As the cannabis industry is prepping up for this year’s 4/20, we bring back our special article series to take stock of what has happened, what is happening, and what will happen in the most hectic yet fascinating horticulture space.
While the cannabis industry is already showing more maturity, it is not excluded from the same current challenges the more established horticultural industries are facing; from finding and maintaining a qualified labor force to inflation affecting companies’ profit margins. On top of that, cannabis operators have the constant challenge of stringent and (sometimes) changing regulations. Every day this week, industry experts, growers, and suppliers will share their insights on their market’s developments, challenges, and expectations for the future.
“Today, surviving is thriving”
“The current market situation is one of a maturing and normalizing market,” agrees Graham Farrar, President of Glass House Farms in California. There are more consumers than ever before, and there will be more tomorrow than today, according to him. “That comes against a backdrop of a rationalizing supply-side market that is undergoing some level of commoditization and professionalization. Today, surviving is thriving.”
Graham Farrar, Glass House Farms
According to Farrar, Glass House Farms is currently bringing online what will be the largest cannabis greenhouse in human history, and doing so in the competitive Californian market. “California is one of, if not the most important cannabis market on the planet. It is the 5th largest economy, the largest cannabis market, bigger than the next 2-3 markets combined.” Glass House is also vertically integrated meaning that they cultivate, make CPG products, and run retail operations. “There are a lot of plates spinning at once, and also tremendous opportunities. Cannabis is a once in a lifetime chance to make the world a better place, build a great home for our employees, and create a company of immense value.”
While Farrar is very optimistic about the future, there are still some hurdles to get through. “I think that we are in a very new, exciting, and fast-growing market and we feel very lucky to have the opportunity to work on the things we are working on. At the same time, I expect it to be a turbulent next 2-3 quarters. The market is young and going through growing pains driven by over-regulation, over-taxation, and a large illicit market. There are lots of possibilities on the regulatory front, and what looks like good odds of tax relief, at least in California. All of it will be worked out but it is going to take another 6 months or so to settle down. I’m very optimistic for the future.”
Further pressure on the market
“We are seeing rapid growth and compressed timelines while dealing with the headwinds of inflation, materials scarcity, freight issues, and labor constraints,” says Mark Doherty, Senior Advisor at Dual Draft, who provides growers with integrated airflow systems. With new states coming online, such as New York, the resource demand for cultivation facilities will be significant, creating further pressure on the overall market, Mark observes.
While experiencing the challenges of lead times and rising material costs, Dual Draft is working hard to get ahead of the curve with suppliers, manufacturing partners, and strategic relationships. “But it really comes down to cultivation companies ordering equipment earlier in their process, if they want to control costs. Holding off on executing an order, by even a few days, can impact project costs significantly.”
Regarding the future of the market, Doherty is expecting there to be some major changes. “The combination of the most highly regulated and fragmented industry meeting massive global economic shifts will result in experienced, tightly run, organizations, who listen to patients and consumers, emerging with clear leads in market share over the next 18 months,” Doherty says. “I think the largest opportunity exists for those operators who can successfully implement a ‘Craft-at-Scale’ model, producing high-quality cannabis while reducing COGS and therefore being more resistant to downward price pressure. This is where I see Dual Draft playing a significant role as well, as we support cultivators in improving yield, quality, consistency, and plant health.”
New York joins the fray
As Mark points out, there are still a few states in the US that are in the process of regulating cannabis, or that have made significant steps about that. One of these, indeed, is New York. “This is a brand new market with cultivation licenses just approved last week,” says Heather Walsh, co-founder of organic hemp farm Twin Arch, out of Hudson Valley. “We are hopeful that dispensaries will be opening by early 2023.”
Heather and Twin Arch really care about sustainable and environmentally friendly practices, and they show that daily on their farm. With a new market opening up in their state, they hope that such practices will be widely adopted. “Jumping into such a new market while focusing on growing using environmentally friendly products surely is one of the biggest challenges we have here.”
Being environmentally conscious as well as ensuring high quality is more easily said than done, but if a grower can combine the two, there are lots of opportunities waiting to be seized. “We believe the market will develop rapidly over the next 12 months and there will be a strong demand for products,” Heather says. “New Yorkers are looking forward to buying a safe, tested product and want to know how the product they are buying was grown, seed to smoke. There will be many opportunities, from cultivation and processing to distribution, retail, and delivery services.”
Equally important is to educate the market on what high-quality cannabis truly is. If a person is used to eating at McDonald’s, they’d hardly opt for a higher quality hamburger alternative if they don’t know what that high quality actually is. “We are also looking forward to the opportunity to help educate the public on the benefits of cannabis and what makes a great quality flower. It’s not just about THC level, but how the THC level and the terpenes work together as a whole.”
Stay tuned for part 2 of our ‘4/20 Stories’!