During the COVID-19 pandemic, several of the country’s largest cannabis producers expressed great ambitions related to the US market.
They are counting on the US government to legalize the pot, which would ensure them greater profitability.
From food to marijuana
While many have signed a large number of agreements to help them do business in the United States, Organigram Holdings is adopting a more modest strategy. However, the New Brunswick-based company is not giving up on the US market, says its new CEO.
“The United States must be part of the strategy of all producers,” says Beena Goldenberg, who has extensive experience in the food industry.
“When I was in the packaged goods business, we always looked at the United States. There is an old law: the US market is ten times larger than that of Canada. We cannot ignore it. ”
Mme Goldenberg is the only woman who holds such a high rank in the cannabis business. She replaces Greg Engel who was recruited by a Vancouver start-up, Clairvoyant Therapeutics.
British American Tobacco
Mr. Engel was the boss of Organigram for four years. He left his post after a subsidiary of British American Tobacco bought 19.9% of the shares in the Moncton company.
Its management was conservative. He avoided thinking too big, refusing to share the strong optimism of his competitors like Canopy Growth, Tilray or Aurora Cannabis. They finally regretted it when cannabis consumption was lower than expected.
Organigram was not spared. The company has laid off hundreds of workers over the past two years to adjust production capacities to market conditions.
The company reported a loss of $ 4 million in the last quarter, a big improvement from that of $ 89.9 million in the same quarter of 2020.
“Organigram has always been cautious when it comes to spending,” she says. We have undoubtedly lost income because we have not increased our capacities. The demand exceeded our capacity. This is the reason why we are spending money. ”
Mme Goldenberg says he doesn’t want to deviate from Organigram’s cautious model, but is counting on his experience gained at Hain-Celestial Canada and Canopy’s Supreme Cannabis to reshape the company’s operations.
Five brands, 84 products
She is overseeing a $ 38 million investment to expand capacity and grow Organigram’s Edison Cannabis Co., Trailblazer, Indi, Shred and Big Bag o’Buds brands.
“Our demand exceeds our supply, so it’s a problem, but it’s a happy problem,” says Mme Goldenberg.
According to ATB Capital analyst David Kideckel, increased competition, oversupply, a proliferation of value brands and early production inefficiencies could weigh on the company’s margins, but not for long.
Organigram has launched 84 new products since July 2020 and plans to launch up to 20 more by the end of the fourth quarter of fiscal 2021, he wrote in July. “The arrival of new products will gradually improve the company’s sales and margin prospects. ”
High-end products, such as Edison (Organigram’s line of chocolate truffles and mint lozenges), will be critical to the company’s growth.
“People are always looking for a new experience, a better flavor, a better aroma,” says Mr.me Goldenberg.
Lisa Campbell, the chief executive of cannabis marketing firm Mercari Agency, believes the company will need to be careful with its prices.
“We see a lot of companies that are just selling products at a discount. This really has a negative impact on the whole market, she points out. It has a ripple effect. It’s like a race to the bottom. ”
The cannabis sector is increasingly consolidated.
In recent months, Tilray has merged with Aphria while Canopy has acquired Wana Brands, AV Cannabis Inc. and Supreme.
Hexo acquired Zenabis Global and Redecan. For its part, Organigram bought Edibles & Infusions in April.
Mme Goldenberg believes that the pace of transactions will continue in this highly fragmented industry. Ultimately, a lot of companies will disappear.
“The smaller players will be swallowed up or no longer exist. The bigger players will eventually get bigger. This is what happens in any market as it matures. ”