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Canopy Growth prepares for increased cannabis sales come October

Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) announced on Wednesday their receipt of amended licenses from Health Canada, allowing the company to increase in size, nearly doubling their growing capacity in some instances. The news comes one week after Constellation Brands (NYSE:STZ) announced they would inject an additional $4 billion investment into the company.

The new, amended licenses impact Canopy Growth’s facilities in Mirabel, Quebec and Smiths Falls, Ontario, with the Mirabel facility adding on an additional 223,200 square feet to their cultivation site, nearly doubling their grow capacity.

Canopy to expand their headquarters in Hershey

The company headquarters in Smiths Falls will add a distribution center to serve both customers and other cannabis businesses in Canada. Last year,  the company announced the purchase of the Hershey Canada Inc. building which was vacant since 2008. At the time, Canopy noted that the facility could triple their production capabilities due to its size.

"Increasing the scale of our cannabis production capacity is vitally important to our operations," said Bruce Linton, Chairman and CEO of Canopy Growth in a statement at the time. “Almost tripling the footprint of our headquarters means more potential for our business, for the economy of Smiths Falls, and for Tweed's customers."

According to a statement, the addition of a distribution center will allow the company to meet the expected demand for recreational cannabis when it becomes legal this fall. Changes to the Smith Falls facility are part of a larger plan to position the company to serve cannabis business partners and consumers across Canada.

“We’ve been focused on building an industry leading growing, value-add and distribution platform across Canada and today we took steps to make it considerably larger and more sophisticated,” said Canopy Growth President and Co-CEO, Mark Zekulin in a statement about the amended licenses. “The new highly automated Distribution Centre is critical to operating in an efficient and cost-effective manner while meeting the needs of our provincial partners."

Ramping up production for October

It appears that the amended licenses are a signal that the Canadian government expects an increase in the demand for cannabis come October. Canada appears to be taking notes from the mistakes made by states in the U.S. where recreational cannabis is legal. Many states experienced shortages in the market due to confusing and in some cases burdensome regulations.

California’s cannabis market had issues with everything from new testing requirements to high taxes, helping the black market to continue to thrive. Their laboratory testing law hit businesses hard. When the testing law took effect on July 1, businesses across the state had to pull 20 percent of their product that could not meet the state’s contamination standards.

Illegal cannabis businesses have been competitive with the legal businesses. The black market is not bound by regulations and taxes which can make cannabis more affordable to consumers.

Canopy Growth opens its doors to the public

The company is also opening its doors to the public, allowing adults over the age of 19 to view its operations. Using a format that is common in the beer industry, visitors will be allowed to witness production activity at the Smith Falls facility. The facility will open its doors to visitors beginning Aug. 25, under the banner of the Tweed Visitor Centre experience, which is designed to draw tourists to the town of Smiths Falls and company headquarters.

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