Introduction
Organigram Holdings is a Canadian manufacturer of cannabis and cannabis products. The company began its activities as a supplier of high-quality medical cannabis. The organization was founded in 2013 and became one of the first legal cannabis producers in Canada (Ben-Ishai, 2020). They were among the first to be certified, ensuring full compliance of their products with international standards. At the moment, the company is focused on the production of cannabis for both patients and adult consumers. The difficulties for the Organigram are people’s preconceptions about the legalization and use of cannabis. However, the company still has the potential for further growth and development.
Description of the Industry
One of the major challenges of the Organigram is the characterization of the market in which the business operates. Organigram used to be one of the most efficient cannabis companies in Canada, but at the moment, the market is not efficient enough to generate quality profits. The company currently does not have impressive price power; the shares have a minimum market capitalization. The Canadian cannabis market is complex as there is currently an oversupply that creates unhealthy competition (Gilbert, 2021). Perhaps such a gap between supply and demand is due to a sharp demand after the legalization of cannabis and a further inevitable decline. The adult cannabis market continues to decline steadily but not sharply. Due to the large number of competitors, Organigram’s market share is declining and the company is unable to provide strong financial performance to compete. At the moment, Organigram only outperforms its competitors by offering a lower price, which may not be a successful strategy. Organigram offers savings by improving production volumes, but this strategy maintains an oversupply in the market. The cannabis business is difficult to manage until the market becomes more profit-oriented.
Factors Contributing to the Ambiguity Faced by Organigram
The Canadian government announced several years ago that cannabis was legalized for both medicinal and adult consumption. First of all, this division provokes the duality that the Organigram faces. On the one hand, the use of cannabis is completely legal when purchased from licensed centers. However, the use of cannabis for non-medical purposes is stigmatized. That is why Organigram is mainly conceived for the production of cannabis for medicinal use; however, not all clinics agree on such methods. Cannabis sales are also constrained by Task Force recommendations, which limit advertising campaigns to minimize the negative impact on children (Government of Canada, 2016). That is why, on the one hand, the company’s activities are completely legal, on the other hand, they are strictly controlled and limited.
Currently Existing Possibilities to Grow
Despite the duality and limitations, Organigram has the potential for further growth. Since the characteristics of the Canadian market are difficult to change, it is necessary to adapt to its limitations and high competition. Organigrams can provide a competitive advantage by declaring their mission to help society cope with medical problems through the use of cannabis. The company must communicate to potential consumers the benefits of this treatment method, its proven effectiveness and its availability. It is expected that public attitudes toward the use of cannabis will change in a more positive direction over time, and stigmatization will decrease. However, Organigram must contribute to this process through promotional campaigns, subject to Task Force restrictions. In addition, the company can continue its expansion, but already on the international market.
Evaluation Criteria
The criteria for evaluating potential growth should include demonstrable sales performance. Moreover, it is proposed to evaluate the sales of medical cannabis in order to comply with the recommendations of Task Force (Government of Canada, 2016). Considering sales of cannabis for adult consumption may not be a reliable indicator. First of all, this indicator can change from independent factors. It is not a profitable strategy in connection with the recommendations of the government. It is proposed to take into account the number of clinics that Organigram supplies with medical cannabis. If the organization manages to enter the US market, it is also necessary to count the clinics that have connected to the service from Organigram; growth is expected to be modest but stable. If the advertising campaign is ethical and effective enough, it will allow a large number of clinics and doctors to reconsider their approaches to treatment.
Next Steps
For successful further functioning, the main difficulties and main opportunities for growth were identified. The two main difficulties are associated with prejudices regarding the use of cannabis for medical purposes and advertising and the high level of competition after legalization. The main opportunities for growth are a return to the sale of medical-oriented cannabis as well as expansion into new markets. The fight against the competition by lowering the price has already been applied by Organigram and has not led to success.
First of all, the management needs to focus on Organigram’s attempt to enter a new market. The United States was chosen because of the country that has states with legalized use and because of the rather similar legal systems and people’s perceptions. To enter a new market, the first step will be to study people’s attitudes toward the idea of using cannabis for medicinal purposes. If potential buyers prove to be loyal, the organization can proceed to the stages of preparing and implementing the entry to the market.
An important operational step for Organigram will be the return to the production of cannabis for medical use only; it will make the government more loyal to the manufacturer. There is a need to clearly articulate the mission and conduct campaigns to explain the benefits of this approach to treatment. The reorientation will allow Organigram to reduce the production of premium cannabis series, which will significantly reduce the cost of the cycle. This step is also necessary because, despite the lack of growth of cannabis users, its use for medical purposes can be popularized.
Changes
Although the legalization of cannabis in Canada is a legally completed procedure, changes in public consciousness take a long time to occur. Possible changes can be characterized as positively affecting the activities of the Organigram. Society is expected to become more tolerant of both medical cannabis use and adult use. In this case, the Organigram will be able to focus again on both directions, not on what the society is neutral about. In addition, the use of cannabis for medical purposes is expected to become more popular. The number of clinics practicing this method of treatment will increase, respectively, Organigram will have more clients.
There is also an area where changes are more difficult to predict. At the moment, competition in the Canadian cannabis market is very strong, with supply exceeding demand. In the future, competition may become even more of a concern for Organigram, especially as production ramps up. However, an increase in demand can be expected due to the growth in the number of consumers. It is assumed that this factor will allow Organigram to cope with the competition.
Another anticipated area of change will affect the international market. There is a trend in the world toward the legalization of cannabis, at least for medical purposes. This trend will allow Organigram to enter the international market in the US and, subsequently, in Europe. Since this market is less developed in America and European countries, this will allow Organigram to count on less competition. This factor will allow the organization to keep prices at an affordable but profitable level for the business.
Conclusion
Thus, despite the legalization of cannabis in Canada, manufacturing companies such as Organigram continue to face difficulties due to the characteristics of the local market. A serious problem is the big competition and the excess of supply over demand. This trend is associated with social prejudice and government restrictions. Society has a prejudice against the use of cannabis, both for adults and for medical purposes, which significantly reduces the demand for the Organigram product. In addition, Task Force imposes serious restrictions on cannabis advertising, which also leads to a decrease in sales. To combat these phenomena, the Organigram needs a new strategy. The first step will be to expand the company’s representation in the US, the development of a new market. In addition, the Organigram is invited to reduce the production of cannabis for adult use, focusing on medicinal purposes, until society becomes more tolerant of the proposed product.
References
Ben-Ishai, S. (2020). Bankruptcy for Cannabis Companies: Canada’s Newest Export? University of Miami International and Comparative Law Review, 27(2), 226-250. Web.
Gilbert, A. N. (2021). Cannabis: The Uncertain Path from Agricultural Commodity to Luxury Consumable. Luxury, 7(1), 35-53.
Government of Canada. (2016). A Framework for the Legalization and Regulation of Cannabis in Canada. Canada.ca.