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The town that pot rebuilt
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When the Hershey chocolate factory closed in 2008, Smiths Falls looked like another decaying, post-industrial Ontario town. Then two marijuana entrepreneurs arrived to save the sprawling facility from demolition. Ian Brown reports from what's become the centre of the (legal) pot universe
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By IAN BROWN
  
  

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Saturday, October 13, 2018 – Page B1

The newest social phenomenon in Smiths Falls, the hard-bitten Ontario town that's home to Canopy Growth Corp. - and therefore the centre of the imminently legal cannabis universe - is money shyness.

It's on display tonight at Matty O'Shea's, the most popular bar in town. That man at the end of the bar, for instance; he joined the Tweed Marijuana Company, as Canopy was known at the time, in 2014, just as the company got rolling. His first job was stuffing medical marijuana into pill bottles.

He bought stock options at $3.50 a share. He cashed them this week at $66 apiece. He's now worth between $625,000 and $2.5-million, depending on how many options the company granted him. But he won't say precisely, just as he won't give his name, because he's a workingclass guy in Smiths Falls and doesn't want to make his friends feel bad. He just bought a house - three bedrooms, garage, pool - for less than $200,000, which is something you can still do in Smiths Falls. He loves working for Tweed. (These days, Tweed is the licensed producer and distributor of cannabis; Canopy is the holding company in which shares are traded.) He's 39 years old.

Tweed moved to Smiths Falls in 2013, taking over the town's abandoned Hershey factory.

The plant had been one more tombstone in the cemetery of branch-plant capitalism in Canada.

But with weed about to become legal, Tweed now employs more than 700 people in the old chocolate plant and hires 20 to 30 more every week. All employees get stock options - that is, the chance to buy Canopy shares at a low price and sell them at (hopefully) a higher price within a six-year window.

As a result, there are now a lot of rich folks in town - something Skid Falls (as it used to be known in snooty rival Perth) is definitely not used to. The dream of a wealthy working class! A stirring thought in a time of income disparity! And yet, what is that faint shadow of worry crossing the brow of the man at the bar? What could possibly be the matter?

"I'm worried that I sold too soon," he says. That's the downside of the dream of affluence: its steady hunger. Needless to say, this isn't a problem anyone in Smiths Falls expected to have.

The centre of the cannabis universe is a pretty place - a classic Ontario mill town with ragged industrial edges. The average resident earns $33,776 a year. The median house price is $219,000. The population is almost entirely white and English-speaking. Ottawa's 40 minutes to the north.

The town's new slogan, Rise at the Falls, refers to a) the Rideau Canal, whose locks at Smiths Falls raise the Rideau River 50 feet, and b) the "rise" in fortunes Tweed has brought. The town's new logo, an S under a waterfall, looks like a dollar sign. It seems to be intentional.

Until Tweed came along, Smiths Falls was leftover scrap from the demolition derby known as late-stage globalism.

"We lost about 1,700 jobs in a town of 9,000," Dennis Staples, the mayor at the time, says today. "And it all happened within a four- to five-year period."

When Hershey Canada Inc. dumped Smiths Falls for new digs in Mexico in 2008, 550 people lost their jobs. But Hershey was just the crest of a wave of destruction. The Rideau Regional Centre, an institution for people with developmental disabilities, closed in 2009, and another 830 jobs disappeared. Stanley Tools laid down in 2008, and so did 175 positions; Shorewood Packaging folded 112 more in 2014. There were many others. The Lament of the Layoffs is a catechism long-time residents of Smiths Falls can recite from memory. RCA Victor Ltd., which pressed North America's Beatles records, closed an eon ago, in 1979 (350 jobs), but people still talk as though it happened last week.

The losses had an unsalutary effect on town life. Forced retirement became a way of coping; the average age today is a doddering 44. In 2016 - until Tweed began hiring everyone from farmers to chemists with PhDs - less than 10 per cent of the town had a university degree. Smoking and drinking in the surrounding counties still outpace provincial averages. The local mission serves 30 free lunches a day - 7.3 per cent of the population doesn't have enough to eat, although Smiths Falls is not unique in that. Yes, there are many signs of economic rejuvenation, including Arts & Science, a new Pilates and physiotherapy studio that opened last March. Still, it's next to the Money Shop, one of three pawn shops in the downtown alone. Three is a lot for a town of 8,780. Smiths Falls' transformation is so recent you can still see the ghosts of what was there before.

