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Report on Business Cannabis Professional 'We think of things on a global basis’: Canopy’s EVP on the Couche-Tard deal

As Cannabis Professional was first to report last Thursday, Canopy Growth Corp. is working with convenience store giant Alimentation Couche-Tard to get its “Tweed” brand onto one of Ontario’s first 25 recreational cannabis stores. In an exclusive conversation with CanPro below, Canopy executive vice-president Rade Kovacevic explained the background of what the companies call a “multi-year strategic partnership” and the future potential of the deal.

Cannabis Professional: Can you walk me through the timeline that led to this deal?

Rade Kovacevic: In general at Canopy, we are very proud to be a company that started in Smiths Falls, we are proud to be Canadian and we are proud to be a Canadian success story that is growing on a global basis. Often for us, when we look at opportunities to have relationships with other companies we look for other Canadian global success stories. So we looked at ourselves and we have done well in the cannabis retail space, we are really excited to have stores open in Newfoundland and Manitoba. We are looking forward to opening stores in Saskatchewan and from that perspective we asked ourselves who else on a global basis would be a strong retailer. Couche-Tard, which has a great Circle K brand, would make sense in the long term, and we should find a way to work together.

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CP: When was that?

RK: About three months ago.

CP: So this was before Ontario replaced its open licensing system for a phased, lottery-based approach?

RK: Yes and I would say it is irrespective of [the lottery process]. As a company, we think of things on a global basis and then we see where it makes sense from a regulatory point of view to work together. The way I like to think of it is we like to have a lot of friends who are really nice and are great Canadian success stories. This was an obvious one of those. It is more fun to work with nice, fun partners. As the rules came out, we understood what the government’s purpose was, we are supportive of the idea of small business people having a chance to be successful in the space and the general approach to retail that Ontario has taken. What we saw as the opportunity was to use this as a way to dip our toes in the water and have an opportunity to work with Couche-Tard and for them to start working with one of Ontario’s lottery winners to start building that relationship. What we found worked well was that we have a brand that is known in the cannabis space as well as the cannabis retailing space for being education-centric and for being very approachable for people who are new to cannabis, but the brand is also known as being very responsible. Where we saw we can take part in the Ontario retail space was we can offer our brand to Couche-Tard, who in turn offered our brand to a lottery winner. So for us it is a great place because we are happy to bring that social capital that we have and have a small business owner/operator in Ontario be able to leverage their brand to be able to drive their business forward. It is a very Canadian approach to this where different relationships go together and are extremely respectful of the regulatory environment so the small business owner will, assuming all goes well in the process, soon have a store that uses a Canadian success story’s brand to create their own small business success story and I think it is a very happy story and it achieves the policy objectives the Ontario government was looking for.

CP: One legal sticking point lawyers say regulators will look closely at is whether the store owner will be given any reason to prefer Tweed products over rivals?

RK: There is no inducement whatsoever. It is up to the discretion of the store owner/operator to decide what products they want to carry. It comes back to Tweed and Tokyo Smoke stores that are operating in other provinces, we carry all sorts of brands in those stores because at the end of the day retail owner operators should be looking at what is best for their customers so at this point they are able to leverage our brand to get some awareness of their store and that tone of the responsible approach to cannabis retailing. But at the end of the day the store owner operator has full control and decision making over what products they might decide to carry. I think it is a great start from our perspective.

CP: How would you define success as first as this first test of the Couche-Tard relationship is concerned?

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RK: I think success is seeing that the small business person is able to open their store on time, that they have access to the resources to be able to do it in a responsible and informed manner and that when people go in on the first day of sales that they have a great experience. Then a few weeks later you’ve got an operator that is able to live a new dream and really enjoying operating their own store. This is really fun and it has worked out as expected.

CP: And if that happens, is the idea that other stores would open using the London location as a model?

RK: For us, as the industry leader, we are judged by how the industry operates as a whole. To that end, we want Canada to be a success story and we want that success story to expand globally. So from that perspective we want Ontario as Canada’s largest province to have a very successful rollout of private retail.

CP: Is the idea that Couche-Tard would be doing most of the legwork in terms of finding entrepreneurs to open Tweed stores?

RK: From a Canopy perspective it is very hands off for sure, but from a Couche-Tard perspective it is very hands off as well. At the end of the day, they are licensing our brand to an owner operator and we like to think our brand is quite well respected so there isn’t much need to go looking for people willing to leverage it.

CP: Is the long-term strategy here, given that this limited retail rollout in Ontario is temporary, to open Tweed stores that are more directly tied to Canopy and Couche-Tard?

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RK: It is more that we like to take part and be supportive of the industry any way we can. But it is very important for us from the earliest days of the MMPR in 2013 that we do so in a respectful manner that is within the regulations and in the spirit of the regulations. So in provinces such as Newfoundland, Manitoba and Saskatchewan where we can own and operate retail stores, we are really happy to do that and we think we do a great job of it and in a province like Ontario, where the regulations allow us to lend our brand to a local business person we are really happy to do that. But I think it is as simple as that. We just want to take part where we can to make sure the industry succeeds.

CP: Is the idea of corporate-owned Tweed stores, similar to the ones you already have in other provinces, is that still on the table for Ontario should the regulations eventually allow?

RK: For the provinces where they allow private stores we are happy to play in that space and have been quite open about that. For a province like Ontario I defer to the [Alcohol and Gaming Commission of Ontario] and the government of Ontario in terms of what regulations they want to put in place and we will take part based on the regulations that exist.

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