Unless labor agreements are reached, Canadian National Railway and Canadian Pacific Kansas City—which hold a duopoly – plan to indefinitely halt operations on Thursday at the same time, marking a first.

Canada relies heavily on railways to transport goods and commodities, but trains are already winding down in anticipation of a strike or lockout.

Daman Grewal, a senior operations manager with British Columbia-based Centurion Trucking, would normally expect 20 or 30 online postings from shippers seeking trips east across Canada on an August Monday. On Monday morning, he saw more than 500.

“Last week is when a lot of the panic started to set in,” said Grewal, noting trips for which he charged C$7,000 ($5,139) a few days ago now cost up to C$9,000. “Similar to COVID, you see the scarcity in supply chain.”

Grewal said Centurion could increase capacity ten per cent to 20 per cent, largely by reducing driver downtime.

“We would just have to turn the drivers around a little bit quicker,” he said.

Industry officials said some softening in the economy has left room to increase capacity but not enough to make up for idled railways.

Some rail shippers have been trying to book additional truck capacity since February ahead of a disruption, said Alberta Motor Transport Association president Robert Harper.

“The industry can help out in the short term in reallocating assets, but in the long term you simply cannot replace long-haul rail distribution. Because in some cases, the industry doesn’t have the equipment nor the capacity,” Harper said.

No plan B

U.S. freight forwarder C.H. Robinson estimates 85 per cent of U.S.-Canada cross-border road freight in either direction is handled by Canadian trucking carriers.

“Anytime you have an event that causes a surge in trucking demand and sudden tightening of capacity, costs in the spot market can increase dramatically. In the past, we’ve seen rates in Canada double overnight,” said C.H. Robinson’s vice president for Canada Scott Shannon, adding this will result in not just higher costs, but also longer lead times.

CN and CPKC have begun phased shutdowns of their networks ahead of the looming stoppage.

The severity of the disruption, should it occur, will be a factor of how long it lasts, said Joseph Towers, a senior rail analyst at FTR Transportation Intelligence.

Canada’s federal government may have no choice but to step in to end a stoppage that could cripple industries, said Western University supply chain expert Fraser Johnson.

“There is no Plan B for any of these industries because it’s not practical to substitute trucks for established supply chains that use rail. … You can’t snap your fingers and increase your capacity in terms of trucking.

—Additional reporting for Reuters by Promit Mukherjee

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The world’s largest pot company announced earlier in the day that Linton was stepping down, leaving Mark Zekulin in charge of the company.

“I think stepping down might not be the right phrase,” Linton said in an interview with CNBC. “I was terminated.”

Linton also said he did not know why he was fired, adding, “At the end of the day I really think sometimes entrepreneurs are entrepreneurs because they’re not super employable.”

Last month, Canopy reported a net loss of about $323 million for the fourth quarter, attributing it to increased investments in expanding the business.

A week later, Constellation Brands, which has a stake in Canopy and four of its six board seats, said it was not happy with the Smiths Falls, Ont. company’s year-end results.

“We are working with Canopy almost on a daily basis to ensure that we are all focused on the right things,” Constellation CEO Bill Newlands had said on a post-earnings call with analysts.

On Wednesday, the brewer said it fully supported the decision made by Canopy’s board to appoint Zekulin as the company’s sole CEO.

“It is pretty clear that it was at the urging of Constellation Brands. At this point they have enough power on (its) board to make these kinds of decisions,” William O’Neil analyst Andrew Kessner said.

Linton’s strategy of chasing growth at the expense of near-term profits seemed to have fallen out of favor with top Constellation executives, who are under pressure to provide a clearer timeline on a return on investment in Canopy, Kessner said.

Linton founded Canopy in 2013 in an abandoned Hershey’s chocolate factory and has since been the face of the company. He took the company public in 2014 and has bolstered its operations with acquisitions worth more than $5 billion.

Under Linton, Canopy also raised over $6 billion since its founding in 2013, with the Corona beer maker agreeing to invest more than $4 billion in the company — the biggest such investment in the cannabis industry.

