Organigram Holdings (TSX: OGI) (NASDAQ: OGI) is working on strengthening its distribution lines. The company announced this morning that it will become Shoppers Drug Marts latest cannabis supplier for its online medical cannabis platform, which provides Canadians with access to a number of different medical cannabis producers.
The news, while not overly exciting given how many producers have now partnered with Shoppers Drug Mart for the distribution of medical product, is still a big development for Organigram. The company has seen a major shift within its sales mix as of the last quarter, with adult-use and medical product sales being on a significant downtrend. While the company beat market expectations handily, this was largely through an increase in international and wholesale product, which is typically sold at a lower margin.
The additional medical distribution line will as a result enable the firm to ideally capture growth in a segment that has been on the decline over a number of quarters. The medical category is typically one of the highest gross margin segments for licensed cannabis producers. However, given that Shoppers will be acting as a middle man in the equation, Organigram may see some price compression in the segment.
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Under the signed agreement, Organigram is to supply Shoppers with dried flower, oil, and future derivative products for a period of three years. The agreement has an additional two year renewal option as well.
Organigram Holdings last traded at $3.14 on the Nasdaq.
Information for this briefing was found via Sedar and Organigram Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