Bruce Linton and Chuck Rifici partnered up on the Tweed Marijuana Company in March of 2013 after Mr. Linton read in a newspaper that Canada's police chiefs were begging the government for clearer rules on cannabis. Both men had made money in Ottawa's tech boom. And both thought the licensed and regulated production of cannabis was the next big thing.

By late spring, Mr. Rifici was searching for a place to grow the stuff. He almost skipped Smiths Falls' collapsing Hershey hulk. Taking on a huge retrofit before Tweed had a licence was one challenge. He also promised his wife that the new pot factory would be less than an hour's commute from Ottawa.

The drive to Arnprior was only 20 minutes. The future weed kings were on the verge of taking over its 25,000square-foot Playtex factory - imagine that rebranding challenge - when Arnprior's town council got cold feet over zoning. "There was certainly stigma involved," Mr.Rifici recalls.

So Mr. Linton hired a consultant to find local small towns with big empty factories and bylaws that permitted agriculture and fabrication in the same space. Two candidates popped up: Long Sault and Smiths Falls. And Long Sault's building was a pipsqueak.

By late June, as the Harper government proposed to license the production of marijuana, Mr. Rifici was back in Smiths Falls, this time with Mr. Linton. There were so many lawn signs, Mr. Linton thought an election was under way.

They were For Sale signs. But nothing was selling.

The decrepit Hershey plant was owned by Icon International, a corporate barter company that wanted it demolished. Loath to see that happen, Mr. Staples asked the Tweed team to make a pitch to the Smiths Falls town council.

"Dennis had grey hair, a grey suit and was a tall, thin, disciplined-looking accountant," Mr. Linton remembers. "And I'm trying to convince this guy growing marijuana's gonna be a good idea? This is not going to go well."

But the mayor was convinced some town would grow marijuana on an industrial scale - and he wanted it to be Smiths Falls. He was the last councillor to weigh in. He talked about his brother, who had found relief in cannabis while he was dying of cancer. The council vote was a unanimous yes.

Tweed planned to occupy only a quarter of the Hershey plant's 500,000 square feet (which was spread over eight buildings) and promised only 100 jobs. "But 100 jobs was 100 jobs," Mr. Staples remembers. Knowing the building was otherwise slated for demolition, Mr. Linton and Mr.

Rifici and a group of investors were able to buy it for $1.6million. It was a steal.

The ownership group later sold the plant back to Tweed Marijuana for tax purposes, at Mr. Linton's insistence and over Mr. Rifici's objections, for $7-million. By then, relations between the co-founders were fraying. The following year, with his shares worth roughly $20-million, Mr. Rifici was fired by Canopy's board. The two parties are still countersuing each other - a nasty contretemps in which it has been reported that Mr. Rifici borrowed $300,000, secured against his share of the plant, from Chris Saumure and his father, two scions of Smiths Falls who own a construction and development company. According to Canopy, the loan threatened Tweed's control of the plant - and all it would eventually come to represent. Mr. Rifici's countersuit claims it did no such thing.

But that was all to come. In the meantime, Tweed needed $16-million just to start producing medical marijuana - a problem, given that its production licence wouldn't arrive until January, 2014. A licence to sell arrived in May, and the first gram went out the door on the fifth of that month.

The company grazed bankruptcy several times, particularly when the Royal Bank turned up its nose at Tweed's ganja business. "Call it corporate elitism, racism - whatever you want," Mr. Linton says. "It was a scramble. And it wasn't just for money. What about payroll? What about paying suppliers?" Or, to put it another way: What about the town?

At least 700 townspeople attended Tweed's opening.

Still, "it's a rather conservative town," says Leisa Purdon Bell, a curator at the Smiths Falls Heritage House Museum.

"I think that there was a little collective gasp: We're going from the chocolate town to the pot town."

