Organigram Provides Corporate Update - Seite 2

The lack of a sufficient retail network and slower than expected store openings in Ontario continued to impact sales in Q4 2019 and were further exacerbated by increased industry supply. The majority of the product returns and price adjustments (of about $3.7 million) was largely due to returns and price adjustments for two slower selling SKUs sold to the Ontario Cannabis Store (OCS), comprised of a bespoke order of lower THC dried flower intended to fulfill a supply gap in the market earlier this year and THC oil which has seen less than anticipated demand in the adult-use recreational market.

Organigram has and continues to build excised finished product across a variety of SKUs and is ready to onboard the addition of the second wave of Ontario retail licensed lottery winners (both traditional and First Nations licenses granted or available). These stores should triple the existing retail network currently available in Ontario. The first few of these new stores are expected to open shortly.

Market Share and Retail Sell Through

Organigram believes market share is an important indication of success for a licensed producer (“LP”) as sell through to end consumers is a strong predictor of long-term sustainable revenue. This is particularly relevant for LPs with strong distribution like Organigram which has sales in all 10 Canadian provinces.

The Company receives market share results from some Canadian provinces. Based on this information and other data points that are accessible to the Company, Organigram believes it has an enviable market share in the national adult-use recreational market. In Ontario, Organigram continues to be one of the major players in this market. On the first anniversary of adult-use recreational legalization, the Company noted the OCS reported its Edison brand had the top three selling pre-rolls in the province with its City Lights, Rio Bravo and Casablanca strains taking the top three positions, respectively¹. In addition, Rio Bravo and Casablanca were highlighted as two of the top five strains ordered on the OCS website.²

“Since we were one of the first success stories following legalization, we had early visibility of product sell through. As such, we are already well underway in aligning our strategy and production mix to emerging consumer preferences,” said Mr. Engel. “We have also piloted ‘limited time’ offers of other strains. Two in particular have been met with exceptional customer feedback: Edison Limelight (sativa) and Edison El Dorado (hybrid) and as such, we are incorporating these new strains into our core offerings.”