RE:RE:RE:RE:Folks I just want to underline somethingTim, I just want to add a few comments. I do not agree with your last statement that Aphria doesnt have the current demand that CGC has for its product. There is no denying that Aphria has a third of the sales CGC has, but I dont equate this to demand. I think it has more to do with Aphria's prodcution capacity. If everything being equal and both CGC and Aph had same production capacity and one was selling more than the other, then you could make the argument that demand was greater for one over the other. However, historically Aphria has always been able to sell all of their production. If anything, their sales have been constrained by their ability to produce product and not because of the demand for their product. As Aphria increases their capacity, I suspect you will see the gap "what you refer to as demand" begin to narrow.
I'm not aware of any business plan for Aphria that says the bulk of their future sales will be wholesale. I think they are inclined to go in that direction, but currently are in a holding pattern to see what the provincial rules will be before they roll out their distribution plan.
From a business perspective, I personaly prefer distribution over going direct. However, that is based on my own personal experience. Much easier for a manufacure to sell through distribution than trying to sell direct to end user.
As a distributor, why would I want to sell CGC product if I have to compete directly against my supplier? I'm stating nothing new. Just the difference between going direct versus relying on distribution channels. Maybe going direct will turn out to be the preferred business model, but I dont see it happening. Maybe the whole Mainstreet model is being driven by the fact that CGC can't be as competitve at the wholseslae level therefore they have no choice but to go direct? Just maybe CGC continues to drive their CGS down to the point where their cost per gram is equal to or lower than a greenhosue operation.
Correct me if I'm wrong, but isn't Aphria and CGC currently selling roughly at the same selling point? Even if $5 was a fair wholesale price. I'm not convinced the additional revenue generated by going direct necessarily offsets the additional costs incurred by maintianing such a system.
Also, I think it is much easier to reach out to the masses through distribution than by trying to sell direct.
One last point. Aphria, by booking their inventory at a lower cost did not drain their inventory from future profit, something which CGC has already done. Is this not true? If not, please explain why because I would be curious to know the other side of the argument.
M
TimMcCracken wrote: GoBlue2016 wrote: BF
you are making the point that there are extra costs which offset the extra rev.
Add COGS and FVI from last Q, they are greater than sales.
And a $5.26 booking cost per bud definitely leaves headroom against sale price. But then the extra costs eat up the headroom. Thus the deficit against sales.
Aphria is booking at $3.75 and selling at same price roughly as CGC. Sure their costs are less but they could FVI to $5.26 too but they are leaving $1.51/gram for future profits and considerably more on oil.
GoBlue
BlackFarms wrote: Blue, respectfully I don't believe this is accurate. From my understanding GoB accounting ends with the raw product being harvested. In a normal agricultural envirnment, the farmer, grower etc... would hand off the raw product to the processor, who in turn would provide the improved or finished product to the retailer. Since CGC is acting as the entire process chain, how do we know where they are declaring the value of the biologicals. In my mind that number is stated on the date of the harvest. Any improvement or transformation of the raw material is not included in GoB's. Therefor there is most definitely profit in the finished oils, pills, bud, etc...
My perspective.
GoBlue2016 wrote: Sorry. I am not bashing. I want investors to understand something that might not make intuitive sense.
I have beaten the GoB horse. I know. But there is not a PENNY's worth of profit in the vault of CGC inventory on Bud and Oil.
They are taking ALL the profits through GoB.
Hi Blue ... I Acknowledge your numbers ... however, please keep in mind that CGC currently has shown they have demand/ customer base to fulfill $70,000,000 or 9333KG based on last Q's revenues numbers and this accounts for no growth forward ... Based on APH's last Q numbers they have current annual demand of $22,800,000 or 3,040KG ... it is my understanding that APH business plan entails the bulk of their future sales to be wholesale? (please feel free to correct me because I don't know) ... if this is correct, what is a fair wholesale price? $5-$6? maybe less ... therefore I think they have no chose but to book their inventory at a lower cost ... so based on this theory it appears APH is pulling just as much profit forward ... because their would be shipping fees to consider with even though it be by mass pallet ... I understand that you will say that's the risk you are talking about ... if CGC has to wholesale ... but in the past 2 conference calls CGC management has mentioned that they believe their future rec sales will be serviced by Mainstreet ... if this is true CGC can still sell in the $8 range ... albeit there will be tax ... but maybe that is on top of the $8 ... or maybe not ... lets assume CGC is able to sell @ $8 - $5.26 leaves $2.74 for costs associated with selling ... and lets assume APH is selling at $5.50 wholesale ... that leaves $1.75 for costs associated with wholesale distribution ... I have said this before but APH is more dependent on need rec to support their share price than CGC as they do not have the current demand that CGC has for it's products ... Tim