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Sept. 10, 2019, 7:15 a.m. EDT

Canopy Growth’s remaining CEO talks about pot company’s shake-up, and the search for his replacement

Former co-CEO Bruce Linton’s termination was ‘abrupt change’ resulting from ‘personalities not seeing eye to eye,’ Zekulin says

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By Max A. Cherney


Canopy Growth
Canopy Growth Chief Executive Mark Zekulin says he will figure out what is next after hiring his replacement and taking “a little bit of beach time.”

TORONTO — Until very recently, Canopy Growth Corp. Chief Executive Mark Zekulin rarely spoke to the news media, relying on boisterous co-CEO Bruce Linton to spread the company’s message and communicate with shareholders.

Canopy’s /zigman2/quotes/200603886/composite CGC +5.22%   /zigman2/quotes/202205609/delayed CA:WEED +4.96%  board, controlled by Constellation Brands Inc. /zigman2/quotes/207737284/composite STZ -0.60%  after its $4 billion investment in the cannabis company, fired Linton over the summer, however. Now, Zekulin is forced to run the largest pot company in the world by himself — and conduct a search for his eventual replacement, as he plans to step down once a new CEO is found.

MarketWatch recently sat down with Zekulin briefly at a cannabis trade show in Toronto to discuss some of the changes at the company and what Linton’s departure means for the future. This interview has been edited for clarity and length.

MarketWatch: Since the board voted to terminate Linton, how have you adapted both in terms of daily responsibilities and also managing around the loss of an important executive?

Mark Zekulin: I’m going to try and separate the two issues. What’s happening at Canopy — we’ve never been in a better spot, right? We’ve been doing this work for five years, building our infrastructure, building a property, building the team to execute. And we’re seeing that now, using the Canadian construction as an example, where [there’s been] 70 months of construction with four months left. So we’re seeing that now shift in Canada, from that building mode, and really being able to focus on operation and execution. That also gives us the platform to launch ‘build mode’ in other places. So leadership transition aside, this was sort of the natural progression of what was happening, the natural progression of all of that work over those years, and that would have been happening, regardless.

On the leadership side, there are some excellent candidates, and I’m frankly very excited to see that next, you know, caliber of people come in. But it’s not about Bruce, it’s not about Mark and as excited as we are about the next CEO, it’s not even about that person, right? It is about the fact that we built a company of 4,000 people who all believe in a culture, a mission, that there is a multi-hundred-billion-dollar opportunity to seize. And that commitment, that team, that structure existed yesterday, it exists today, and will exist tomorrow.

MW: When can investors expect Canopy to select a new CEO?

Zekulin: A matter of months. We’re going to take the time to make sure it’s the right candidate. I hope it’s one of the first 10 that we whittle down from the 200 we’ve gotten from the recruitment firm. But if it’s not, we’ll keep going.

MW: Did it surprise you when the Canopy board voted to remove Linton as co-CEO, and how much did you and he anticipate that as a potential risk in terms of taking Constellation’s investment dollars?

Zekulin: I would certainly say it was an abrupt change. And, you know, was ultimately the result of personalities not seeing eye to eye, and that just didn’t happen one day, you can see that. But nonetheless abrupt.

What’s happening now is the natural progression of what the company was going to be doing. The knowledge and expertise that a company like Constellation brings in helps us do that all the quicker.

Previously: Canopy Growth’s quiet co-CEO on the pot company’s ambitions in the U.S. and more

MW: How has Linton’s departure changed the day-to-day operations at Canopy?

Zekulin: Not a lot. From the operation of the company, which I was already largely doing — what has happened is that Rade Kovacevic, who has always been my No. 2 guy, has stepped up and taken the role of president and therefore has managed to take on more things from me individually. As we think about, for example, international operations and expansion, which then frees up some of my time to do things like interact with the board and other stakeholders. The core remains intact. There’s a little bit less over here, which Rade can fill in, and a little bit more over here, which Bruce used to do.

MW: How will the eventual CEO change affect Canopy’s ability to get edible products onto the shelves in December, when they are first allowed by the Canadian government?

Zekulin: So the short answer is absolutely not at all. We have a large team in place. We have leadership in every single region, we have leadership on the recreational side, on the medical side, on the animal-health side. We have dedicated people whose sole jobs are to bring new edibles to market. That’s the research-and-development side, that’s the vape side — whether that’s the logistics and distribution. That is going to continue completely without any impact of the CEO change.

MW: To what extent are provinces and private retailers prepared for the launch of edible products, vaporizers and other new forms of cannabis in December? Is Canopy prepared?

Zekulin: They are definitely thinking about it, they are definitely preparing. And we’re preparing. One of the best decisions we made early on, at the original launch of recreational cannabis, was to build our own distribution center and build our own logistics team and have partnerships with [companies] like Brink’s.

Every province will be different, but I’m not concerned that, at the wholesale level, they’ll be unable to get products onto the shelves. The timing issue is really — the earliest we can sell those products is Dec. 16. So if you just start to do logistics during the holiday season, I think there’ll be some products on shelf in some places for Christmas and New Year’s, but really just the sheer logistical nature of it, will mean January when you have that full presence. There will be some sales in December, but the [March quarter] for us will be when you really see value-add products come to market, and hopefully as well, more and more stores come online.

See also: The $4 billion time bomb ticking away inside the biggest marijuana companies

MW: Canopy Growth has made a substantial bet on Acreage Holdings Inc. /zigman2/quotes/205165963/delayed ACRGF +2.01% , buying the right to acquire the U.S. operator if regulations in America loosen. What’s it like to work with Acreage CEO Kevin Murphy?

Zekulin: Kevin, you’d have to call him the early visionary of the U.S. market. I mean, what he managed to put together in a reasonably short period of time is incredible, right? So he has that vision, he has that depth of knowledge. And we do interact regularly. Now, at the end of the day, we are two separate companies running two separate businesses, and we’re not merged. We’re not together. But as you say, there is there is an intellectual-property agreement where we’re giving him the resources to execute on our intellectual property. And that happens at different levels of the company. But you know, it's a fantastic relationship. We’re blessed to have him as a partner in that country.

MW: What are your plans after you complete your duties at Canopy?

Zekulin: So truthfully, I’m not thinking about that yet. I’m focused on the big job right now and then focused on a little bit of beach time. And with that clear mind I’ll be able to think about the next step.

/zigman2/quotes/200603886/composite
US : U.S.: NYSE
$ 20.76
+1.03 +5.22%
Volume: 7.01M
Oct. 17, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$6.86 billion
Rev. per Employee
$115,039
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/zigman2/quotes/202205609/delayed
CA : Canada: Toronto
$ 27.31
+1.29 +4.96%
Volume: 1.74M
Oct. 17, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.05 billion
Rev. per Employee
$150,142
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/zigman2/quotes/207737284/composite
US : U.S.: NYSE
$ 197.29
-1.19 -0.60%
Volume: 984,194
Oct. 17, 2019 6:30p
P/E Ratio
51.16
Dividend Yield
1.52%
Market Cap
$37.57 billion
Rev. per Employee
$842,260
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/zigman2/quotes/205165963/delayed
US : U.S.: OTC
$ 6.08
+0.12 +2.01%
Volume: 146,364
Oct. 17, 2019 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.00 billion
Rev. per Employee
N/A
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Max A. Cherney is a MarketWatch reporter based in San Francisco. Follow him on Twitter @chernandburn.

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