The other thing I’ll mention is that we started in the European markets with Canadian flower particularly. And in the German market and some other European markets, they value for whatever reason the Canadian product as having a higher quality and being more sort of valuable to them. And so, it is a margin increase for us, but also the predictability because of our knowledge and experience with those indoor facilities in Ontario is so much higher that it’s just an overall better system, which is why we think we can grow margins. Now in terms of the overall margin profile, we don’t see any added costs. And because the economics run through the wholesale list price for the overall system, you’re not seeing the same pricing compression that you would see say in the rec market in Canada.
And as we get greater efficiencies in our production as well as in other aspects of the distribution and sales and marketing in those markets, we do see the opportunity to have an accretive margin situation. So we’re excited about that.
Operator: Our next question is from the line of Tamy Chen with BMO Capital Markets. Please proceed with your question.
Tamy Chen: Hi, good morning. Thanks for the question. I wanted to step back a bit and talk about your cost structure. And I suspect, you may also, as a result touch on the new cost savings plan that you mentioned. But I just wanted to understand, if I look at your business now, the majority is in the medical side. Canada as well as International, though Canada is the bigger part. And with respect to the consumer or recreational segment, over the last several while you’ve really narrowed down that business and your focus to be profitable. I’m just wondering at this point now, when I look at your quarterly SG&A on an adjusted basis, it’s about, as you said, around $30 million a quarter. So that’s still $120 million a year of adjusted SG&A, which is a decent amount versus your total revenue figure.
So I’m just wondering, at this point now, what — why is it so significant? What are the biggest cost components there that you feel can still be worked down going forward? Thanks.
Miguel Martin: You got it. Let me — I’ll make a couple of comments and then I’ll turn it over to Glen. So, first and foremost is [indiscernible], Tamy, and we appreciate the question. We took about $400 million out over the in the past three years and we’ve announced another $40 million to $30 million that you’re describing in SG&A, there’s still complexity and general cost to the cannabis system that looks a little different than say what I’m used to from a CPG standpoint. The production, the medical, the regulation, the shipping, all of that is complex and therefore creates cost. It’s something we look at a lot and I think people should have great confidence that when we say we’re going to get to this $40 million within the time period, we’re going to get there, but that doesn’t mean we’re going to stop there and as we see other opportunities.
In terms of rec, about $14 million or $15 million a quarter in revenue there and we’ve made significant improvements in terms of the cost profile of that. But as you mentioned, the vast majority of our focus and where we think the real upside is on the medical business which scale does benefit you there, which will help with sort of the scaling of the SG&A versus future growth because we can produce out of those common facilities in Canada and ship around the world. Glen, maybe I can turn it over to you and you could talk a little specifically about the cost structure for Tamy.
