sell Terry her weed — it had already been purchased by Canopy.
Chapter 14 50 Shades of Grey
“My supervisor had a gun to his face, but he said, ‘Not my money.’ It was fucking jokes.”
Jackson Flynn
Legalization had changed Canada, but one thing had not changed: in the spring of 2019 in Toronto, the most popular cannabis dispensary was called CAFE, and it didn’t have a licence to exist.
“We thought we’d be able to effectively deal with these places, but we never anticipated such brazenness as the operators of CAFE,” says Mark Sraga, the city’s director of municipal licensing and standards, who’d been tasked with shutting down the illegal cannabis dispensaries. “We knew they were making a shitload of money.”
CAFE still is a bustling, trendy, illegal retailer of cannabis that sells products without a licence from companies that don’t have licences — some which they also own. It still runs a bustling operation two kilometres from my house, where they sell edibles with one thousand milligrams of THC, one hundred times the legal limit. Founded by Wes Weber and Jon Galvano in 2016, CAFE — “coffee and fine edibles” — sells lattes and macchiatos, infused or not, which is illegal, alongside their marijuana strains, which aren’t available on the legal market. To the average consumer, all pot is the same. But to the heavy smokers, the folks who buy 80 percent of the product, strains matter. The heaviest consumers, like the lawyer Alan Young always says, like buying pot outside of the government system. They shop on the black market because the pot costs less. They buy the marijuana because it’s stronger. And they buy it, Young says, to say “Fuck you” to Bruce Linton, Lorne Gertner, and everyone else making money on and gentrifying cannabis culture.
On the Rocks: CAFE, an illegal weed store in Toronto. The city erected large concrete blocks in front of the store to block entry. There are five illegal CAFE shops operating in Toronto today.
Jodie Giesz-Ramsay, who was the face of cannabis activism, calls Canopy Growth “a rotten cartel corporation,” and tweeted, “Temporary foreign workers are slaving away in Canada’s factory farms, like Canopy Growth, where profits are more important than people.” Pot came from the counterculture. Serious consumers don’t want to buy Julian Fantino’s weed. The counterculture couldn’t care less about Terry’s stock price — or else actively wants him to fail. Weber and Galvano, the owners of CAFE, two white marijuana profiteers, are, according to the Toronto police, criminals.
“It is without question that the Ontario Cannabis Store system and its subsequent rollout of cannabis retail in Ontario is flawed,” the company said in an unsigned July 2019 statement to the Toronto Star. “We are here to provide reasonable dignified access to the many Canadians who have come to rely on us.” So who were these cannabis consumers relying on?