Organigram’s new CEO talks about the future of the company and the legalization of pot in the United States
During much of the COVID-19 pandemic, executives of Canada’s largest cannabis companies have expressed high ambitions related to a U.S. pot market that they firmly believe is on the verge of federal legalization and will be their ticket. towards 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 don’t count the New Brunswick-based cannabis company, its new chief executive says.
â(The United States) has to be on everyone’s game plan,â said Beena Goldenberg, a food industry veteran who took over as Organigram on September 9.
âWhen I was in consumer packaged products, we always looked to the United States.
Goldenberg – the only female CEO of a large publicly traded Canadian cannabis company – is still settling into the role she took over from Greg Engel, who moved to Vancouver-based psychedelic startup Clairvoyant Therapeutics.
Engel spent four years in the top position of Organigram. He left months after a subsidiary of British American Tobacco bought a 19.9 percent stake to boost production development at the Moncton, New Brunswick-based company.
He ran Organigram with caution and avoided much of the over-construction that rivals Canopy Growth Corp., Tilray Inc. and Aurora Cannabis Inc. regretted when demand for cannabis fell short of expectations.
Organigram is not unscathed. It has cut hundreds of workers over the past two years as it tries to better align production capacity with market conditions.
âOrganigram, I think, has always been very careful about spending and operating expenses,â Goldenberg said.
“But we probably left sales on the table because we weren’t building capacity and our demand grew faster than our capacity, which is why we are now spending money.”
Goldenberg is unlikely to stray from Organigram’s cautious model, but will reshape operations with his experience managing Hain-Celestial Canada and Canopy’s Supreme Cannabis.
Topping his to-do list is overseeing a $ 38 million investment to increase capacity and develop Organigram’s Edison Cannabis Co., Trailblazer, Indi, Shred, and Big Bag o ‘Buds brands.
âOur demand exceeds our supply, so that’s a problem, but it’s a good problem to have,â Goldenberg said.
As the company catches up, ATB Capital analyst David Kideckel warns that increased competition, oversupply, a proliferation of value brands and early production inefficiencies could weigh on margins, but not for a long time.
âOrganigram has launched 84 new SKUs since July 2020 and plans to launch up to 20 additional SKUs by the end of the fourth quarter of fiscal 21,â he wrote in a July memo.
âWe believe that the introduction of new products will gradually improve the company’s sales and margin prospects. “
High-end offerings like Edison, Organigram’s line of chocolate truffles and mint drops will be essential as in-store purchase returns and budtender advice become more vital.
âPeople, after trying the valuable products, are looking for something that is an experience that’s a little better, maybe a better flavor or a better aroma,â Goldenberg said.
But the value category cannot be forgotten, said Lisa Campbell, managing director of cannabis marketing firm Mercari Agency.
She has noticed that high-end products are less popular in Alberta and British Columbia than in Ontario, but says Organigram’s value brand, Shred, is very appealing.
âShred is a product that retail cannabis stores are actually going to accumulate,â she said. “They’ll buy 10, 20 cases at a time, so they definitely have a really loyal following.”
She cautions, however, that companies like Organigram need to be careful with their prices in the long run.
âWe see a lot of companies that are just selling products at a discount, and it’s having a really negative impact on the whole market,â Campbell said.
“It has a ripple effect and it’s like a race to the bottom.”
This race takes place in an increasingly consolidated market.
In recent months, Tilray has merged with Aphria Inc., while Canopy has taken over Wana Brands, AV Cannabis Inc. and Supreme.
Hexo Corp. Also joined in the action by acquiring Zenabis Global Inc. and Redecan.
Organigram acquired Edibles & Infusions Corp. in April.
Goldenberg believes this pace will continue for the highly fragmented industry, although some companies will become more intentional in their purchases.
In the end, she thinks most won’t last.
“The smaller players will either be swallowed up or leave, and the bigger players will eventually get bigger,” she said. âThis is what happens in any market as it matures. “
Those who last will keep a close watch on the United States, which allows medical cannabis in about 36 states and recreational use in 13, but has not deemed it admissible under federal law.
Studies show broad support for the decriminalization of cannabis, a view also favored by US President Joe Biden, but Goldenberg doesn’t think federal legalization is on the horizon.
âI don’t believe legalization is coming anytime soon. I think it will take time, âshe said.
âThe market has changed so much in a year or two, so who knows what it will be in two years. “
This report by The Canadian Press was first published on November 7, 2021.
Companies in this story: (TSX: OGX, TSX: WEED, TSX: ACB, TSX: HEXO)