By Christopher Curtis / Montreal Gazette

Adam Greenblatt of Canopy Growth Corporation in Smiths Falls, Ont., is spearheading expansion of Tweed-brand marijuana into Quebec. Dave Sidaway / Montreal Gazette

SMITHS FALLS, Ont. — The journey to the centre of Canada’s marijuana economy begins on a stretch of country road in eastern Ontario.

It weaves through a patchwork of cornfields and hamlets before settling in Smiths Falls — a town that boasts a stone mill, a Lion’s Club that meets every second Thursday and a factory that grows cannabis by the tonne.

The building on Hershey Dr. looks barren. Weeds sprout between cracks in the asphalt parking lot and its stucco walls betray a painfully dated style of architecture.

For nearly over 40 years, this place manufactured enough Hershey’s Kisses to crown Smiths Falls the “Chocolate Capital of Ontario.” But in 2007, Hershey laid off 600 workers, shuttered the factory and moved it to Mexico.

Today, the plant is home to the Canopy Growth Corporation and its Tweed brand of medical marijuana.

There’s an element of absurdist humour to this: The place that once churned out untold crates of Reese’s Pieces now grows medical marijuana strains with names like Lemon Skunk and Boaty McBoatface.

“The joke never gets old,” says Adam Greenblatt, who’s spearheading Tweed’s expansion into Quebec. “They used to make munchies here and now we induce them.”

Here’s where the joke ends.

Founder and CEO Bruce Linton is guiding Canopy Growth on an aggressive campaign that will pour millions into new labour and construction costs. Darren Brown / Ottawa Citizen

Last week, shares in Canopy Growth were trading at $12.69 on the Toronto Stock Exchange, up from $3.15 last July.

Since November, the company has swallowed competitors in Quebec and Ontario in a pair of deals worth an estimated $430 million. As it stands, Canopy is valued at $1.6 billion — making it the most lucrative marijuana operation in Canada.

Now the company wants to break into the largely untapped Quebec market. Last fall, Canopy bought a 90-acre farm outside Drummondville, and Greenblatt is hustling to get more doctors and patients on board with Health Canada’s medical marijuana program.

Last month, CEO Bruce Linton announced Canopy will triple its production in short order. Linton, who founded the company four years ago, is guiding it on an aggressive campaign that will pour millions into new labour and construction costs.

He isn’t alone. Competitors like Aphria and Aurora Cannabis are also injecting cash into expansion projects that one market expert has dubbed “the great marijuana arms race.”

This strategy isn’t without its risks.

Canopy’s frenetic growth is outpacing the demand for medical cannabis in Canada. It already supplies about one-third of the medical space but the end game is for the company to accommodate something much bigger — a national, legal recreational market.

The Liberal government is to introduce legislation to legalize recreational marijuana this year, and it may take until 2018 before a new law is on the books. A study by the Deloitte auditing firm pegs the size of an eventual recreational market at more than $22 billion a year.

However, there are hurdles ahead. One is the Senate, where the Conservatives hold a majority and must sign off on the bill.

Even so, Canopy welcomes the challenge.

“We’ve overcome longer odds,” Linton said. “I think this is our moment, I think we’re on the cusp of something big.”

Marijuana plants at the Canopy Growth facility in Smiths Falls, Ont. Dave Sidaway / Montreal Gazette

Greenblatt has a sort of slacker-chic esthetic to him.

The 32-year-old sports a short but unkempt crop of hair and his jawline suggests he’s either trying to grow a beard or hasn’t bothered to shave in weeks. He wears a jacket, button shirt and Oxford-shoe combination but still looks like he just rolled out of bed.

Greenblatt carries this juxtaposition with him in conversation.

He’ll rattle off sections of the Criminal Code and quote a line from Seinfeld in the same breath — “That’s gold, Jerry! Gold!” is a common refrain.

This duality is also at the centre of his work.

Greenblatt meets with doctors, lawmakers and the business community in Quebec with the aim of growing Tweed’s foothold in the province.

At the same time, he is trying to reach into the province’s underground network of medical marijuana users and draw them into the legal system.

“Quebec is sort of an enigma,” he said. “You’ve got some of the highest rates of marijuana use in the country and some of the lowest participation in the legal system.

“It’s an untapped market and one with so much potential. But there’s also a really strong underground economy of growers and dealers who work outside the system.”

The numbers support his claim. More than 100,000 patients buy medical cannabis through the Health Canada-approved system, but only about 3,000 live in Quebec.

Likewise, there are 38 licensed producers of medical marijuana across that country, but just one in the province — the Hydropothecary farm near Gatineau.

Greenblatt knows about Quebec’s black market because he was once immersed in it. He used to grow pot out of a duplex in Montreal, supplying a dispensary that operated “outside” the Health Canada program.

His customers, he says, suffered from chronic pain, degenerative nerve conditions and a variety of ailments for which they received a doctor’s prescription to use marijuana.

They dipped into the “grey market,” he says, because the Health Canada program was too cumbersome at the time. Patients had to get a license to grow their own weed, or order cannabis from one of the few government-approved producers.

