From one of many Creso Pharma's ASX announcements:
'About Creso Pharma
Creso Pharma is bringing the best of Cannabis to better the lives of people and animals.
Creso brings pharmaceutical expertise and methodological rigour to the world of medicinal cannabis and strives for the highest quality in its products. It is a global leader in medicinal cannabis and cannabidiol (CBD) innovation and developing cannabis and hemp‐derived therapeutic‐grade CBD nutraceuticals and medicinal cannabis products with wide patient reach for human and animal health. Creso uses GMP development and manufacturing standards for its products as a reference of quality excellence with initial product registrations in Switzerland. Creso has worldwide rights for a number of unique and proprietary innovative delivery technologies which enhance the bioavailability and absorption of cannabinoids.'
Based on there recent announcements, it looks to me like CPH are following through with their vision!
In response to your post:
'In general, young companies flourish when they are really good at a small number of things. Then, as their reputation grows, they can branch into new products or markets. This approach minimises early cash-burn and significantly increases the chances of long-term success.'
You are generalising, and this is not always the case.
'The reason is quite simple. A company's cost function depends on several variables, most importantly the:
1. number of products (SKUs) they produce or sell; and
2. number of geographic markets they serve.
It therefore follows that, the fewer products and the fewer geographic markets that a company enters, the lower its initial costs.'
You are focusing solely on the costs. By diversifying their product line and geographic markets they achieve a broader revenue base, which will all add to the bottom line. Assuming management are conscious of their costs & control them within acceptable bounds, then company profits should increase. Personally, if I had a product to sell I would be trying to reach as many markets as possible.
'Basically, concentrating on only one market or product line etc results in significant economies of scale, whereas a diversified start-up never reaches sufficient scale in any product or market to achieve said economies.'
Sure economies of scale can be achieved by focusing on one market or product, but it doesn't mean the company is not capable of achieving economies of scale for multiple products concurrently.
I disagree with your statement that 'diversified start-up companies never reach sufficient scale in any product or market to achieve said economies'. It's an unfounded generalisation.
'So, while I applaud CPH's ambition and vision, the financial realities paint a far less appealing picture to me.'
Each to their own view. However if you are examining financial realities, then I suggest you consider the potential for revenue also. You need to spend money to generate revenue and there will be a time lag for the latter. Time will tell if CPH strategies are successful or not.
