QUESTION

 

• Prepare a 3-page report (12-point font, double spaced not including the title page or reference page), that addresses the following questions:
  • Describe the industry in which Organigram is operating.
  • What factors contribute to the ambiguity faced by Organigram?
  • What possibilities currently exist for Organigram to grow?  Will they change with legalization and if so how?
  • What evaluation criteria should Organigram use when assessing growth options while keeping in mind the recommendations from the Task Force?
  • What would you recommend Organigram’s next steps be?
  • What changes may occur within the industry that may impact Organigram’s growth? 

 

 

ANSWER

 

Case Solution

• • Describe the industry in which Organigram is operating.

Ans) Organigram is a company basically from New Brunswick founded in the year 2013. The industry in which it is operating is it is a legalized producer of medical cannabis in Canada. It is the first company in Maritime to be licensed to grow and sell medical cannabis as well as certified (ECOCERT) for Organic medical cannabis producer. It’s one of the niche and evolving industry across the globe.

What factors contribute to the ambiguity faced by Organigram?

Ans) When Canadian Government, on 20 April 2016 announced that they are planning to introduce legislation to legalize recreational use of cannabis, Organigram found great deal of opportunities in it. However, the picture was quite hazy because of multiple variables that ultimately led to ambiguity. They were as follows:

• Timeframe to exactly implement the legislation was not clear.

• Will there be licenses issued to grow cannabis for recreational purpose or it would open for all?

• What kind of regulations would be there to ensure customers get quality recreational cannabis products?

• How brand positioning would be impacted for organization like Organigram who are positioned as pharma-grade cannabis?

• Task force had recommended severe restrictions on advertisements and branding of edible cannabis so as to avoid letting children getting into trap.

• Will the Import of edible cannabis from US be allowed?

• Which products would be permitted under recreational category?

• • What possibilities currently exist for Organigram to grow?  Will they change with legalization and if so how?

Ans) As per the exhibit 1, total number of registered clients for medical purposes has been increasing at the rate of 32.74% (on an Average) every quarter. Currently we can see that application process was rigorous and with proper campaign Organigram can acquire customer base of other competitor leveraging its ECOCERT certification as well as competitive pricing. Moreover, as stated in case study, in addition to be the first medical company in Maritimes to be licensed to grow and sell medical cannabis, it was also a certified organic medical cannabis producer. This was a great opportunity as recreation market often suffers from adulteration which can be knocked off if we are a certified organization for organic produce.

Also, Canada had only 3 Organic LPs wherein Organigram being the only maritime based company to cultivate, produce, and sell cannabis products.¹

Already Brunswick government had provided payroll rebates of $990,000 over 3 years for creating jobs to Organigram. And now with legalization the rebate may rise as Organigram would have to expand their resources as well as employee base. With Legalization, there can be paradigm shift in LP licenses, hence if Organigram can capitalize on its existing user base as well as brand Image, once legislation is implemented Organigram can have early mover advantage too.

• • What evaluation criteria should Organigram use when assessing growth options while keeping in mind the recommendations from the Task Force?

Ans) PEST Analysis

Political:

1. NGO’s & Social Activist Groups: They may protest legalizing the recreational usage. Moreover, Canada has high Sikh population and smoking of any form is strictly prohibited in their religion, so this may be challenged.

2. Government Regulation: Based on ‘Grey Knowledge’ it’s difficult for Organigram to decide exact strategy

3. Taxation: Again, government has to come up with fair taxation for recreational usage as the market expected is $22.6 billion including ancillary market

Economic:

1. Government Support by Investment: With the help and support from government in the form of rebates and other benefits, Organigram can easily target other areas including tier 1 &2

2. Disposable Income: With many LPs in the process of increasing their patients it was quite evident people were having sizeable income as well as support to purchase medicinal cannabis

3. Educated Workforce: Organigram had an advantage of having skilled workforce in New Brunswick

Social:

1. Gender: The gender roles are quite evolving, and Organigram can try to take advantage of the evolution to support recreational usage.

2. Religious Beliefs: Several religious beliefs often prohibit smoking, and this has to be taken seriously

Technology:

1. With latest technology, Organigram can cut down its cost of production easily with initial investment

2. With the collaboration from third party firms, it can easily identify its target segments and position itself

3. Heavy Research & Development for $22.6 billion market (Ancillary included) can provide Organigram early mover advantage.

 

• • What would you recommend Organigram’s next steps be?

Ans) In the cloud of uncertainty, I would recommend Organigram to prepare a holistic strategy keeping in mind most of the variables. To begin with, it can start working on how to separate THC in most cost-effective way and then use it as primary ingredient in -Butter, Maggie etc. While at the same time, the brand positioning needs to be thought of from both- Medicinal as well as Recreational perspective. How not to attract children at the same time ensuring no unethical means are used to promote it. Well with almost 2 years to go till legislation is approved and implemented, Organigram can leverage what Colorado had used and various challenges it faced post legalizing the recreational use of cannabis. With improved pricing and competitive pricing, patients can be the brand ambassadors of the recreational use of Organigram products and hence Organigram can leverage word of mouth ad strategy. With majorly 4 popular publicly traded LPs, Organigram can think of merger and acquisition of the competitors so as to capture maximum market before the recreational usage of cannabis is legalized. Lastly, lobbying for legislation to be approved as fast as possible can help Organigram in coping up with uncertainties or grey-knowledge.

• • What changes may occur within the industry that may impact Organigram’s growth? 

Ans)

PORTER Analysis

1. Bargaining Power of Buyers: With limited LP’s and stringent application process to acquire licenses, buyers won’t have much options to leverage. Also, Organigram was the first medical cannabis company in Maritime which makes its position unique and authentic, hence giving buyers limited window of bargaining.

2. Threat of Substitute: With other drugs for recreation (e.g. Cocaine, LSD etc.) strictly banned, there is no scope of substitute for cannabis.

3. Rivalry among existing Players: This is important as Canopy Growth was largest player in terms of licensed capacity & resources and was working on international expansion too. Many LPs were in the process of increasing registered patients too.

4. Threat of New Entrants: This is minimalistic due to stringent licensing scrutiny.

5. Bargaining power of Suppliers: This is also minimalistic as the LP’s had the complete control on production to sale of cannabis.