Tough decisions to be made as market gets more crowded with product, says Organigram CEO
Canadian marijuana companies face a huge challenge to know when to convert product from plant to oil, according to an industry insider.
Greg Engel, CEO of Organigram, said that as the range of products and demand continues to grow – edibles and cannabis drinks are expected to hit shelves in 2019 - firms will have to deal with avoiding undersupply.
The biggest issue so far since October 17 has been the general failure of LPs to quickly meet the orders and interest of customers but Engel said Organigram is already ahead of the curve when it comes to the increasing demand for oil. He added his operation has been building up and storing it as concentrate because it doesn’t degrade over time.
Speaking during the Cannabis Investing 201 webinar hosted by Charles Taerk, sub-advisor to the Ninepoint Alternative Health Fund, Engel said: “Now we are seeing more demand in the oil market, we are actually shifting to more oil products because there has been so much rec demand.
“It’s where one of the challenges is going to be – when do companies start to convert product or start to move product into that prep? We’ve seen challenges moving from a small medical market into large scale rec and those challenges are going to be even more common when we move into a bigger range of products.”
Right now, the question remains when producers will catch up to demand and Engel, whose company was the only one who built out production solely indoors, said that early forecasts of between three to four years are looking accurate.
He said: “We have seen challenges with execution with many companies and many have put out forward-looking statements about building out but not necessarily hitting those timelines.
“If you’d asked everyone this question a year ago, everyone would have said it’s three years to four years. Six months ago people were saying it may be only 18-24 months but I’d say it’s back to later now – it could still be that three years plus.
“It’s challenging and people are reporting in the earnings calls lower yields than expected with some of the buildouts. Our approach is to make sure we build out with what we know but there are some challenges and I think we all have to consider the market is going to change dynamically next year as we go into derivative-based products. Companies are going to have to make decisions about what products you are converting and what you are routing into that.”
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