A more methodical approach to selling cannabis products instead of throwing everything in the wall to see what’s sticking out may be part of the secret sauce that has set Organigram Holdings Inc. on track to become profitable earlier than expected.
Organigrams CEO Beena Goldenberg said the company often works with provincial wholesalers to determine what unique products it would like to sell, pointing to an example of its lozenges that have been able to circumvent strength requirements by packing every 10 milligrams edible in a package. of 10.
“It’s an approach that we take: proof that the product provides, build extra SKUs, but do not flood the market,” Goldenberg said in an interview Tuesday. “We want to make sure you get the right kind [sales] decrease so you always manage the portfolio with our retail partners to ensure we have fewer but excellent products. “
It’s a strategy that has led Organigram to rise in the rankings of Canada’s best cannabis companies, vying for third place just behind pot giant Canopy Growth Corp., according to industry data tracker Hifyre.
It has also helped propel the company’s net sales in the first quarter to a record high of $ 30.4 million, an annual increase of 57 percent, while eventually generating positive gross margins of $ 2.5 million. It also posted adjusted earnings before interest, tax, depreciation and amortization (EBITDA) loss of $ 1.9 million, less than the $ 5.7 million loss it reported a year earlier.
Analysts expected Organigram to report $ 29.4 million in revenue and an adjusted EBITDA loss of $ 4.7 million for the quarter, according to Bloomberg data.
“For the first time in recent history, Organigram recorded positive gross margins and made a multifaceted effort to expand margins in the short term, which the company believes will provide positive EBITDA in 3Q22,” Raymond James analyst Rahul Sarugaser said in a note to clients on Tuesday .
This does not mean that Organigram has not had its fair share of challenges. The company reduced the construction of its Moncton production facility in mid-2020 and laid off more than 200 employees to better tailor its range to consumer demand.
But since Goldenberg took over as CEO of the company in August, Organigram has further leveraged a consumer panel of 2,500 Canadians, which it often uses to measure what specific flavors and product types they would like to see sold in Canada.
And these supply-demand dynamics are beginning to stabilize as more than half of the country’s cannabis consumers now buy from legal channels, with the price of pot products being roughly the same amount as their illegal counterparts. This is also likely to help create more “sticky” consumer brands, which so far have not resonated significantly since cannabis was legalized over three years ago.
“I can not predict [prices] has reached the bottom, but I think it has stabilized, and that’s because we’re at the point where you can not find much cheaper deals in the illegal market, “Goldenberg said.” Then suddenly the legal market becomes interesting for the shopper who was going to the illegal market because it was significantly cheaper. ”
To take advantage of the company’s momentum that has made Shred value flourish, edible offerings and bulk brands are gaining market share at the expense of larger, more well-capitalized players like Tilray Brands Inc. and Canopy Growth, Organigram plans to expand its growth capacity by about 50 percent to 75,000 kg annually. It will help it sell its Shred brand outside the markets of Alberta and Ontario, where it is one of the most popular cannabis products in those provinces, Goldenberg said.
The company also plans to leverage its recent acquisition of Laurentian, a Quebec-based licensed manufacturer, with an additional $ 7 million in capital to help build a processing and automation production line. Deal flow will remain an interest for Organigram, but any acquisition would have to complement the company’s current product portfolio instead of adding a competing brand or other manufacturing facility, only to have it shut down months later, Goldenberg said.
“The real opportunity for me in the Canadian marketplace is to find gaps in our portfolio, whether it’s regional, whether it’s by segment, and really add some capabilities to these areas, so we continue to strengthen our business in Canada,” ” she said.
Goldenberg said she expects to see meaningful revenue in 2023 from the company’s joint venture with Hyasynth Biologicals Inc., which uses biosynthesis to produce pure cannabinoids without being dependent on cannabis plants. Organigram invested $ 2.5 million in Hyasynth in December, bringing its total start-up investment to $ 10 million.
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