For much of the COVID-19 pandemic, the leaders of CanadaB次元官网网址檚 biggest cannabis companies have spouted lofty ambitions linked to a U.S. pot market they strongly believe is on the brink of federal legalization and will be their ticket to profitability.
While many have made bold predictions and signed a dizzying number of deals to help them break through south of the border, Organigram Holdings Inc. has taken a more modest approach.
But donB次元官网网址檛 count the New Brunswick-based cannabis company out, says its new chief executive.
B次元官网网址�(The U.S.) has to figure into everyoneB次元官网网址檚 game plan,B次元官网网址� said Beena Goldenberg, a food industry veteran who took the helm of Organigram on Sept. 9.
B次元官网网址淲hen I was in consumer packaged goods, we always looked to the U.S. ThereB次元官网网址檚 that old 10:1 rule, which is (the U.S. is) going to be 10 times the size of Canada, so you canB次元官网网址檛 ignore it.B次元官网网址�
Goldenberg B次元官网网址� the only female CEO of a major publicly-traded Canadian cannabis company B次元官网网址� is still settling into the role she took over from Greg Engel, who moved to to Vancouver psychedelic startup Clairvoyant Therapeutics.
Engel spent four years in OrganigramB次元官网网址檚 top job. He left months after a British American Tobacco subsidiary bought a 19.9 per cent stake to spur production development at the company based in Moncton, N.B.
He ran Organigram conservatively and avoided much of the overbuilding that rivals Canopy Growth Corp., Tilray Inc. and Aurora Cannabis Inc. came to regret when cannabis demand fell short of expectations.
Organigram hasnB次元官网网址檛 been unscathed. It cut hundreds of workers in the last two years, as it tried to better align production capacity with market conditions.
Its most recent quarter brought a $4-million loss, an improvement over the $89.9 million loss recorded during the same quarter last year.
B次元官网网址淥rganigram, I think, has always been very careful on spending and on operating expenses,B次元官网网址� said Goldenberg.
B次元官网网址淏ut we probably left some sales on the table because we werenB次元官网网址檛 building up the capacity and our demand grew faster than our capacity, which is why weB次元官网网址檙e now spending money.B次元官网网址�
Goldenberg likely wonB次元官网网址檛 stray from OrganigramB次元官网网址檚 prudent template, but will reshape operations with her experience running Hain-Celestial Canada and CanopyB次元官网网址檚 Supreme Cannabis.
Topping her to-do list is overseeing a $38-million investment to expand capacity and grow OrganigramB次元官网网址檚 Edison Cannabis Co., Trailblazer, Indi, Shred and Big Bag oB次元官网网址� Buds brands.
B次元官网网址淥ur demand is outstripping our supply, so itB次元官网网址檚 a problem, but itB次元官网网址檚 a good problem to have,B次元官网网址� said Goldenberg.
As the company catches up, ATB Capital analyst David Kideckel warns increased competition, oversupply, value brand proliferation and early production inefficiencies could strain margins, but not for long.
B次元官网网址淥rganigram has launched 84 new SKUs since July 2020, and plans on launching up to 20 more SKUs by the end of Q4/FY21e,B次元官网网址� he wrote in a July note.
B次元官网网址淲e believe that new product introduction will gradually improve the companyB次元官网网址檚 sales and margin outlook.B次元官网网址�
Premium offerings such as Edison, OrganigramB次元官网网址檚 chocolate truffles and mint lozenge line, will be key as in-store shopping returns and budtender advice becomes more vital.
B次元官网网址淧eople, having tried the value products, are looking for something thatB次元官网网址檚 an experience, thatB次元官网网址檚 a little bit better, maybe a better flavour or aroma,B次元官网网址� Goldenberg said.
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But the value category canB次元官网网址檛 be forgotten, said Lisa Campbell, chief executive at cannabis marketing company Mercari Agency.
SheB次元官网网址檚 noticed premium products are less popular in Alberta and British Columbia than in Ontario, but says OrganigramB次元官网网址檚 value brand Shred has widespread appeal.
B次元官网网址淪hred is a product that cannabis retail stores will actually hoard,B次元官网网址� she said. B次元官网网址淭hey will buy 10, 20 cases at a time, so they definitely have a really loyal following.B次元官网网址�
She warns, however, that companies like Organigram should be careful about their long-term pricing.
B次元官网网址淲eB次元官网网址檙e seeing a lot of companies that are just selling product below cost, and it really negatively impacts the entire market,B次元官网网址� said Campbell.
B次元官网网址淚t has a ripple effect and itB次元官网网址檚 like a race to the bottom.B次元官网网址�
That race is taking place in an increasingly consolidated market.
In recent months, Tilray merged with Aphria Inc., while Canopy snatched up Wana Brands, AV Cannabis Inc. and Supreme.
Hexo Corp. also got in on the action when it bought Zenabis Global Inc. and Redecan.
Organigram acquired the Edibles & Infusions Corp. in April.
Goldenberg thinks that pace will continue for the highly-fragmented industry, though some companies will get more intentional about purchases.
Ultimately, she thinks most wonB次元官网网址檛 last.
B次元官网网址淪maller players will either be gobbled up or will go away, and the bigger players will eventually get bigger,B次元官网网址� she said. B次元官网网址淭hatB次元官网网址檚 what happens in any market as it matures.B次元官网网址�
Those that last will be closely watching the U.S., which allows medical cannabis in about 36 states and recreational use in 13, but has not deemed it permissible under federal law.
Studies show broad support for decriminalizing cannabis, a view also favoured by U.S. President Joe Biden, but Goldenberg doesnB次元官网网址檛 think federal legalization is on the near horizon.
B次元官网网址淚 donB次元官网网址檛 believe legalizationB次元官网网址檚 coming imminently. I think itB次元官网网址檚 going to take time,B次元官网网址� she said.
B次元官网网址淭he market has changed so much in a year or two years, so who knows what itB次元官网网址檒l be like two years from now.B次元官网网址�
Tara Deschamps, The Canadian Press
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