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Organigram Case Study 9

Organigram Case Study

Introduction

Organigram is a known name in the cannabis industry. It was founded in 2013 in New Brunswick with very few members of the staff but in few years the company has increased in stature and workforce numbers. The cannabis industry in the country is undergoing rapid changes due to shifting governmental regulations and the companies have to constantly push themselves to keep pace with the same and also stay ahead of the competition. The report seeks to analyze the strategic position of the company in the wake of the recent changes in the governmental policy concerning the cannabis industry.

Industry in which Organigram is operating

Organigram is operating the Cannabis industry of the country. The industry is highly competitive with many players operating in it like the Organigram, Canopy Growth Corporation, Mettrum Ltd., etc. Ever since the official nod for medical use of the substance in 2016, the industry has seen soaring growth. The industry is all set to export to other markets like the US, China, other Southeast Asian nations, Brazil, etc (Canada, 2020). The 2019 legislation to legalize the same for recreational purposes has sent the industry cheering. It is expected the legal market of the company will touch USD 7 billion by 2021 (CannabisBusinessPlan, 2020). The current market value for the company is around CAD470million (Statista, 2021).

Strict guidelines and policy statements are guiding the sameas the Marihuana for Medical Purposes Regulations (MMPR) that fall under the ambit of the Controlled Drugs and Substances Act 2013. MMPR ensures that only some Licenced Producers are allowed cultivation and sale of the dried cannabis to various patients (Professors, 2019). However, with the latest Task Force rules, the companies are now making a foray into the recreational options as well. The ambiguity regarding the same has led the company to take the decision with more grey knowledge which has made the same more challenging(Professors, 2019).

Factors Contributing to Ambiguity faced by Organigram

Organigram is the first company in the region to have been granted the license to sell and grow medical cannabis in the area. It is the certified cannabis producer in the country. The company due to its certification is supposed to abide by the increased number of regulations.The company is faced with a new ambiguity with the latest revisions on the recreational use of cannabis by the latest governmental task force. The company has been operating successfully in the medical use of cannabis and has been promoting its flagship product lines to be organically grown under regulated soils and only regulated fertilizers. The company had received organic certification in 2014 (Professors, 2019).

Although other companies have started to service international markets, the management of the company wants to focus on the Canadian market as it is not fully serviced in terms of medical cannabis use. Being a credible player in the industry and having suitable licenses the management wants to cover the entire Canadian market and consolidate its position there(Professors, 2019). However, the legalization of the recreational use of Cannabis presents a grand opportunity for the company to venture in this direction as this is the most appropriate time to establish one’s position. However, there is a chance the company might lose its position as a trusted supplier of medicinal cannabis. But the partnership with TGS can be highly useful at this juncture if the company wants to foray into recreational cannabis as Colorado is the gold standard for the same even though the state faces legal restrictions (Professors, 2019).

Possibilities for Growth of Organigram

The Canadian Cannabis industry has come a long way since Cannabis consumption was illegal to allow the use of same for recreational purposes(Professors, 2019). The industry already has many players operating in the medical use of Cannabis and with the latest guidelines by the task force on the recreational use of the same, it has become even more important that the company reconsiders its strategy. There are many factors that the company has to consider for its growth. Although the company has a know business line in the medical use of Cannabis, it can continue to expand itself on the same front across Canada and then to the international markets (Professors, 2019). This will not impact its legalization in any manner as it already has requisite licenses for the same.

However, if the company decides to use the TGF partnership and develop recreational Cannabis, there are many risks that it will have to face(Professors, 2019). One, it maybe possible that it will need fresh licensing for the same. Also, the marketing requirements for the same being highly peculiar the company will have to deal with it very carefully to avoid any scrutiny by the government. Also, it will have to factor-in constraints like underage access to the same and not allowing any illegal sale to the criminals for profit-making (Calla, 2018). This can bring severe consequences for the company. Apart from that the inherent risks in the cannabis industry and the possibility of the sudden introduction of more regulations on the finances, cultivation, taxation, supply chains, etc. cannot be ruled out(Parker, Di Mattia, Shaik, Cerón Ortega & Whittle, 2019). Also, there can be trademark disputes especially in the case of recreational Cannabis if the company pursues its TGF partnership or any other in the US as there is a huge gap between the trademark protections between the states and the US government that can come in the way of TRIPS treaty (Wells, 2021).

