"As the cannabis industry has matured, we're beginning to see market compression around the world, and businesses are now required to operate more efficiently. The other challenge is capital: cannabis has gone from a fun risk to just another risky investment," says Cory Waggoner, Founder and CEO of Higher Yields Consulting. Cory founded the cannabis consulting company in 2015 after working as one of the first cannabis operators in Colorado. "At the time, the cannabis industry and its regulations were developed in theory and not practice. We were one of the pioneers who worked through these regulations in practice. As pioneers, we took a lot of bad beats, and I saw the opportunity to support new businesses and current businesses to avoid those pitfalls. As the industry has matured and markets are compressing, businesses are struggling to survive."
Challenges
According to Cory, the biggest challenge currently is efficiency. "With such tight margins, you need to be efficient. With some companies growing in old facilities or with dated technology, that's a major issue. Sometimes, cannabis growers are resistant to change. They don't always believe that modern systems, such as fertigation, LED lighting, and data analytics tools, are helpful. They believe there is no better way than their way," Cory says. "The other challenge in the industry is capital. Since cannabis programs have evolved and the barrier of entry is less, it has created saturation in markets around the world. Operators have not been able to keep up with market compression, which has resulted in defaulting on loans. Now investors are anticipating their return, and they're not receiving it, turning their for-sure investment into a distressed investment," Cory says.
Yet this is exactly why the company finds it important to help the industry. "Especially when the market is challenging, we want to add value. When states like Oklahoma set up a market where anyone with $2,500 can enter the cannabis industry, which has led to over 10,000 active licenses, that is a problem. That's why we also work with lawmakers to create more sustainable cannabis markets," Cory says. "Moreover, we focus a lot on the producers and improving their quality. When everyone's prices are low, quality is more important than ever to make your products stand out."
Emerging markets
But it's not just the North American market that the consulting company focuses on. "We've been in the Australian market for quite some time. It started out with very strict regulations and a very limited amount of licenses. As a result, the market has managed to maintain its pricing," Cory says. "We also do a lot of work in Central America. We're currently working in Panama, for example, to advocate for sustainable cannabis industry regulations." Overall, Cory believes that the global cannabis industry will develop into certain areas being better for certain parts of the production process. "For example, we're not going to be able to produce products as inexpensively in Europe as we can in Central America. In the future, I am expecting Central America to become a major player in the cannabis industry."
Helping companies
Overall, Higher Yields Consulting helps cannabis companies in four different aspects. First, startup services. "This basically concerns all the things that aren't as fun, such as the business plan writing and the regulatory work. We also help companies that are looking for permits. That can be quite the challenge now: while some states are very easy to enter, some are very competitive." Secondly, facility and system design. "We've designed over 5 million square feet of cannabis facilities. This includes supporting the design of floor planning, where we focus on allocating space, workflow, and mitigating risk. We then support these facility designs with the engineering of all the environmental equipment that comes together to replicate Mother Nature." Higher Yields also help with marketing and demand generation. "Once the products are created, we help to bring them to market. We help create branding and packaging that makes the brand stand out, and help with marketing their products." Lastly, growth services. "This is a two-pronged area. For a long time, this was dedicated to helping companies expand their footprint, so finding new licenses, new emerging states, or countries. In the last two years, the markets have matured. Now, we're working a lot more to optimize companies, so internal growth instead of external growth. This is important, as many operators used to work at high margins for a long time. Now that it has become more difficult to sustain your market share, it helps a lot to provide them with better lights, better HVAC, and using data to have more insights into their production, for example."
Overall, Cory says that it's been an interesting time working in the cannabis industry and seeing the developments. "While it is still nascent, it has grown into an industry that is being taken seriously. It is also great to see other industries developing further because of the cannabis industry. For example, indoor LED technology wouldn't be where it is today without cannabis. It's amazing to see where we are today as an industry, and we are excited as an organization to be leading the way for global change."
For more information:
Higher Yields Cannabis Consulting
www.higheryieldsconsulting.com