Preparing your infrastructure for initial production as you prepare for scale

By Eric Brandstad, General Manager, Forever Flowering Greenhouses

 

You’ve secured initial funding and are about to purchase land, or you’ve just purchased land, and you want to get into cultivation as soon as possible. Now what?

 

As state regulatory details come together, your focus is now on preparing your infrastructure. Questions you are likely considering include:

 

·      Where should I locate?

·      What local permitting issues apply?

·      How do I assess if and when my property is suitable for cultivation?

·      Who are the right people to talk to help me assess how to build out my operation?

 

Legalization has created a huge surge of people wanting to get into the cannabis game. But it appears very few of them have a clear understanding of their path to successful production. I saw lots of lost souls walking around Vegas at last month’s MJ Biz Conference.

 

Here’s my set of recommendations on preparing your infrastructure for your first production cycle.

 

1.    Perform due diligence

 

You absolutely need to understand local regulations. Which counties and cities are favorable to cannabis siting? How are ordinances affecting land values (and your budget)? How stable do these positions seem to be?

 

This industry is riddled with regulatory uncertainty. It is highly possible that local regulations affecting your grow site will change. I urge you to check CannaRegs or other sites to track laws.

 

Cannabis is so attractive that investors are too often too loose on due diligence. The level of risk some cannabis investors are willing to take is way beyond other investments. The thinking is that “Money grows on trees…” Well, that might have been true in medical markets a few years back but the game is different nowadays.

 

You can pencil in the fence and the gravel and everything else. But you can’t pencil in ROI. You can get crop loss in a variety of ways, and you may need more experience before entering with such profit certainty. Make sure you understand what you’re getting into. I have seen investors buy land – very expensive land – and later learn that they can’t get power to their property.

 

Perform power and water analysis, talk with neighbors, engage regulators, join local chapters of growers associations like California Growers Association.

 

After all, you may need to upgrade the property. So build in a smart contingency and don’t buy fancy tile! Forgo all this, and you will learn the hard way!

 

2.    Determine your path toward scale

 

Look at your property and budget. Consider how you’ll scale up. Be very clear with your timelines and budgets. The closer you get to the outdoor season as you close on a property, you may decide to start there.

 

I advise to focus on learning the craft, generating revenue, gaining investor confidence. Do some R&D. Get your feet wet. Then scale.

 

Maybe you can’t start with a mega structure. Maybe you get a simple hoop house. Maybe you start one acre of open field production CBD, plant early, create some oil, make a killing, then plow it into your next decision. Use the cash flow to build a facility or go from a rental facility to purchasing a property.

 

Maybe you have a mobile office to start. For processing rooms, the most cost-effective and permittable starting point may be a shipping container. Depending upon where you are, maybe your key initial investments are dehumidification units and circulation fans.

 

Make sure you plan well and have enough left in the budget to have good genetics and soil and equipment. The main point is: The infrastructure shouldn’t be the death of the grow!

 

3.    Size your power and water needs according to your plans

 

At both a firm and industry level, energy is a competitive issue.

 

Transformers have blown up in Oregon from oversized indoor grows. Breakers are popping in many markets. In situations like these, unbudgted facility upgrades may be needed immediately.

 

But these planning shortfalls don’t only impact producers. When utilities need to upgrade their infrastructures, they pass associated rate hikes along to all customers. It does none of us any good if all classes of utility customers start seeing increased bills because of what they perceive as “wasteful pot growers.”

 

As for water, it’s relatively straightforward if you have a municipal hookup. But, when you drill wells, the water may need to be treated. You may need sophisticated filtration systems.

 

Critically important, can your property provide enough water for your production needs? Will you need water delivery? In Boulder, local regulators forced production in industrial zones where there was no water. Producers were trucking in 10,000 gallons of water per week and putting it into a cistern. Ultimately, this is obviously an inferior competitive position.

 

For more information on establishing energy and water efficient production, check out Resource Innovation Institute.

 

 

Eric Brandstad is a member of the RII Technical Advisory Committee

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How I chose my production mix: The Three “E”s

By Jesce Horton
Panacea Valley Gardens and Saints Cannabis
Portland, OR

 

When I decided to leave Siemens Industry to try my luck in cannabis cultivation years ago, I was eager to leave behind so many aspects of corporate engineering. The monotony and drudgery that corporate life was for me, seemed to melt away as I wrapped up my final project. However, the experiences I gained as an energy account manager carried over into my new profession. Especially the lessons learned while consulting industrial facilities on energy efficiency and environmental conservation, and the strong and dynamic role they play in business success. 