“I won’t hide from my past,” Greenblatt said. “I’m proud of my roots as an activist and someone who fought for patients rights.

“The fact is, many of the people who work (for Canopy Growth) come from that world. The industry needs expertise, and where else is it going to come from? It comes from people who worked in the shadows.”

The dispensary system continues to thrive in Canada’s major urban centres. More than 500,000 Canadians use medical cannabis, according to Health Canada. But only one-fifth participate in the government’s program, which requires people to mail-order their cannabis from a licensed producer.

The majority of patients, then, are either growing their own marijuana, buying it off a dealer or going to an illegal storefront — despite the existence of a legal marketplace.

In 2013, Health Canada began licensing dozens of growers who could sell their product through the government-regulated program, bringing variety and quality into the fold. Many patients, though, see no clear incentive to buy into the system.

For one thing, the cost of medical marijuana is not covered by public health care or private insurance providers. Users pay out of pocket, and prices are generally comparable (though federal sales tax applies under the government plan).

There have also been issues with a breakdown in the supply chain with the government program. Last year’s labour dispute at Canada Post stalled delivery of cannabis to thousands of patients across the country.

Whatever the reasons, many patients remain loyal to the black market, and keep their prescriptions only as a protection against arrest if ever they are found to be in possession of marijuana.

Marijuana plants at the Canopy Growth facility. The company says quality control is one of the main advantages of the legal economy over the black market. Dave Sidaway / Montreal Gazette

“A lot of patients have a connection to their local dispensary that began years before the current system was in place,” noted Marc-Boris St-Maurice, who founded Montreal’s first dispensary in 2000.

“We were arrested, our product was seized, we went to court and spent a small fortune to fight for legal access to medical marijuana.”

In a way, the Health Canada program exists because of people like St-Maurice. Dispensary owners acted as a go-between for patients with a legitimate need for pot and growers in the criminal underground. The police raids of dispensaries and subsequent court appeals paved the way for the first laws codifying access to medical cannabis, in 2001.

The new federal program, in which patients deal directly with suppliers, leaves dispensaries out in the cold — at least in theory.

Certainly the program has made big strides. In 2016, it nearly tripled the number of patients on its rolls. Still, Health Canada data suggest the black market remains a major source of medical cannabis, with hundreds of thousands of patients using illicit means to get their medicine.

One reason might be that it’s more efficient that way.

“People assume that the strength of criminal operations in Quebec is that they dominate the drug trade through intimidation and violence (of rival dealers),” said one source, who once managed marijuana grow houses for the Hells Angels. “Yes, the implication of violence and outright violence is sort of the glue that holds everything together. There’s no denying that.

“But above all else, the bikers oversee an efficient system with regulated prices, a near limitless supply of weed and distribution channels that reach into every corner of the province.

“Everybody knows a dealer they can text, every dealer has a supplier, and every supplier has a network of grow operations they can tap into. Most people can have weed delivered to their house within minutes of sending a text message.

“That’s what the government is competing with.”

Health Canada data suggest the black market remains a major source of medical cannabis, with hundreds of thousands of patients using illicit means to get their medicine. Dave Sidaway / Montreal Gazette

Despite its gruff exterior, the Smiths Falls factory is a far cry from the ramshackle grow ops that feed the black market.

Gaining access to the facility is like walking into Batman’s lair. Visitors pass through a labyrinth of security cameras, bolt-locked doors and checkpoints before arriving at the factory entrance.

From there, a steel door will open only if an employee with security clearance presses their thumb on a biometric scanner and swipes a pass-key.

Within the factory, there are additional layers designed to protect Canopy’s cash crop. The finished product is stored in vacuum-sealed bags and locked behind a stainless steel vault with doors thick enough to withstand an explosion.

The vault can hold upwards of $150 million in product.

Access to the flowering rooms is also tightly monitored. That space — a climate-controlled room where buds the size of a child’s fist sprout from hundreds of plants — is off limits for most workers.

“The flowering process, that’s where so many of the disease vectors can get into the plants,” said Jordan Sinclair, Tweed’s communications manager. “This process is designed to make it nearly impossible for the product to get contaminated.”

Employees wear white coveralls and hairnets, and sanitize their hands every time they enter the facility. This, Greenblatt argues, is one of the main advantages of the legal economy over the black market.

“There are growers who use space heaters and fans to dry their weed. You have trimmers who work at (an illegal) grow house and they’ll be cutting the buds, go to the bathroom and forget to wash their hands before they get back to work,” Greenblatt said.

“That’s how rot sets in. Some people I know speak of smelling Windex on their pot. But I tell them their dealer isn’t spraying cleaner onto the pot; that’s the smell of ammonia.”

Health Canada data suggest the black market remains a major source of medical cannabis, with hundreds of thousands of patients using illicit means to get their medicine. Dave Sidaway / Montreal Gazette

Despite its gruff exterior, the Smiths Falls factory is a far cry from the ramshackle grow ops that feed the black market.

Gaining access to the facility is like walking into Batman’s lair. Visitors pass through a labyrinth of security cameras, bolt-locked doors and checkpoints before arriving at the factory entrance.

