“While California remains a challenging market, we have continued to make progress. We are cash flow positive this year and continue to expand our production,” says Graham Farrar, President of Glass House. The company is expanding its production in phases, retrofitting a 5.5 million square foot greenhouse in Southern California. “We’ve been operating in the first phase for about 16 months now and are on track to put plants into the next phase in the first quarter of next year. We also expanded the nursery significantly, almost doubling the size,” says Graham. Yet, at the same time, many other California cannabis growers haven’t been able to survive the challenging market. “Since day one, we’ve been focused on producing the highest quality for the lowest cost. Our goal is essentially to disconnect ourselves from the pricing cycle. If we can grow the best cannabis for the lowest cost, then our product will be in demand, no matter what the average price of the market is.”
Something all of California had to deal with this year was the weather. “From beginning to end, it’s been a wild year when it comes to the weather,” Graham says. “To start off with, it rained for the entire month of January. We don’t complain about rain here because we need water, but from a cultivation perspective, it was wet and dark. We track our light levels on a weekly basis relative to the ten-year average. For two months, we had half or less light than expected. On top of that, we had the first tropical storm on record to hit California in August. So that meant more cloudiness and humidity.” Those are some challenging conditions to deal with when growing in a greenhouse. “We’re fundamental believers in greenhouses. In the long run, we’re convinced that it is the best, most environmentally friendly, and efficient way to grow. But it also means that sometimes you’re playing with the hand you’re dealt. Luckily, our team has done a great job dealing with those challenges and we now seem to head back into a more normal cycle.”
These past years, a lot of California cannabis producers have left the market. According to Graham, consumption hasn’t changed much. “If you see any numbers that are down, they’re usually in dollars, not units. Instead, price compression is happening, while more people are probably using cannabis than ever before.” Graham explains that the price compression is not necessarily a bad thing. “The market exists for the patients and consumers, not for the producers. Before legalization, cannabis used to cost $4000-5000 per pound, meaning that it was only available to a small group of people. We believe in the benefits of cannabis and want to keep it accessible to everybody who wants it. That means that the price has to be accessible as well. So, while the price compression is, of course, a challenge for producers, it does increase the size of the available market. We have to continue keeping in mind who we do this for: the patients and consumers.”
Overall, Graham is optimistic about the future of the industry and Glass House. “Cannabis is not something people will move on from. People will continue to use it, and more and more people are learning about its benefits. That being said, there are, of course, many challenges the industry faces. For example, the excise tax on a bottle of wine is 15 cents, whereas the excise tax on a 1-gram joint is $1,50. On the one hand, society is saying that cannabis is medicine, but on the other hand, it’s being taxed like it’s a vice. The illicit, unlicensed market, of course, doesn’t charge any tax. On top of that, there are around 11,000 liquor stores in California, while there are only 1,000 dispensaries. If a product is difficult to access and is being highly taxed, then it doesn’t come as a surprise that it’s challenging to get people to go through licensed channels.” Yet these are all fixable problems, and positive progress is also happening, Graham says. “Unprecedented progress is happening in the industry. The HHS has recommended the DEA to move cannabis from Schedule 1 to Schedule 3, the SAFER Banking Act was approved by the Senate Banking Committee for the first time, Ohio just legalized adult-use cannabis, Gov. Gavin Newsom is working on bills to allow interstate commerce, to give some examples. It might be happening slowly, but there’s lots of progress happening,” Graham says.
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