The market has not looked too kindly on TGOD stock. Since mid-March, shares have declined roughly 50%, and today, that decline increases with shares selling for $3.21 CAD. Is The Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) a unique cookie in the cannabis jar?
TGOD Stock Continues to Drop
With a focus on "premium" upmarket cannabis, TGOD has for quite some time placed all its emphasis on quality and not quantity (I say this, and yet, the company has approximately 200,000 kilos pegged for annual yield come 2020). The goal is to become a leading brand in the premium or craft cannabis space.
Artisan cannabis, if you will. It's not a bad idea. We have artisan coffee shops that routinely drive profits from small cups of high-quality coffee. The same can be said for bread and meats—where consumers are willing to pay more to know where their products come from rather than succumb to the 2-for-1 deal at the local conglomerate supermarket. But will that idea really work for cannabis?
Well, TGOD stock price would suggest that investors don't really believe it will—not yet anyway. In fact, there is so much emphasis on production capacity within the cannabis industry, that focusing on quality over quantity might spell certain doom.
Further, The Green Organic Dutchman is not concerned about cutting cost to increase profit margins. Rather, the focus remains on paying whatever it must to produce the best premium cannabis in the industry. Of course, if the company can achieve this, then a loyal consumer base is likely, and higher margins can be commanded.
But right away? Probably not.
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A Preference for Organic
The company's own survey shows that 61% of medical cannabis users and approximately half of recreational cannabis users prefer using premium organic products. In other words, the preference is for organic rather than a quick turnaround product potentially pumped with chemicals.
The global move towards healthier meat-alternatives, less-sugary drinks, low-calorie lifestyles does back up this train of thought. So there's every chance that this niche of cannabis will indeed blow up.
But niches tend to establish themselves later on an industry's life-cycle. Not at the start. Consumers have to try the generic first to know what premium even means. So perhaps The Green Organic Dutchman's plan is a little bit premature.
Should the company simply look to cut operational costs to turn a profit sooner than later? Perhaps then TGOD stock may climb again. When the industry establishes itself and consumers begin to recognize the difference between product quality, then perhaps niches will emerge, and TGOD stock can shine.
What are your thoughts on this?
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