From time to time in business, you witness an epic story filled with ups and downs, wins and losses, heartbreak and elation; the construction and now full licensing of Zenabis Atholville is one of these stories.
I am probably not the right person to tell this story. I showed up years into it, I am not a member of the community, and I never swung a hammer or turned a wrench, but I am going to do my best.
In 1998, the Province of New Brunswick chose to assist with the financing of the construction of a yarn factory in the community of Atholville, NB. Over the course of the next 21 years, the province invested $37.3 million in the form of grants and loans into the project before the company declared bankruptcy in 2009. The result was an incredibly sturdy, well-built facility with no capacity for economic success.
I was not there to observe what caused the failure of the facility, but, by October 2009, the company moved to liquidate all assets and ownership of the facility turned back over to the Village of Atholville, ultimately leaving the facility devoid of activity. The hopes of the community, for employment and for economic recovery, had been dashed.
In late 2013, Mark Catroppa, one of the Co-Founders of Zenabis, was looking across Canada for a large, empty, inexpensive warehouse in which to grow cannabis. He eventually stumbled upon the facility in Atholville when searching for commercial properties on the internet. Mark did not get on a plane to visit the building. Instead, he made a call to make an offer to buy the property. Within a few weeks, the offer was accepted, and Zenabis owned the building in Atholville.
Mark and Kevin Coft (another Co-Founder) then got on a plane to Atholville. The community rolled out the red carpet, and it was not just Atholville itself: the mayors and leaders from more than ten communities were there to greet Mark and his Co-Founders when they first arrived in January 2014. The community was supportive of this team of entrepreneurs who were arriving from British Columbia to build jobs in, of all things, the cultivation of cannabis. It was at this time that Mark moved his family from White Rock, BC, to Atholville, NB, to get the project started. Mark knew that out of this abandoned yarn factory the team could build a state-of-the-art facility that would one day become the crown jewel of Zenabis.
It was not just the local community who wanted to provide support: The Northern New Brunswick Economic Development Fund, through both Opportunities New Brunswick and the Regional Development Corporation, offered Zenabis an additional $4 million towards the build out of the facility. Within months, the Province of New Brunswick was a lender to Zenabis, and they had even included an option to convert their debt into equity in the future.
Soon after, the Listuguj Miꞌgmaq First Nation of Quebec, just across the Restigouche River from Atholville, called Zenabis and offered to provide more capital. Chief Darcy, the forward-thinking head of the Listuguj community, could sense an opportunity and he wanted to ensure his community participated. On September 8th, 2016, Zenabis announced their partnership with the province of New Brunswick and the Listuguj community, as well as the start of construction at the Zenabis Atholville facility. Further support from the local first nations community followed soon after, with Chief Bob Gloade and the Millbrook Nation offering additional support following an introduction from Chief Darcy.
Almost Immediately upon the purchase of the building, an application to become a Licensed Producer of cannabis was completed and submitted to Health Canada. The Co-Founders initially put construction of the Atholville site on hold, wanting to wait until the license application had progressed to the final stages. However, Health Canada’s licensing application process was, at the time, long and challenging, requiring many months of waiting for RFIs (requests for more information), and there were numerous hurdles to pass in terms of quality assurance and security clearances.
In late 2015, our perseverance with the application process began to pay off, as Zenabis’ applications for both our Delta facility in British Columbia and our Atholville facility had reached the final stages of the process, and had met all the requirements of Health Canada’s legislative requirements. As quickly as possible, we commenced construction Delta (March 2016) and Atholville (May 2016).
In April of 2016, Kevin Coft moved to Atholville to initiate the construction project while concurrently managing the licensing and site evidence packages for both facilities. Our Delta Facility received its license with Health Canada in June 2017 and our Atholville Facility was licensed in August 2017.
I first met Kevin, Scott Coft, and May Nazair on the ground in Atholville in October of 2018. As part of the negotiation of the transaction to combine Bevo and Sun Pharm to create Zenabis Global, the management team from both companies had agreed that we would pursue the most aggressive possible schedule for completion of the facility. Originally, the plan had been to complete Zenabis Atholville by March 2022, but now we had set the ambitious timeline of June 2020.
Late on a snowy night, we arrived at the Charlo airport and were packed into vans and pickup trucks to head into Campbellton, just outside of Atholville. Driving one of those pickup trucks was Kevin Coft. At the facility the next day, Kevin and Scott gave us a tour of the facility. There were four complete, operating flower rooms, and then a massive, cavernous warehouse. It was not just an empty warehouse: it was a warehouse full of people engaged in the demolition of the original HVAC system from the yarn factory. But aside from what was operating, it appeared to simply be a mess. But Kevin and Scott had a vision, and if you listened closely, followed their hand movements, and used your imagination, you could see how this warehouse could end up being a cannabis cultivation facility.
I sat with Kevin and Scott, and they presented their timeline for completion. I told them it should be faster. They told me that the current plan was nearly impossible. I told them it should be faster. The exchanges were heated. We agreed to disagree, but their passion was evident: they were committed to completing this project.
When I took over as CEO of Zenabis on January 21, 2019, I commenced daily morning calls, separately, with the entire senior leadership team. Every morning would start the same way:
“Good morning, Sir!” Kevin would say in an upbeat voice.