From there, a steel door will open only if an employee with security clearance presses their thumb on a biometric scanner and swipes a pass-key.

Within the factory, there are additional layers designed to protect Canopy’s cash crop. The finished product is stored in vacuum-sealed bags and locked behind a stainless steel vault with doors thick enough to withstand an explosion.

The vault can hold upwards of $150 million in product.

Access to the flowering rooms is also tightly monitored. That space — a climate-controlled room where buds the size of a child’s fist sprout from hundreds of plants — is off limits for most workers.

“The flowering process, that’s where so many of the disease vectors can get into the plants,” said Jordan Sinclair, Tweed’s communications manager. “This process is designed to make it nearly impossible for the product to get contaminated.”

Employees wear white coveralls and hairnets, and sanitize their hands every time they enter the facility. This, Greenblatt argues, is one of the main advantages of the legal economy over the black market.

“There are growers who use space heaters and fans to dry their weed. You have trimmers who work at (an illegal) grow house and they’ll be cutting the buds, go to the bathroom and forget to wash their hands before they get back to work,” Greenblatt said.

“That’s how rot sets in. Some people I know speak of smelling Windex on their pot. But I tell them their dealer isn’t spraying cleaner onto the pot; that’s the smell of ammonia.”

In January, the 26 most valuable marijuana stocks on the TSE had a combined worth of $3 billion. Dave Sidaway / Montreal Gazette

As it stands, patients are on pace to buy a little over 24 tonnes of dried cannabis through Health Canada this financial year, according to its market data. In other words, the companies are planning for something more than 10 times bigger than the current market.

For this strategy to pan out, the Liberal government’s plan to legalize recreational pot can’t come quickly enough, Damas says.

“Canopy is a good business — it’s well run, it has a clear strategy and, with Tweed, a brand that people connect with,” Damas said. “I mean, they have an exclusive deal to distribute Snoop Dogg’s brand of marijuana in Canada. They’re going to stand out and these sorts of things will help them emerge as a big player in the recreational market.

“But no one — not the smartest CEO or the best sales force — is immune to the laws of supply and demand. So when I see all of these companies raising millions to expand their business — and when I see their stock prices soaring based solely on speculation — that’s something that worries me.”

Ken Lester, a business professor at McGill University and president of Lester Asset Management, has been following the frenetic run on marijuana stocks, and says we can look to the past for hints about what may be in store for the industry.

“You look at the rise of the automobile in the early 1900s. At the beginning you had something like 102 car companies. Within a few years that number was down to three.

“Look at computers. In the 1980s there must have been 200 companies manufacturing computers. By 2005, it was down to a handful.

“So what you’re seeing now — the easy profits, the speculation, the gold rush mentality — most companies won’t emerge from this unscathed. In the end, it will likely be Canopy and a handful of others left standing.”

There are other potential setbacks for these emerging giants.

Damas cautions that the workers who grow, trim and harvest marijuana may see the billion-dollar valuations within the industry and begin to demand concessions from their employers.

Sure enough, the 50 employees at MedReleaf in Markham, Ont., are fighting for the right to unionize in a legal battle before Ontario’s Agriculture, Food and Rural Affairs Appeal Tribunal.

In January, the 26 most valuable marijuana stocks on the TSE had a combined worth of $3 billion. Dave Sidaway / Montreal Gazette

As it stands, patients are on pace to buy a little over 24 tonnes of dried cannabis through Health Canada this financial year, according to its market data. In other words, the companies are planning for something more than 10 times bigger than the current market.

For this strategy to pan out, the Liberal government’s plan to legalize recreational pot can’t come quickly enough, Damas says.

“Canopy is a good business — it’s well run, it has a clear strategy and, with Tweed, a brand that people connect with,” Damas said. “I mean, they have an exclusive deal to distribute Snoop Dogg’s brand of marijuana in Canada. They’re going to stand out and these sorts of things will help them emerge as a big player in the recreational market.

“But no one — not the smartest CEO or the best sales force — is immune to the laws of supply and demand. So when I see all of these companies raising millions to expand their business — and when I see their stock prices soaring based solely on speculation — that’s something that worries me.”

Ken Lester, a business professor at McGill University and president of Lester Asset Management, has been following the frenetic run on marijuana stocks, and says we can look to the past for hints about what may be in store for the industry.

“You look at the rise of the automobile in the early 1900s. At the beginning you had something like 102 car companies. Within a few years that number was down to three.

“Look at computers. In the 1980s there must have been 200 companies manufacturing computers. By 2005, it was down to a handful.

“So what you’re seeing now — the easy profits, the speculation, the gold rush mentality — most companies won’t emerge from this unscathed. In the end, it will likely be Canopy and a handful of others left standing.”

There are other potential setbacks for these emerging giants.

Damas cautions that the workers who grow, trim and harvest marijuana may see the billion-dollar valuations within the industry and begin to demand concessions from their employers.

Sure enough, the 50 employees at MedReleaf in Markham, Ont., are fighting for the right to unionize in a legal battle before Ontario’s Agriculture, Food and Rural Affairs Appeal Tribunal.