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Canopy Expanding to the U.S.

Canopy announced its license to produce hemp in New York state this week.

Photo by Markus Spiske on Unsplash

Canopy to enter New York state

Canopy Growth Corp. (TSX: WEED.TO) (NYSE: CGC) secured a New York state license to produce and process hemp there, according to an announcement early this week. The company said they intend to invest between US$100m-US$150m in a hemp extraction and manufacturing facility, and shareholders took well to the news.

Although they have yet to announce the location of the new site, the company said that information would become public within the next 100 days.

New bill removes a roadblock

A U.S. farm bill made hemp and legal last month, clearing one hurdle for cannabis producers. Commenting on the change, Canopy Chief Executive Officer Bruce Linton said  “I applaud the political leadership at the federal and state level that has allowed today’s announcement to become reality.” Indeed, shareholders are applauding the news as well.

Investors awaited southern expansion

After making the announcement, Canopy shares shot up 11% in Monday trading. Indeed, the move was anticipated by many and feared to be a pipe dream by a few. Canopy’s management stated its intention to move south before, and its fruition came as a relief to investors.

Canopy eyes the CBD market

CBD, a non-psychoactive component of cannabis, was de-scheduled only recently by the DEA. As a result, its potential market is still hard to gauge.

Nonetheless, the buzz around the bud extract is enormous. Moreover, its expected uses extend beyond the recreational substance market. Indeed, it’s purported to uses extend across products in the beauty and food industries. Those industries have a market size in the tens of billions of dollars. Of course, a small piece of that would be big for Canopy.

Early bird gets the worm

Canopy started building hemp assets in 2016. In the third quarter of last year, the company collected on 4,500 hemp acres in Saskatchewan. That translates to roughly 7 tonnes in CBD extracts.

That, together with the knowledge gained in its ebbu Inc. acquisition puts them in a good position. The ebbu deal aimed to add to Canopy’s hemp and THC-rich cannabis genetic breeding, and cannabis-infused beverages such as Constellation drinks.

Now with IP from ebbu, distribution from Constellation and commercial operations in New York, the company’s U.S. position is looking stronger and stronger.

Having those ducks in a row should give the company an ‘early-mover’ advantage.

Ahead of the pack

The company is well-positioned to take the lead among Canadian cannabis companies south of the border. Don’t forget; they also shipped the first legal cannabis product to the United States. While that was the first legal export of cannabis across the border, the company only plans to increase its business there.

Investors are hoping the move will double Canopy’s projected U.S. sales.

Written by Rob McLean

Rob loves staying on top of developments in the cannabis sector, and always has his finger on the pulse of real estate markets.

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