“How is it going today Kevin?”
“Well, to be honest, it’s tough.”
Nearly every day was a struggle. It was not easy to take a project that should have taken two years and compress it into nine months. It was not easy to run the largest private-sector construction project at the time in New Brunswick. It was not easy to do all of that while also ramping up production.
Kevin never came to me with problems, though. Instead, he always came with an already-devised solution. When there was a flood, Kevin told me his cleanup plan. When there was a power problem, Kevin told me his backup generation solution. When there was a contractor problem, Kevin told me nothing, because he already had a backup plan.
Kevin describes himself as thrifty and insensitive. I describe him as tough-as-nails but compassionate. Kevin cares about his team, his family, and his community.
While Kevin and Scott were building the facility, May, our Director of Compliance and Regulatory Affairs, was following behind ensuring we received our license amendments. I put a lot of pressure on May: “May, we need the turnaround time to be within four weeks on this license. Everyone in the company is counting on you. We believe in you. Make it happen.” A lot of pressure is an understatement. I put an unreasonable amount of pressure on May, and she always delivered.
As a result of the work of Kevin, Scott, May, and so many others, by the end of July 2019 the facility was complete, and on Friday the 20th of September 2019, we received our final licensing amendment. In less than a year, we had gone from four flower rooms to 40. Kevin lived in Atholville from April 2016 to September 2019. He left only days before final licensing, knowing that it was inevitable, and finally returned home to Vancouver. Kevin was, and is, a loyal soldier.
I have participated in a lot of construction projects, both large and small. When I worked on the Port Mann Highway 1 project in 2007-2008, the end result was a bridge. When I drive across that bridge, I think back to the long hours spent working on the project, and I smile to myself, because I was there at the beginning. The key thing, though, is that there is a bridge for me to cross. For our facility in Atholville, it is different. The proof is in what we grow.
The first harvest in Atholville was completed in March 2018. At that time, we harvested 55 kg of dried cannabis flower. Six months later, in September 2018, we harvested 94 kg of dried cannabis from the same room, nearly doubling our production. Six months later, in March of 2019, we harvested 518 kg from three rooms, increasing our production by more than five-fold from September of 2018. And by August, we harvested more than 1,900 kg, increasing production by a multiple of four, again over less than six months. By December of this year, this facility is expected to be at steady-state operations, and we expect to be harvesting approximately 4,000 kg of cannabis a month on a continuous basis.
That means that our facility works. You can buy cannabis from this facility in nine provinces and one territory. How well does this facility work? Well, if every half gram of cannabis is one serving for an individual (of course, this varies from person to person), then this facility should generate nearly 93 million servings of cannabis next year, or three servings per adult Canadian. I would be ecstatic if every adult Canadian consumed three servings of cannabis from here in Atholville next year, but sadly, we will have to export some to Europe. Sorry, everyone!
So, if you cannot drive across a bridge, how do you know our facility works? I think you know the answer, and, unless you are in Newfoundland, there should be a cannabis store near you that can prove it.
Over the course of the past ten years, small town New Brunswick, Atholville included, has suffered numerous industry closures and job losses which significantly impacted the local economy. When Zenabis first announced the acquisition of a facility for cannabis production, the local community, municipal bodies, and provincial government opened their doors and their hearts to the company. Zenabis equally recognized the value of building strong relationships and partnerships with the town, regional and provincial governments, and its inhabitants.
These ties not only helped build the enterprise, but also continued to strengthen the local economy. In addition to the support received from the provincial government, a partnership was established with the local community college on the development of a 20-week cannabis cultivation course, where students receive the opportunity to complete their work placement at the Atholville facility to apply their learning.
The course is currently offering its 5th session, and we have since hired many of the graduates, some of whom have moved into roles of greater responsibility and leadership within the company.
These partnership efforts are undertaken with a dual focus on both what is best for the company as well as what is best for communities, like Atholville, which can benefit from the positive economic impact of legalized cannabis. Zenabis has had a tangible positive impact on the local economy in that we have hired over 400 employees over the past three years. While we have also attracted certain individuals from outside of northern New Brunswick who have specific required skills and experience, the majority of our employees are from the surrounding region and include many who had originally moved elsewhere for work. These individuals are now able to return to their hometowns with the prospect of meaningful employment opportunities and career development.
Another positive impact, though not as immediately recognizable, is the number of homes being sold, new restaurants opening, schools opening additional classrooms to accommodate the increased number of children, and, for the first time in 20 years, there is a traffic jam on the main street in downtown Campbellton during lunch hour. In fact, the area’s unemployment rate fell from 17.1% in 2014 to 12.1% in July 2019. All of this, in turn, suggests higher spending per capita, and more revenue coming back to local governments.
While Atholville is now fully licensed, the story is not over. By December of this year, we expect the facility to be in steady-state operations and producing a consistent yield every month. By that time, we also expect to have our new, expanded extraction capacity operating, which means we also expect to be providing new, innovative products. While there will be challenges in the future, we do not expect them to be similar to the challenges faced along the way. We expect our facility to be a part of this community for as long as there is a demand for cannabis in Canada, and we see no reason why that would ever go away. We are incredibly grateful for the support we have received from the community and the province, and we look forward to being here for a long time.
Chief Executive Officer