Organigram: How a Misunderstood Recall Created a Rebound Opportunity — CFN Media

SEATTLE, WA–(Marketwired – Mar 6, 2017) – CFN Media Group (“CFN Media”), the leading agency and digital media network dedicated to legal cannabis, today announced publication of an article covering Organigram Holdings, Inc. (OTCQB: OGRMF) (TSX VENTURE: OGI). The article covers details of the company’s recent voluntary recall, the company’s vigorous response, and the company’s path forward.

Organigram began a voluntary recall of 69 lots of product under a Type II recall and an additional five lots of product under a Type III recall on December 28, 2016. These products included both dried marijuana and cannabis oil produced between February 1, 2016 and December 16, 2016 that tested positive for low levels of myclobutanil and/or bifenazate — two pesticides that aren’t authorized for use on cannabis plants under the Pest Control Products Act.

These two pesticides may not be approved for use on cannabis plants, but they are commonly used in other areas of food production. Myclobutanil is a fungicide that’s considered “slightly hazardous” by the World Health Organization with a “relatively low acute toxicity” by Environmental Protection Agency (EPA) standards. Bifenazate is similarly described as “unlikely to affect your health when used according to label directions” by Health Canada.

The company was unable to identify the source of the contamination, but as an organic producer, it wasn’t required to test for materials found in fungicides or pesticides that aren’t employed in its production processes, which is why it slipped in under the radar. Actual product returns are expected to be low based on dried marijuana and cannabis oil sales, while Health Canada only received a report of one adverse reaction due to the contamination.

Investors will get an idea of the full impact of the voluntary recall during the company’s second quarter financial results coming out in April of this year. In particular, clients will have been given the required month to switch providers if they were concerned and the full impact of the company’s reimbursements will show up. The stock has fallen nearly 30% over the past three months, but the true impact may be less than many investors are expecting.

Organigram has taken several measures designed to ensure that contamination of its products will never happen again, which involves several voluntary measures that exceed federal requirements imposed on the industry. In essence, these changes could make the company one of the safest licensed producers in the future given these new guidelines. New consumers may appreciate these trends and management’s openness in dealing with these issues.

The new measures being implemented include:

1. Testing of every product lot for pesticides before they’re made available for sale.
2. Testing of all inputs from outside supplies, including seeds, fertilizers, water, etc.
3. Updated operating procedures for periodic live plant sampling for pesticides.
4. Formal program for receiving, securing, and testing critical inputs on a routine basis.
5. New screening process to pre-qualify suppliers before they’re approved.
6. New closed-circuit cameras in areas of the facility that aren’t required to be monitored.
7. New education and training program for all employees.

Finally, the company announced that uninsured clients impacted by the recall with receive full credit for their affected purchases, which will represent around $2.26 million and be reflected in the company’s second quarter financial results coming out in April 2017. By issuing these refunds, the company has proven their commitment to clients and may have created an even more loyal customer base over the long run.

The company’s handling of the situation demonstrates management’s strength in being open and honest with clients and doing the right thing with compensation. With Greg Engel joining the company as incoming Chief Executive Officer, the company further strengthened its management team given his experience in several senior-level and executive positions in related industries over the past 25 years.

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CFN Media (CannabisFN) is the leading creative agency and media network dedicated to legal cannabis. We help marijuana businesses attract investors, customers (B2B, B2C), capital, and media visibility. Private and public marijuana companies and brands in the US and Canada rely on CFN Media to grow and succeed.


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Frank Lane
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