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4/20 stories, pt. 1

"There may be fewer total projects, but quality and scale have increased"

It is that time of year again: the cannabis industry is getting ready for 4/20. In honor of the cannabis holiday, we bring back our special article series to take stock of what is happening in the industry. Every day this week, industry experts, growers, and suppliers will share their insights on their market's developments, challenges, and expectations for the future.  

Vertical farming gaining popularity
"It is no secret that 2022 was a difficult year for most cannabis owners and operators," says Michael Williamson, Director of Cultivation at Pipp Horticulture. "Cultivation facilities in mature and competitive states (especially on the West Coast), have been experiencing the price of flower tumble to all-time lows. Naturally, this price compression has forced operators to either lean up operations and improve throughput and efficiencies or, in some cases, close their doors for good. Price compression paired with inflation, supply chain bottlenecks, labor shortages, and banking restrictions, the last few years have been a rough ride for most."

Michael Williamson 

According to Micheal, one of the ways existing operators are improving their revenue and reducing the cost of goods sold is by converting legacy single-tier HID cultivation facilities to multi-tier LED. "Mobile racking and multi-tier cultivation has gained significant popularity and acceptance with growers, owners, and investors over the past few years and now is a common and best practice cultivation strategy for indoor cannabis cultivation."

Unfortunately, customer project delays continue to create some challenges with sales cycles, production flow, material storage, and shipping logistics, Michael says. "These delays are usually caused by one or more of the following: funding, licensure pending, construction, utility upgrade, local municipalities, and value engineering. Pipp has been in business, during good times and bad, for over 40 years. So we are well-positioned and excited to continue to support growers and owners for years to come."

"Though our supply chain has improved from a couple of years ago and customer lead times have improved, we anticipate the next three months will look very similar to the last three months," Michael says. "Equipment sales continue to trend similar to 2022 with fewer total projects in the pipeline, though the quality and scale of the projects have increased. Several client projects are delayed for various reasons, which include licensing delays, local municipality issues, financial challenges, and value-engineering."

While mature markets struggled, new and emerging markets (primarily on the East Coast) started to take flight, with seven states beginning sales this past year. "Though a bit slow out of the gate, New Jersey and New York are on track for huge growth in 2023-24 as more licensed operators complete licensing and construction. Pipp is also gearing up for the European market, which is starting to gain traction. Pipp will be showcasing products and solutions at trade shows in Amsterdam and Berlin this year," Michael says.

"Fantastic developments"
Let's take a look at a market that is starting to find a state of normalization, according to Will Bowden, CEO of Grasshopper Farms. "Michigan operators with a sound business plan who are able to remain agile with the market are finding their footing. A balance in the business relationship between retailers and suppliers is starting to develop. The regulatory body of Michigan has been more aggressive with enforcement, which is addressing illicit material and practices. We have a ways to go, but these developments are fantastic for our Michigan market."

Will Bowden

One of their top issues has been struggling with licensed facilities, Will says. "Operators who enter into an agreement they aren't able to honor is always an issue of any new (and even existing) market. But communication has to be the top priority in these instances. We can work through the issue if we work together. Unfortunately, many choose to avoid the conversation and simply leave things hanging with no obvious path forward. I wish more facilities could understand that we are all in this together and there is always a path to a resolution - that always starts with a conversation."

"Michigan has not yet found the ceiling of demand. So, the biggest opportunity we see at Grasshopper Farms is doing the work to develop a thorough understanding of our market, our customers, our demand, and our potential demand," Will adds. "This is also a time in which businesses who focus on a core competency will find a solid foundation, versus those who keep changing their business model. We focus on our identity, premium sun-grown flower, and core competency, a single-season outdoor farm."

Stay tuned for part 2 of our '4/20 Stories'!

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