But Mr. Linton saw how much Smiths Falls needed Tweed as he commuted in from Ottawa every morning through the town's bedraggled north end. "When I came in here about five or six years ago," he remembers, "I'd see people taking their kids out to get on their school bus. But the people were still in their pyjamas, with the smoke and the coffee, dressed to go back in the house. Now I see fewer parents like that, and so I see fewer kids coming home to a shit show, because Mum and Dad might be going to a job now." He likes to divide the town into eras: DH (During Hershey), AH (After Hershey) and now DT (During Tweed). "There's like these glacial cuts. If you cut the town, you can see them." Money is transforming Smiths Falls in multiple ways. Money can do that.

Amy Rensby, a former tech consultant in Ottawa, bought a Victorian mansion in Smiths Falls (for $240,000) a month before Hershey closed its doors. "People were losing their houses." Nowadays, prices are up at least 10 per cent, and Park View Homes, a local builder, has resurrected not one, but two new subdivisions. Some $3.5-million worth of building permits were issued in 2015; the total so far this year is $161-million.

"It has been very sudden," Ms. Rensby says. She's now working 70-hour weeks. When she opened C'est Tout, a French bakery and café - on the main drag of workingclass Smiths Falls, no less, complete with $12-a-litre artisanal kombucha - Mr. Linton told her it was a crazier idea than starting a cannabis company. But partly because Mr.

Linton refuses to open a competing cafeteria in the Tweed factory (employees can order from town), her business is up 70 per cent this year. Even the town's traffic is intensifying. When the 7 a.m. Tweed shift heads into work, you sometimes have to wait to cross the road.

Younger and better-educated workers have meant "more innovations, more idea creating." Ms. Rensby sees people jogging and biking - she never used to. This summer, Tweed sponsored Smiths Falls's first Pride parade.

More people turned out to watch than anyone predicted.

"If you had asked me five years ago if Smiths Falls would have a cannabis plant, I would have said: That's a crazy idea," Ms. Rensby says. "And if you said it'll have its own Pride parade, I would have said: You're even crazier."

But the development that best exemplifies the new striving fancy-pants Smiths Falls is Le Boat, a New Yorkbased travel company that leads tours on the great rivers of Europe. This summer, it began to sell week-long selfguided motorized cruises up and down - yes, the Rideau Canal! "The boats are specifically designed" - extra bumpers, stern and bow thrusters - "for people who have no boating experience," explains Lisa McLean, the company's North American marketing manager. "It's kind of like the best of Europe's cruising grounds, in one place." If that seems faintly breathless, that is precisely the mood in Smiths Falls these days: Anything's possible, baby. Ms.

McLean, who has herself happily moved to Smiths Falls, urges all her clients (a third are from Europe) to visit Tweed's new visitor centre. With time and luck, the world will flock to Smiths Falls for weed the way tourists travel to Dublin for Guinness and Vienna for pastries. Next sum-

mer's boat tours are already selling out.

The reception area of Tweed's rapidly expanding Smiths Falls headquarters resembles a very cool high-school cafeteria: pool table, high ceiling, constant music, free coffee bar, communal tables, incessant action. There is no dress code. Employees are free to "medicate at will" in the company's vape rooms, provided they have a prescription and don't drive heavy machinery. Security is relaxed because cameras are everywhere; video footage has been kept for two years. There have been no reported thefts. An apocryphal story is told of a trimmer in one of the company's 16 flowering rooms who shook resin onto his latex glove, then turned it inside out and dropped it into his pocket, only to be apprehended by the time he got to his car. But it is an apocryphal story, as the Tweed public relations people insist.

A huge new addition to the existing plant, slated for "advanced manufacturing," is under construction. Meanwhile, cultivation specialists waft in and out of reception in white lab coats and hair nets like a strange new life form: people having fun at work. The first tour through the new visitor centre last month was a busload of seniors from a retirement home. Tweed hopes to eventually draw 400,000 tourists a year, as Hershey did. The company store sells Tweed clothing and clever books (How to Smoke Pot) and an array of paraphernalia (including $600 vaporizers) and - as of next April, in keeping with Ontario Premier Doug Ford's new rules - actual Tweed weed.

