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Bruce Linton is photographed in Toronto on Feb 27 2017.

Fred Lum/The Globe and Mail

Continued from part one.

BK: Why was purchasing BioSteel a good deal?

BL: What they needed was what we did, but what we needed was what they had –which was a platform. Just like our deal with This Works, UK-based hair care and facial products for sale in 36 countries.

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BK: What’s the connective tissue between BioSteel and This Works?

BL: Credible product lines that you can add too. Take a great product and add cannabis science and that’s an outcome that people will buy.

BK: Let’s talk about vapes for a little while.

BL: Vapes are a brilliant medical device. If I ever get Parkinson’s, I want to vape and have flow metering connectivity to the cloud and a data set on my wrist that measures how quick I start moving after consumption and temperature combustion that best optimizes my day.

BK: An Apple watch for smoking cannabis vapes.

BL: We did trials at Canopy and vapes, I think, the future is in the context of oncology treatments – if you feel sick and can’t eat, give me a vape, but make sure it’s designed to generate an appetite. I see vape technology associated with oncology treatments.

BK: What will 2020 mean for Canadian cannabis investors?

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BL: In 2020, you’re going to go to the east coast of Canada and two provinces will have coffee shops that turn into cannabis lounges. You’re not smoking – maybe you’ll be able to vape – but you’re going to sip cannabis and businesses are going to say, “Let’s have our annual convention in Newfoundland or New Brunswick, because they’re fun.”

BK: So what cannabis needs is … what?

BL: Social consumption is the key thing for adopting new products and volume.

BK: In Los Angeles, they have a restaurant where you can smoke pot with your meal.

BL: And they have [crappy] products compared to what we’re going to have in Canada.

BK: What’s the future of Canopy?

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BL: Canopy doesn’t have that cash problem. So the headline could’ve been: ‘The biggest cannabis company in the world has the biggest burn and falls over,’ but my thought process was: I know how to spend $10-billion easy, and if we have $5-billion, we’re halfway there.

BK: To what?

BL: Dominating the world.

BK: What happened?

BL: I should’ve thought about accounting.

BK: What do you mean?

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BL: There’s two categories of global companies: earnings-per-share companies, which is how much money do you make from running your business in the last 90 days, and the other is adjusted EBITDA, which is unless it’s cash we don’t give a [crap].

BK: Constellation Brands was earning-per-share.

BL: And we were adjusted EBITDA and those conversations have nothing in common. I should’ve made sure I understood how they were going to explain to their shareholders that by giving us money, they had a robust future. Their stock should’ve become $300 instead of $182. Had it come in at $300, they would have said, ‘Mr. Linton, you’re a genius.’ But because I didn’t focus on their explanation to their shareholders – and their shareholders didn’t love the deal – that put pressure on them.

BK: Mr. Linton had to take the fall.

BL: The customer is always right and in the stock market, the customer is the shareholder.

BK: Were you surprised?

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BL: The disappointing point was that we saw the script for what they were going to read for their quarter, which occurred just after our quarter, and in the script there was some mention of ‘disappointment’ with Canopy’s results, which in our opinion the results were – give or take – 1 per cent exactly our plan, given our earlier margins.

BK: But your last quarter at Canopy produced a $98-million loss.

BL: The reason your margin goes down is you increase your capacity. Five quarters earlier, our gross margin was 56 per cent. In my last quarter, it declined to 17 per cent. The reason it did that was because in those five quarters, we increased the capacity of the company eight fold. We built our future with great margin – the bottling plant, pharmaceutical plan and the greenhouses. That was the plan because we knew what the margins could be. So how can your script say, ‘You’re disappointed about the fact that your birthday is on a Tuesday when it’s been your birthday forever?’ It’s a fact.

BK: When was the last time you drank a Corona?

BL: Not since.

BK: Do you still believe in Canopy?

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BL: For sure. Canada is a test kitchen for the entire world. Kick-ass in the test kitchen. Roll [crap] out. You have to think about how to scale this globally and you’ve got to start somewhere. Canopy has started, for sure.

BK: Does Canada still have first-mover advantage against the rest of the world?

BL: The Israelis are running around saying they’re killing it. They’re not. The Americans are running around saying they’re going to be federally legal next year. They’re not. And Canada can create amazing products with tons of money. We spent $50-million on our bottling plant. Nobody has a bottling plant like that.

BK: Is collaboration the way for cannabis brands to make new products?

BL: I know this is called ‘Joint Ventures,’ but joint ventures are a bad idea. What a joint venture says is, 'We don’t have time to fight now, let’s sew our [crap] half together – and fight later.” From day one I said we’re not doing joint ventures. Get on the bus or get run over by the bus, that’s it.

BK: Where will cannabis 2.0 lead?

BL: 2.0 is the point in which the cannabis industry stratifies. Do you grow biomass, extract oils or create goods that people will line up for? There aren’t going to be that many companies that have the full triangle. A whole bunch have the bottom, flower. Three or four are in the middle, extraction. And a bunch want to make products. But if you make something that people have five times, that’s not a preference. That becomes something else. It’s the baseline. You become the thing that other people get compared to – the go-to. You want to become the default.

BK: But you’re talking about weed like McDonald’s coffee. I don’t think a person in a dispensary shops for cannabis by name.

BL: You’re talking about selling things in grams. When you start selling things in milligrams, it’s a different story. Grams aren’t a brandable thing. It’s not a unique formulation. 2.0 is about milligrams.

BK: Milligrams?

BL: Milligrams are an extracted formulation. The options around a milligram is limitless. A gram is a visual, olfactory experience, limited. A milligram is amazing. We’re having wine. Some wines on the menu are $40-per-glass. What’s 2.5 milligrams of THC cost, a dime? What do you sell it for? $5? Margin opportunities are higher in creating branded milligram products. If you can’t sleep and you get a formulation with cannabinoids that helps you, what would you pay for that? Whatever the price is. And if the active ingredients costs 20-cents, whoever makes that out of the same shit you’re already growing, that’s who wins. I don’t care where you are.

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