Jul 13, 2021

Organigram aims to add premium offerings in profitablity pursuit

Organigram Q3 revenue rose 13%


Security Not Found

The stock symbol {{StockChart.Ric}} does not exist

See Full Stock Page »

Organigram Holdings Inc. is looking to add a premium, higher-margin brand under its portfolio mix to help the Canadian cannabis producer come closer to profitability, a senior executive said.

Paolo De Luca, Organigram's chief strategy officer, said the Moncton, N.B.-based company would like to see one-quarter of its sales come from the premium segment of Canada's cannabis market, which would offset a drag on Organigram's margins from selling lower-priced products. The company is also planning to launch its line-up of soft chew edibles later this year, which would also help drive margins higher.

"[Buying a premium brand] is something that we would consider for sure," De Luca said in a phone interview with BNN Bloomberg. "Because [premium] is not something that we would pursue in the short term in our [Moncton] facility."

He added that he isn't a fan of purchasing market share in the premium space as that would likely dilute Organigram's shareholders, and is eyeing a "more disciplined' way of entering that category. Some of Organigram's Canadian rivals such as Canopy Growth Corp. and Hexo Corp. have acquired smaller cannabis companies to add premium offerings under their product mix amid a highly competitive environment.

"The market has kind of stabilised and as customers walk into stores, they're more likely to try for a premium product," he said.

De Luca's comments come on the heels of Organigram's third-quarter results released earlier on Tuesday. The cannabis producer reported a 13 per cent jump in sales to $20.3 million that beat analyst expectations. However, Organigram still posted adjusted earnings with interest, taxes, depreciation, and amortization (EBITDA) loss of $10.1 million and a net loss of $4.0 million in the quarter.

The company said market demand in Canada, spurred on by the reduction of COVID-related lockdowns, will see revenue in its fourth quarter come in higher than the prior quarter, without providing specifics.

De Luca said to help meet that expected market demand, Organigram will resume construction of its Moncton production facility after it suspended a build-out due to COVID-related capital concerns. The company has also budgeted $30 million over the next three years within its "centre of excellence" joint venture with British American Tobacco Plc to develop cannabinoid products for the Canadian and international markets. He said that the products that are derived from that partnership will be better suited for Organigram's international expansion, rather than to acquire a company in a different country.

"That's really our way to get into international markets," De Luca said. "Derivative products … that transcends borders can be replicated in a different manufacturing facility or using a contract manufacturer in a different jurisdiction. We view that as a smarter way of thinking internationally versus just spending on acquisitions."