Canopy shuts the joint down: Was a dream of industrial cannabis in N.L. just a puff of smoke?

There was something in the air yeah, it was probably what you think, but also a sense of excitement and maybe even a little history when the first retail weed was legally sold in Canada.

News cameras were there in October 2018 to catch the lineup at the Tweed store on Water Street not the type of retailer that the downtown St. John's merchants of decades past would have predicted, but times had changed.

Right after midnight on Oct. 17, time zones made it possible for Tweed and its local competitors to be the first in Canada to start ringing in sales.

Soon after, a ceremonial sod-turning happened in another part of St. John's, as Canopy Growth Tweed is Canopy's retail arm showed it was at the forefront of a newly legal industry.

Canopy made news this week when it pulled the plug on five locations across the country, including a plant in St. John's that it finished building but never opened.

That tired real estate clich location, location, location popped in my mind then when Canopy Growth decided to put a production plant right next to the dump in St. John's.

WATCH | Canopy Growth's decision provoked some strong decisions at the House of Assembly:

Canopy will not open St. John's cannabis production facility

4 years ago

Duration 1:57

Canopy Growth is folding in several provinces, including Newfoundland and Labrador which means the St. John's production facility won't even open its doors. Mark Quinn reports

That being said, the plant was built in the White Hills, an industrially zoned area of the city that is notable for not just waste management and recycling, but also for warehouses and distribution centres that supply. It's also worth noting that Canopy's trucks can drive off the parking lot and straight onto the Trans-Canada Highway.

A lot of big numbers

Canopy, which was building production centres across the country, had some impressive-sounding numbers attached to that plant. It was described as a $55-million project. It would employ 146 people, working on a site with about 150,000 square feet of space. It would pump out 12,000 kilograms a year of dried cannabis.

There was, of course, another number associated with Canopy's plant: 80521.

Specifically,80521 Newfoundland and Labrador.

That is the name of the numbered company that actually owns the land where Canopy built its plant. You may remember that the wholeCanopy narrative how itemerged as the front-runner in commercial cannabis, in general, and how it came to build on a certain location in St. John's, in particular unfolded very quickly a couple of years ago.

Which of course raised eyebrows, at the House of Assembly, where the opposition started asking questions about how exactly the Newfoundland and Labrador government came to be doing business with Canopy, and the numbered company that had the land and the leasing deal.

In December 2018, my colleague Rob Antle reported that while 80521 Newfoundland and Labrador had listed only a lawyer as its initial contact, there was more to it than that. City building permits that he obtained through access-to-information legislation listed this address: Suite 301 at 7 Plank Rd.

The names of people associated with the company were redacted, on grounds of privacy. But that address turns out to be where Dean MacDonald the businessman, Growlers owner and (notably) prominent Liberal supporter happens to run a number of other businesses.

MacDonald, who told CBC that a "cast of thousands [is] operating out of that building" on Plank Road, would not say whether he is actually involved in the company, but did say the numbered company's office is somewhere else.

Crosbiesays'cronies' came out on top

That hasn't stopped opposition politicians from saying that something smells about the deal. Where there was smoke (or a toke), there must be a political fire, the thinking seemed to be.

This week, PC Leader Ches Crosbie was shaking his headand remindingpeople about warnings he made long ago.

"We did a press conference outside the gates of Canopy Growth, and I warned then that the driving force behind the Canopy Growth deal and the government was the desire to fatten the back of Liberal insiders, not jobs and growth at all.

"Now we see the end result. Canopy is shutting up and going into mothballs. The only people to benefit from this is not Newfoundlanders and Labradorians. It's Liberal cronies."

Industry Minister Andrew Parsons says that's nonsense."It's a patently stupid, false statement," he said Thursday outside the legislature.

Parsons emphasized that taxpayers are not on the hook for Canopy's collapse, that $1.9 million owed is being repaid.

"Right now this process has cost us zero dollars. This hasn't cost us a cent," he said. As for Crosbie's claim, he said, "If the province did not pay out one cent, who got it?"

Transparency and market economics

But there are things to wonder about.

First, let's look at transparency and oversight.

There was a time and that would be up until the 1980s when anyone could find out who ran a company in this province. Legislation was changed in the Peckford era that removed the requirement that directors of a company must be identified on documents filed with the Registry of Companies and Deeds.

Journalists, among others, did not like the change: it was just one change of many that made the public's access to information sealed off.

WATCH | See how the first dayof legal recreational cannabis played out:

Cannabis becomes legal in N.L.

6 years ago

Duration 2:13

Some scenes from parts of the province on Oct. 17, as marijuana became legal.

Another question to address was about the size of Canopy's plans. When the plant was announced, it was natural to wonder if the market here was big enough to sustain all the weed that it would produce let alone other companies, too.

While Canopy was confident enough to finish building the place, it was clear, even in pre-pandemic times, that common marketplace factors supply and demand were askew.

"The problem is that there's just so much overcapacity, and that's what Canopy is dealing with here," Brad Poulos, who teaches business at Ryerson University in Toronto, told CBC this week. "They themselves, as well as the industry as a whole, just has an overcapacity problem. So large players like Canopy and Aurora are rationalizing operations."

Don't forget that one of the storylines that quickly emerged when cannabis became legal was about how small, independent players felt they were being squeezed out of a business that was just finding its first feet. (That said, we learned in the summer that the pandemic was actually helping some vendors.)

Also recall that one of the significant policy decisions here was to turn over regulatory decisions tothe Newfoundland and Labrador Liquor Corporation, which as a Crown agency has decades of experience running what is essentially the alcohol monopoly. A number of small players told us they never had a chance with the prices and thus margins that the NLC has set.

Just over two years later, all that hoopla over legal weed has blown away like a puff of smoke. The small ones are struggling. One of the biggest players in the country is struggling. Here in St. John's, as my colleague Mark Quinn put it, "There might be a white elephant in the White Hills."

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