Early secret to success
The chief executive of Organigram Holdings Inc. — one of the best-performing licensed producers in terms of gross margins since legalization — believes that the core driver of his company’s relative success in the space was its decision to cultivate cannabis not in massive greenhouses, but in smaller indoor facilities instead.
“I had visited 54 different greenhouse sites in Canada, and I had seen a lot of issues. What we saw in an indoor environment was that you can consistently control the environment, and that has really paid off for us,” said Greg Engel, in an interview with the Financial Post at the GMP Cannabis Conference in Toronto, where he was presenting to investors.
The Moncton, N.B.-based company brought in net revenue of $26.9 million for the quarter ending Feb. 28, 2019, a 117 per cent increase from its previous quarter. Although the company did not disclose the amount of cannabis it sold last quarter, Engel said it was able to meet demand from all provinces with which it has supply agreements.
Organigram, which only grows premium cannabis that fetches a higher price, operates a threestorey indoor facility that currently yields 36,000 kilograms of cannabis annually. One of the biggest differentiators between greenhouse growing, and indoor growing is cost, the latter generally costing more than the former.
But Organigram’s cost of growing has decreased significantly over the past year, and is now almost on par with the per gram cost of growing in a large greenhouse. In the quarter that just ended, it cost the company just $0.65 to cultivate a gram of cannabis, compared to just over $2 four quarters ago, according to Engel.
“The reason for that is because we decided to focus on a group of five to seven core strains instead of trying 15 to 20 different strains. We started seeing increasing yields on these strains over time. We then made a decision to go from 1,560 plants to 1,080 plants but we got three per cent more yield per room because the plants in and of themselves are more efficient,” Engel said.
The company is also less focused on branding and marketing strategies than others in the space, a decision that to some extent reflects in its lower-thanaverage administrative expenses relative to other licensed producers.