A tour of the plant - the "mom rooms," white and bright like hospital nurseries, the sepulchral clone and vegetative rooms, the darkened flowering cathedrals, trimming and extraction, the teeming encapsulation room (where Tweed's technicians are figuring out how to standardize dosages, which makes cannabis easier for resistant doctors to prescribe - there, that big freezer bag on that dolly rumbling into the vault, that's $11,000 worth of cannabis in 2.5 milligram soft-gel capsules, four of those equal one Colorado gummy bear - a tour of the plant, as someone was saying, is undeniably thrilling but complicated to explain. You feel like Gulliver encountering a New World no civilized being has ever seen before, an entire community devoted to, of all things, cannabis. And yet, you sense the natives are onto something meaningful. The dedicated Constellation room, for instance, is teeming with clever researchers devising new ways to drink cannabis. (Constellation Brands Inc., the U.S. Fortune 500 liquor behemoth that owns Corona beer and Robert Mondavi wine, injected another $5-billion into Canopy last month, earning in return four seats on the board and stock warrants that, if exercised alongside further investment, will give it control of the company. The deal has been given the thumbs-up by shareholders and is awaiting approval from the federal Foreign Investment Review Agency.) Everyone moves with a sense of mission.

What accounts for the camaraderie? At Tweed, says Jordan Sinclair, Canopy's vice-president of communications, "there's a chance you're going to go home very rich. But there's also a chance that you're going to change the world." An early employee, Mr. Sinclair reluctantly admits that, at 36, he has done well enough by the company that he could, theoretically, retire. There's that money shyness again. But he has zero desire to retire. "I like to come to work." His new challenge is "normalizing cannabis around the world. When I travel to other countries" - such as Germany, only now developing a medical marijuana system - "it's like travelling back in a time machine. Canada's great as a training ground for that." In Tweed's preferred narrative, plucky Smiths Falls is the home base of that expansion.

Canopy has led the charge to legalization, capitalizing on investor euphoria all the way. What remains to be seen is how co-chief executives Bruce Linton and Mark Zekulin and their village of enthusiasts manage the day-to-day slog of running a multinational conglomerate. Canopy operates 12 factories and greenhouses in seven provinces and has operations in 12 countries, including the U.S., where this week it became the first company to import Canadian cannabis for research purposes. Canopy has spent $250million on the Smiths Falls crown jewel alone. As of October, the company was worth $14.4-billion on the stock market. Mr. Linton's share is said to be $180-million.

Canopy's revenues, on the other hand, were a teensy $77.9-million in fiscal 2018. And they produced a net loss of $70.4-million. How long can that go on? And what will it do to those employee-motivating stock options?

If you hang around the buzzing reception hall of the Tweed plant long enough, you eventually run into Bruce Linton. He tries to get back to Smiths Falls two days a week, when he isn't travelling and touting Canopy and Tweed.

Short and blond with the build of a farm-fed hockey player, he looks younger than his 53 years. He's pathologically energetic, gets 200 e-mails a day (he has abandoned voicemail) and hardly ever stops talking. Listening to Bruce Linton answer a question is like sitting in a helicopter and watching rush-hour traffic converge on a huge city from every conceivable direction: Your only choice is to wait and hope that one of the cars makes it downtown. He doesn't finish sentences so much as keep starting them until he finds one he can work with. He never stops travelling. On historic Oct. 17 - legalization day - he'll start his day in St. John's, N.L., where Canopy has a big operation, sell the first-ever legal gram of recreational cannabis in Canada (based on the time zone), then hop on a chartered jet to Smiths Falls to celebrate the end of prohibition with his staff and townspeople. Plans to continue on to Toronto for a blowout with cannabis industry pioneers are now under review. Note that Smiths Falls is the centrepiece of the day.

Today, he is granting interviews to The New York Times, NBC, NPR and CNN. To that end, he is wearing a blue tweed sports jacket. It's 30-plus degrees outside, and he's melting, but he knows the value of a brand. The media have always been drawn to yakky Bruce and struggling Smiths Falls.

It's that old underdog dream again, the plain-talking fellow and the hard-working town that finally get their due and strike it rich by breaking the rules. Not that Mr. Linton is so sentimental. "They were curious because it was a taboo topic with an easy access point," he says. "And the easy access point is we just put a ton of pot science in a chocolate factory. You want to understand why the Oompa Loompas are so happy? We'll tell you in a few years" - a reference, of course, to Willy Wonka's tireless workers in Roald Dahl's novel Charlie and the Chocolate Factory.

