August 29th, 2018
The legal cannabis industry is only in its infancy, yet some companies are already gaining a strong foothold in what is soon to be a multi-billion dollar business. Organigram Holdings Inc. (TSX VENTURE: OGI) (OTCQB: OGRMF) is one of the leading licensed producers of medical cannabis in Canada and is preparing itself for the launch of several strong consumer brands when the country begins adult-use sales in October.
CFN Media caught up with Organigram CEO Greg Engel at the recent MJBizConINT’L trade show in Toronto, who provided insight on the company’s recent financial reportings and where they stand at the dawn of a new era for the global marijuana marketplace.
CFN Media: Organigram recently released their Q3 Financials. What were some of the highlights?
Greg Engel: I think what surprised a lot of people was the fact that while historically we have been known as a top tier indoor grower, we now also have one of the lowest growing costs in the industry. The majority of companies have opted to expand by using greenhouses, but we are a firm believer that indoor grown product is of higher quality and will yield better margins. We’ve taken the approach that you’re going to grow a better product if you become efficient and effective and with growing indoors, the market certainly perceives a much higher quality product. You will always have a market for premium product, even when there’s commoditization and price pressure on lower quality product.
We’ve become so efficient at indoor cultivation that we actually now have one of the lowest costs in the industry. This last quarter, our cash costs were CAD$0.66 a gram and our all-in costs, including depreciation, were CAD$0.80 a gram. A lot of people assume greenhouses are going to be so much more cost effective, but I have not seen a greenhouse producer yet come close to that number.
CFN: Tell us about your recent partnership with Hyasynth?
GE: Hyasynth is a Canadian biotech company using bio-fermentation to produce cannabinoids, an already proven methodology for vitamin and insulin production. The company uses genetically-altered yeast to produce olivetol, which is a precursor molecule to cannabinoids. Through their own proprietary enzymes, Hyasynth is producing CBD, THC, and CBG in a pure form.
That really lends itself to not only use as a pharmaceutical ingredient, but also for recreational products. I think it’s also a very disruptive technology in that, theoretically, you can produce cannabinoids at pennies on the dollar to what it would cost to produce them from a plant directly.
CFN: How has Organigram been preparing for adult-use sales in Canada when they go live on October 17th?
GE: Going back to last year, we’ve seen rapid expansion. That’s helped us in terms of driving our cost down because you become more efficient with scale. We are now licensed to produce 36,000 kilos annually, which actually puts us in the top four of current licensed capacity in Canada from the publicly disclosable information we can see.
One thing to keep in mind when you think about the Canadian market is that it’s going to be a multi-stage launch. This fall, we’re going to have cannabis flowers and blends, pre-rolls, and then a range of oral ingestion oil products. It won’t be until October 2019 that we have are able to launch vaporizable products and edibles. Building up our inventory has always been important for us and we’ve been prepping from a production perspective that way.
CFN Media: What is your brand strategy and how does it set you apart from other LPs?
GE: Our core mainstream brand, as well as our premium brand, is called the Edison Cannabis Company. Last fall, we conducted a pilot project called The Edison Project by OGI, where we launched a product line for our medical consumer base of premium hand-crafted, hand-manicured cannabis products at $15 a gram. These are very large flowers – some in the five to seven gram range even – and we wanted to see if people would be willing to accept that price point. We had a phenomenal response and the reorder rate was very high.
Rounding out our portfolio is Ankr Organics, which is our organic line, and Trailer Park Buds, which is a licensing agreement with Trailer Park Productions. It’s our aim to have a more diverse strategy and have a house of brands in order to offer a comprehensive brand portfolio that hits each demographic.
CFN: The global cannabis market is exploding. Where are you looking to expand beyond North America?
GE: Five months ago, we hired Guillermo Delmonte to help us with international expansion. He previously was CEO of ICC, which was the first publicly-traded international hemp company on the Canadian Stock Exchange, and brings with him a broad network of experience.
Since that time, we’ve signed distribution agreements for Australia and we’ve started exporting there. We have also developed a partnership with Alpha-Cannabis in Germany and we’re working towards getting things started in that market. Additionally, Organigram announced a planned investment in a company called Eviana, based in Serbia, to access CBD from hemp, which we plan to use as a source material for the broader European market.
CFN: Why should potential investors or business partners work with Organigram?
GE: One of the key things we’ll see happen this fall is a reset in the industry in terms of the players in the Canadian industry. There’s going to be companies that deliver on their commitments to the provincial governments and there’s going to be companies that don’t.
Not everybody will be ready from a packaging perspective, or from an inventory perspective – I think that’s going to become pretty apparent when the adult-use launch occurs. Frankly, I believe demand will outweigh supply initially for at least the first two years. But, if you’re a leading company like Organigram and are able to meet that demand, it’s a great opportunity to take the baton and run with it.
About Rachelle Gordon
Rachelle Gordon is a Minneapolis-based writer. Find her online at www.rachellegordon.net.
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