Thus, the company may have to cope with contrasting legal and marketing requirements for both types which can lead to a considerable strain on management and resources(Professors, 2019). Moreover, there is a possibility of the company losing its existing positioning in the Canadian market.

Evaluation Criteria to be used by Organigram for Growth

Organigram is a trusted brand in the field of the medicinal use of Cannabis in the country(Webster, 2019). The company has been one of the first to get a license for both growing and selling the same. It has been selling under the banner of 100 percent organic products and hence complied with all the requirements to meet the government guidelines. The company has a bright chance to expand the same in the Canadian markets and capture the same(Professors, 2019). This will only require that it expands its supply chains and seek the necessary approvals that will become easy as it already has a credible name in the industry. But, if it wants to venture into the recreational segment, it has to evaluate its production of possible edibles that will be permitted, import lines from TGF, the supply chain requirements for recreational products, the financial transparency to show the government that the products are not passed in the hands of illegal persons or groups, and also the marketing requirements to keep underage use in check(Professors, 2019). Thus, the company has to work around a multitude of factors to make the most of the opportunity. There is a huge risk involved as the chances of reversal or more stringent rules to monetize the same and more restrictions on edible formats can be introduced keeping in mind the public health (Parker, Di Mattia, Shaik, Cerón Ortega & Whittle, 2019).

Next Steps of Organigram

The company has to take many strategic calls and the management has to walk ahead with care. The best way forward will be to consider the emerging conditions in the industry and factor in the assets and resources of the company. It is also important to consider the current market positioning of the company to ensure that it does not get diluted as it enters the recreational goods segment. The company can thus continue to expand in the Canadian market for the medicinal use of the product(Professors, 2019). At the same time, it can consider introducing the recreational product under a new brand name and in selected markets in Canada. This will help it to get desired licenses, and also not impact its current position. The venture should be small in the beginning to keep minimal resources busy in the same (Professors, 2019). This will give it enough cushion to expand into the new market and also change strategy in case a new policy revision is made.

Industry Scenario

The industry is likely to see many new players entering with the legalization of recreational drug use (Webster, 2019). There will be more competition but also the possibility of stringent entry requirements and more checks cannot be ignored. The industry will see more responsible ads and messages by the companies to not invite wrath by different rights organizations. The industry is already booming and with new options, it will flourish further. This will also lead to the potential for more risks.

Conclusion

The Cannabis industry in Canada is growing and with the legalization of recreational use, the growth is going faster as more players will enter the same. Organigram is a known name in the medicinal use of Cannabis and hence it will have to weigh in many considerations before opting for recreational use (Professors, 2019). Although a strategic option but the stakes are high and hence a prudent decision is the need of the hour taking into account the current scenario, the company position, and the market ambiguity.

References

Calla, L. (2018). Black Market to Blue Chip: The Futures of the Cannabis Industry in Canada. Retrieved 23 March 2021, from https://core.ac.uk/download/pdf/157730421.pdf

Canada, H. (2021). Cannabis market data - Canada.ca. Retrieved 23 March 2021, from https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/market.html

CanadaBusinessPlan. (2020). Canadian Cannabis Market, existing medical and recreational forecast. Retrieved 23 March 2021, from https://cannabusinessplans.com/canadian-cannabis-market/#:~:text=The%20total%20cannabis%20market%20in,in%20the%20legal%20recreational%20market.&text=The%20cannabis%20market%20is%20poised,effect%20overall%20on%20Canada's%20economy.

Charles W., (2021).Trademarking Recreational Marijuana and Potential Threats to the United States' Treaty Obligations. Available at: https://digitalcommons.law.uga.edu/jipl/vol28/iss1/11

Professors, V. (2019). Contemporary Issues in Business: A Case Approach (1st ed., pp. 103-109). London: Ivey Publishing.

Parker, K., Di Mattia, A., Shaik, F., Cerón Ortega, J., & Whittle, R. (2019). Risk management within the cannabis industry: Building a framework for the cannabis industry. Financial Markets, Institutions & Instruments, 28(1), 3-55. doi: 10.1111/fmii.12104

Statista. (2021). Topic: Recreational cannabis in Canada. Retrieved 23 March 2021, from https://www.statista.com/topics/4500/recreational-marijuana-in-canada/

Webster, P. (2019). Canada to widen its newly opened retail cannabis market. The Lancet, 393(10167), 116. doi: 10.1016/s0140-6736(19)30075-3