"Deciding whether you want to play the short or long game is vital to your success," says Ryan Douglas of Ryan Douglas Cultivation. It is no secret that increased competition and price compression are worrying cannabis growers across the United States. As the new year is approaching, how can growers best focus their time, attention, and investments to ensure a prosperous 2023? From properly determining your business strategy to looking at other sources of revenue, Ryan has much practical advice to share in his upcoming webinar. "There is a tremendous demand for certain cannabis services of which there is currently a lack of in the U.S. Instead of being susceptible to the ups and downs of the flower market, these services will continue to be in demand."
The short-term strategy
According to Ryan, short-term and long-term strategies can both be lucrative. However, the company needs to decide and invest accordingly. "A company with a short-term strategy is planning to be in operation for about two to three years. This makes the most sense in new markets. The goal is to come to market quickly, take advantage of high price points, and exit once competition increases," Ryan explains. The first couple of years in a new market are the most lucrative, as there is a high demand with a typically low supply. "In those first years, growers can typically sell a pound of cannabis flower for $3,000-$4,000."
In order for the short-term strategy to work, a couple of aspects need to be in alignment. First of all, the strategy affects genetics. "In the short term, there is no time for pheno-hunting or breeding. Therefore, in order to be successful, you have to come to market with the genetics of known quality, something that the consumers want and will perform well in a commercial environment." When it comes to the grower, there is no time for a long learning curve either, Ryan explains. "When implementing a short-term vision, you need to have a grower who has experience working on a commercial scale." Lastly, the facility choice is affected as well. "There is not much focus on energy efficiency with a short-term vision, so growing in an indoor facility makes sense. At the same time, there is no time for expensive retrofits or dealing with technological problems. Therefore, it is important to have a team that is experienced in designing and building production facilities. Overall, if all aspects come into alignment, a short-term strategy can be very profitable."
The long-term strategy
When choosing the long-term strategy, how you grow and should invest is dramatically different. "Energy efficiency and quality assurance should now be the focus. We need to anticipate that our industry will come with much tighter scrutiny in terms of our energy efficiency in the future. For example, in 2023, California will come out with new energy codes for CEA businesses. That is going to dictate the light and energy spent on HVAC and even dictate how greenhouses can be built. Even though this is just one state, such policies tend to influence other states' policies. When wanting to be successful in the cannabis industry in the long term, one needs to look at the building and operating the most energy-efficient facility possible. Inevitably, that comes down to either a hybrid greenhouse or a greenhouse," Ryan explains.
As the United States is inching closer to federal legalization, companies with a long-term strategy can expect to be in business when federal legalization is a reality. Ryan explains that that is something these companies should take into account. "Once cannabis is federally legal, there will be a much greater focus on safety and consistency for the consumer. There will be entities creating and enforcing such regulations. Therefore, having a quality management system based on SOPs will be essential to be successful in the long run."
Other sources of revenue
When talking about short-term and long-term strategies, the tipping point is really the increased competition. "What worries growers is the fact that they can only drive down their cost of production so low while the market rate for a pound of flower is out of our control." So when the prices go down, how can you stay in business? Ryan's suggestion is to explore other sources of revenue. "There are other services you can provide to the cultivation industry. For example, there is a serious demand for, but a lack of, young plant producers in the U.S. Every time a brand new company starts up, or an existing company has had a crop failure, they need to acquire a lot of rooted cuttings in a relatively short time. But there are very few suppliers that offer clean genetics of known characteristics. Therefore, becoming a producer of young plants or rooted cuttings offers a lot of potential."
A similar opportunity lies in tissue culture propagation, according to Ryan. "More and more diseases are jumping from conventional crops onto cannabis, which is going to continue in the near future. What growers need is a chance to start their crop clean from the get-go, but there are only a few tissue culture companies in the U.S. that will service cannabis growers. Moreover, with these new cannabis viruses emerging, offering diagnostic lab services is also a great opportunity. Oftentimes, viruses have a funny way of manifesting themselves in the crop, and it is especially difficult with new viruses to identify what the issue is. A diagnostic lab helps growers by identifying the virus or pathogen. After that, the grower could decide to find a tissue culture lab to clean up the genetics. These are all ways that cultivation companies can make money through services that will continue to be in demand without being susceptible to the ups and downs of the flower market."
Interested in hearing more?
If you are interested in hearing more of Ryan's advice on running a lean and profitable cultivation business in 2023 and beyond, you can join his free webinar. "Seeing Green: How to Ensure a Prosperous Cultivation Business in 2023" will be held on Wednesday, December 7, 2022, at 11 am EST / 4 pm GMT. Click here to register.
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