So naturally, realizing the role that resources play in growing cannabis, cultivation type and methodology was something I assessed from several different angles in the development of Panacea Valley Gardens. When beginning in cultivation I tried numerous different energy and water saving techniques including different lighting technology, heat exchangers, water-cooled equipment, automation, water reuse, alternative timing tricks (e.g. 11 hours of flower instead of 12) and many of these in greenhouse and indoor applications. We even tried our hand at full outdoor cultivation in rainy Portland, Oregon (silly us). Some of these trials worked better than others and many are in use in some form at Panacea Valley Gardens now. The most successful techniques and processes are a cornerstone in the development of my new facility, Saints Cannabis in northeast Portland.

Ultimately, my assessment method on how to choose between outdoor, greenhouse and indoor cultivation types comes down to the “3 E’s”. Ok, I know what you are thinking…one of these “e’s must to stand for “energy” or “efficiency” or maybe even “energy efficiency”. Well, you’re wrong. Energy efficiency is an end goal and not so much a decision factor in this assessment. Reaching sustainability, as measured by resource (energy and water) efficiency, is a continual adjustment process that can be achieved whether one is growing outdoors or in a warehouse. There is an efficiency or sustainability component to each decision you make in your facility. Therefore the three “E”s are how I chose my grow type for business success, not just resource efficiency. 

Here they are, in no particular order:

  1. Environment – Where is your operation located? If like me, you’re in the Pacific Northwest, outdoor cultivation or simple greenhouses just won’t work. The rainy season comes at a crucial time in harvest season and with it comes humidity, cold weather, and problems. Partly due to the environment, indoor is king in the Pac NW, but light deprivation greenhouses are becoming popular also. Depending on where you are located, some options may be less feasible than others.

    Environment and location also play a large role in your sustainability profile. How does your power company source its energy? Coal, hydro, renewables, natural gas or other? This matters in assessing your true carbon footprint. How cold or hot does your region get on average? How will this affect your heating and cooling needs?

     
  2. Expertise – The success of a cultivation operation has a great deal to do with one key member of your team? Who’s that? The cultivator. Do you have a cultivation team member who knows how to grow in a light deprivation greenhouse like tying his shoe? Are you working with a cultivation team that has been growing outdoor cannabis in Northern California for 20 years? Are these people you trust and can depend on, no matter what? Well, you may want to consider them in the design of your facility. I’ve seen some of the most amazing outdoor growers melt down in an indoor environment. Some indoor growers just simply don’t thrive in organic, no till greenhouse methodologies. I’m not saying base your whole business plan off preference of the head grower, but I’m saying make sure they are intimately involved in the decision.  A lost crop or poor yields or quality could erase the gains in resource efficiency very quickly.

    Regardless of your equipment and building types, the leader of your facility will have a far greater impact on the level of resource efficiency. The most sustainable companies, in my experience, always had an “energy champion” or someone who is tied to this important aspect of success. If your cultivation expert is bought into this idea, your results will certainly be reflective. 

     
  3. End User (customer) – What is the preference in your region? What do your patients/customers want? Where can you win?  This could be the most important factor in selection of grow type. There are some regions where the mere word “outdoor or greenhouse” gets a door slammed in your face at some dispensaries on vendor day (ok, maybe not that bad, but still pretty harsh). I know in other regions, greenhouse flowers may be a standard and do not carry a lower perceived value in the market. You must know your market before making such an important decision. 
     

Sustainability will prove to be a strong differentiator in the cannabis market. In an industry where products are moving closer to being viewed as traditional commodities, consumers are caring more about company principles and how products are produced. Customers are asking more and more questions about responsible practices. Perhaps you drive the need for more acceptance of your greenhouse flower by proving you’re more environmentally responsible than the indoor flower in the store. Perhaps you can prove your indoor facility is sustainable enough to compete in a sun grown (greenhouse or outdoor) market.  

With these things in mind, we decided on a mixed-use cultivation method at PV Gardens and Saints Cannabis with roughly double the amount of greenhouse as indoor canopy space. This has allowed us to meet market demands, keep overhead costs lower, and reduce the carbon footprint and water usage in our facilities.  

Choose your cultivation type in a similar fashion, based on factors that will affect your ability to thrive in your market conditions. Then make resource efficiency a cornerstone in the development of your business. 

Can you think of any other “E’s” that should be considered? What else played a crucial role in your cultivation type decision?
 

Jesce Horton is a board member of the Resource Innovation Institute.