Not about size - it's about efficiencyLooking at the news Canopy put out tonight shutting down over 1M square feet of greenhouse space in order to "right-size" for the real supply/demand in this market, it confirms that the race to get the largest number of square feet was a losing one. I remember a couple of years ago where the bigger the facility a company announced, the higher their stock price went.
Supreme, although having a respectable size greenhouse, wasn't the largest, but at this point I believe it's just the perfect size they need for this market. They didn't have to invest billions and write down billions like some of these big behemouth companies are doing. Despite the setback in recent quarters due to adjustment in startegy from B2B to CPG, Supreme is of a size that can navigate through these murky waters more nimble than the big guys. With the compartmentalization of the greenhouse in 10,000sq.ft isolated and independant rooms, they can granualy scale the production on current demand in a cost effective manner.
I believe in the end of the day it will be the smaller companies that will prevail. Supreme delivers quality product that the consumer demands, has already taken "right sizing" measures to control costs, and has demonstrated adjustments in price to ensure they move product. They will be offering products at the right category mix proven in California focusing on dry flower, vapes, convenience products (pre-rolls) and shatter/resin. Edibles and especially beverages make up only a small market segment yet require significant tooling and investment. Look at how much Canopy spent on their beverage production lines only to have issues with the aluminum cans absorbing the THC out of the fluid, for a product category that makes up 2% of the entire market demand.
The next few quarters are very critical for Supreme to demonstrate that it has made the right adjustments in strategy and being executed properly by an expereinced CEO (Colin Moore) and demostrate growth QoQ going forward.
They don't have to sell as much volume of product as the big boys out there, but sell out the max they can produce out of their cultivation capacity in the various product mixes, and be profitable at it. That's what will win going forward.