Linton did not immediately respond to a Reuters request for comment. Reuters’ calls and emails to Canopy seeking details on Linton’s departure were not answered.

While it was not clear what Linton’s severance package would be, company filings showed that his total compensation for 2018 was $2.46 million, a near six-fold rise from a year earlier due to $2 million of option-based awards.

Analysts at brokerage Stifel said they would not be surprised to see Linton take on another role within the cannabis industry, likely as an entrepreneur as his strength was in recognizing early stage value.

Rade Kovacevic, who currently leads the company’s Canadian operations and recreational strategy, will take over the role of president from Zekulin.

The company, whose cannabis retail brands include Tweed and Tokyo Smoke, also named John Bell, Canopy’s lead director of five years, as chairman, a decision that it said would be reviewed at the board’s annual meeting in September.

Earlier this year, Canopy also replaced long-term chief financial officer Tim Saunders with a former Constellation executive.

Shares of the company, which fells as much as 5.3% earlier in the session, reversed course to trade marginally up.

— Reporting for Reuters by Debroop Roy, Nivedita Balu and Shanti S Nair in Bangalore.

CORRECTION, Aug. 27, 2019: Reuters has removed a reference to the specific size of Constellation Brands’ stake in Canopy Growth.

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The company said it expects to record revenue of $210 million in 2019 (all figures US$), with break-even earnings, before interest, tax, depreciation and amortization (EBITDA).

Analysts on average forecast full-year sales of $205 million, and a loss, before interest, tax, depreciation and amortization, of $10.28 million, according to Refinitiv IBES data.

The company has captured a wide audience for its imitation meat patties and sausages made from ingredients such as pea protein, coconut and canola oil.

The burgers, a hit with consumers switching to a “flexitarian” diet, feel, smell and taste like real meat.

Beyond Meat’s sales have increased five-fold since it began selling its flagship Beyond Burger in 2016.

“We are very conservative and view this as a floor,” CEO Ethan Brown said on a conference call when asked about the revenue forecast. The company does not count customers who are using its products as a part of a testing project.

“As we are entering into additional test and distribution channels and take on new customers, those will be additive to our numbers,” Brown said.

The company is also working on making its plant-based products cheaper than animal protein to capture more market share.

Beyond Meat, whose rivals include U.S.-based Impossible Foods, is likely to face increasing competition in the niche market as companies such as Nestle and Tyson Foods ready their own lines of products.

“Beyond Meat, right now, does have the first-mover advantage,” said Megan Brantley, vice-president of research at LikeFolio.

The California-based company said its net loss widened to $6.6 million in the three months ended March 30, from $5.7 million a year earlier.

First-quarter net revenue came in at $40.2 million, an increase of 215 per cent, the company said. Analysts had expected revenue of $38.9 million.

“Beyond Meat is in a business that could be absolutely incredible,” John Gillin, an analyst with Stansberry Research, said.

In the Canadian market, Beyond Meat in April announced deals to sell its Beyond Burgers for home grilling through several major grocery retail chains. Fast food chains including A+W and Tim Hortons have also added Beyond Meat products to their menus.

Beyond Meat and its contemporaries have, however, seen some pushback recently from Canada’s meat sector.

Quebec’s Union des producteurs agricoles (UPA) and cattle producer group Producteurs de bovins du Quebec said last month they would approach the Canadian Food Inspection Agency to prohibit the use of the word “meat” in marketing vegetable protein products.

For its part, the Canadian Cattlemen’s Association last month said its view is that “for a product to be labelled or marketed as meat it must meet the legal definition of ‘meat’ or ‘meat byproduct'” as per federal food regulations.

Recent efforts to stop food firms from labelling “vegetarian-based” products as “meat” in Canada is part of an “international movement towards achieving a common nomenclature for meat derived from animal-based proteins,” the CCA said in a statement.

— Reporting for Reuters by Nivedita Balu and Tina Bellon. Includes files from Glacier FarmMedia Network staff.

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