Lately, Ms. Rensby observes, there has been talk around town that Tweed, too, may one day pull a Hershey and split Smiths Falls. "It's unusual to have any industry stay in a town for any length of time," Mr. Staples, the former mayor, points out. "Twenty-five years would be great."

Twenty-five years is a long time. But a town that has most of its eggs in one basket worries a lot about the basket. The prospect of cheap outdoor cannabis grown in hot countries such as Colombia could threaten Tweed's Canadian margins (although, Mr. Rifici says, not for at least a decade). Constellation Brands, the American giant, may one day care as little for Smiths Falls as Hershey's head office in Pennsylvania did. Inco decimated Sudbury. Massey Ferguson dumped Brantford. The list of betrayals is endless.

Mr. Linton dismisses these fears out of hand. He had to dilute the company's shares and expose it to takeover, he says, so the company (and therefore the town) could expand after Canada's chartered banks snubbed him. As to the distant threat of Tweed leaving Smiths Falls to produce more cheaply elsewhere, "that pattern does occur. But the fly in the ointment on this topic is the United Nations narcotic control act." The treaty ensures that each country can protect itself, and thus its own production of cannabis, from imports. Mr. Linton insists the UN treaty won't be abandoned in his lifetime.

As prudent as it may be to consider him a potential traitor to the town because he's a capitalist running a public company, the reality is that he cares more about Smiths Falls than a hard-nosed bottom-line CEO probably should.

He's thinking of buying two properties downtown - one of which would become a much-needed first-class hotel.

He backs the town's Santa Claus parade. Tweed's local charity golf tournament raised more than $240,000 this year; last year, $25,000 went to the local Big Brothers Big Sisters organization - surreptitiously, so no one could accuse the weed company of trying to convert kids. (Even so, the organization's board debated the issue for months.) He's spending $50,000 on a 400-foot mural for the outside wall of his weed factory, but instructed the Toronto-based artists to give it "the texture of Smiths Falls." The company has a Thanksgiver program - free turkey in return for food bank donations - and used to do something called Frydays, born of Mr. Linton's love of takeout Chinese food. (It goes without saying that there are three ChineseCanadian restaurants in Smiths Falls.) "But then it became chaotic. You start trying to order Friday lunch for 200 people." He is nothing if not a pragmatist. He spends every penny he can in Smiths Falls. He even patronizes Mr.

Moustache, the local barber, which may explain his protomullet.

"I worry about everything about the town," he says, shortly before heading home to his wife and kids for the first time in three days. "I worry about, like, everybody here. When they go home. Who's paying for the gas in their car. Who's paying for their house. So you want to make sure you're doing this right in the beginning."

Alas, now that legalized weed is a fact in Canada, Mr.

Linton admits he will have to spend more time overseas, spreading Canopy's and Canada's cannabis footprint.

Meanwhile, the weed business is becoming ferociously competitive, and easy money is harder to find. At Tweed, the romance of hyping cannabis will yield to more mundane managerial issues. You will remember that Willy Wonka had to learn, in the course of Mr. Dahl's story, to care more about people and less about his magical product. Now that Mr. Linton has turned his personal touch to the rest of the world, Tweed - and therefore the town of Smiths Falls - may have the opposite problem.

Associated Graphic

A worker stands in front of cannabis plants at Tweed, a licensed producer and distributor of marijuana, in Smiths Falls, Ont., in September. PHOTOS BY FRED LUM/THE GLOBE AND MAIL

A worker operates a machine among storage containers at Tweed. At the company's rapidly-expanding Smiths Falls headquarters, employees are free to 'medicate at will' in the company's vape rooms, provided they have a prescription and don't drive heavy machinery.

Trucks park in front of an area of Smiths Falls where new housing development is taking place. The once-stagnant Smiths Falls economy has been rejuvenated by the jobs Tweed has brought to the town.

Canopy's chief executive officer Bruce Linton, seen at Tweed's visitor centre, has said now that marijuana is legalized, he will have to spend more time overseas, spreading Canopy's and Canada's cannabis footprint.


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