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3yrs ago Cannabis greenmarketreport Views: 542

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Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) reported its third-quarter net revenue fell to $18.0 million from last year’s $24.8 million for the same time period ending in May. The net loss increased 783% to $89.8 million from last year’s net loss of $10 million.

“Since the onset of the global pandemic, the priority for us has been protecting the health and safety of our employees,” said Greg Engel, Organigram CEO. “This prioritization led to a significantly reduced workforce which contributed to a number of product launch delays, including our initial large format value offering, which affected opportunities to potentially capture significant market share and sales in dried flower, the largest product segment of the recreational market. Since then, we have launched a number of new products and line extensions with more to come. Furthermore, we believe we have right-sized our workforce and even before doing so, we were able to generate positive cash flow from operations in Q3 2020 as we continue to remain focused on building a business that delivers an attractive return on investment for shareholders.”

What Went Wrong

The company noted that several things went wrong which led to the drop in revenue. Organigram said in its statement, “Lower flower sales volumes and a lower average net selling price driven by increased competition and as the large format dried flower value segment of the recreational market grew in Q3 2020 while there was a delay launching Organigram’s large-format value product due in part to a reduced workforce from COVID-19 and earlier delays in packaging material and equipment.

Fickle customer preferences resulted in returns and price adjustments on the slow-moving aged products to the tune of $3.0 million was recognized during the third quarter. Write-offs of excess and unsaleable inventories of $19.3 million, of which $11.9 million was related to excess trim and concentrate. The company also took a $2.7 million in inventory write-down to net realizable value to reflect the declining price.

The third quarter resulted in a negative gross margin before fair value changes to biological assets and inventories of $26.4 million compared to positive $12.3 million in Q3 2019.

Organigram cut its workforce by ~25% or ~220 employees in June. However, it took $7.9 million in charges related to a reduced workforce due to COVID-19 comprised of $5.0 million in plant culling, $2.0 million in unabsorbed fixed overhead as a result of lower production volumes, and $0.9 million mostly related to lump-sum payments paid to temporarily laid-off workers.

New Value Products

Organigram had already planned to launch new value products and it seems those items are now on the shelves. The value segment strategy includes dried flower offerings launched in larger format sizes of 7g and 15g under the Trailblazer brand in mid-July 2020. The Trailblazer value brand offers higher THC levels versus what was offered when originally launched near the start of adult-use cannabis legalization, at a competitive price point such that the company believes it has the ability to compete in the growing large format value segment of the market.

The company said it expects to start shipping new core strains with higher potency THC during Q4 Fiscal 2020 and began rolling out further line extensions, including new size formats and three-pack pre-rolls of its most popular strains, such as Limelight and Blue Velvet, in June 2020.

Organigram Sales Hurt By Customers Wanting Value Products on Green Market Report.


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