Competition, Consistency & Scalability: How to Overcome Key Challenges Commercial Cannabis Growers Face in 2019

Navigating the complexities of the commercial cannabis market can be daunting. The industry has gained national attention over recent years, allowing for explosive growth and attracting the interest of mainstream industries. As the cannabis market continues to mature, it’s necessary to consider three key factors that can make or break your business; competition, scalability and consistency.

Competition

All states are not created equal when it comes to competition for cannabis cultivators. Prices are falling fast across the board, but drops are much steeper in many of the more mature markets. In Oregon, for example, there was previously no limit on the number of grow licenses the state issued, which in turn flooded the market with product causing a staggering price drop of 65% in 2018.

What does this mean for you?

If you’re new to the game, establishing your footprint in the newer markets where prices are more robust and there is less risk of overproduction (think Michigan and Utah) is one way to go. If you’re already set up in an established cannabis market, competition is likely unavoidable and your best bet is to focus on efficiency to remain profitable. Looking at labor and energy costs and how to mitigate them, will have the greatest impact on your bottom line.

Another way cannabis cultivators everywhere can curb the competition is to differentiate themselves in the market with a strong brand and by building a loyal customer base. You can rep product quality, growing methods (organic farming, sun grown, living soil) or other unique selling propositions like in-house genetics, remarkable terpene profiles or high THC content flower. These are all things that consumers get excited about and want to consider when buying cannabis products. An example from outside of the cannabis industry of consumer preference for quality over price can be seen in the U.S. beer industry. In 2017, U.S.-brewed beer experienced the largest percentage decrease in annual shipments since 1954, while sales of craft beer increased by 5.5%.

Scalability

As the market has grown, the overall scale of cannabis operations has increased proportionally. Cultivators are taking on more production space and as a result, have experienced growing pains (some pun intended). Larger cultivation operations can lead to larger problems. It’s much more time consuming to perform routine observations to ensure plant health when there are significantly more plants to observe. Increased operations also require larger teams and as teams grow, it becomes difficult to maintain efficient communication and individual accountability. Especially when operations are spread across multiple facilities or even states, making keeping everyone aligned with business objectives and informed of operational data a challenge.

What does this mean for you?

Simply put, your team is everything. Your operation is only as strong and efficient as your team. Take the time to make smart hiring decisions. Find skilled people with a passion for cannabis and train them well. Give them the resources they need to succeed – it will cost more, but it will be worth it! Consider using software that will align your team, keep them on track, and enable real-time data collection so management can track key performance indicators across facilities and teams.

Consistency

Providing a consistent experience for consumers remains one of the biggest challenges for cannabis cultivators, especially for medical producers. Patients need a predictable outcome every time they consume medicine, and historically when it comes to cannabis, no two ‘doses’ are identical. Additionally, with the rise in recreational sales, the industry has seen a meaningful increase in new consumers. As people explore the vast market of cannabis products, ensuring their experience is pleasant, measurable and repeatable is essential to retaining their business. Beyond customer experience, cannabis businesses need to be able to consistently predict yields, keep production costs down, and keep the team firing on all cylinders in order to be successful.

What does this mean for you?

There are numerous factors at play when growing cannabis and many areas that influence the outcome of a harvest, which can make consistency a beast! Having a controlled environment is a great step forward, but also ensuring employees perform tasks consistently, monitoring growth cycles, and tracking batch results is necessary to provide you with a complete view of your operation. Take advantage of available technology such as environmental controls, team management software, and software systems that allow you to track batches and yields in order to keep your operation consistent and performing optimally.

The best thing cannabis cultivators can do to establish themselves in the market and be competitive is: invest in their team, focus on efficiency, take advantage of available technology, and create a brand authentic to themselves. By doing all of this, and of course, producing a quality product, growers can bank on a prosperous future.

Lean and Green: How to reduce the two greatest costs in commercial cannabis cultivation

When California opened its doors to recreational cannabis just over one year ago, there was much excitement and anticipation about how legalization would unfold. The state projected massive tax revenue and consumers lined up outside of dispensaries. Adult-use markets enable greater access and contribute to the momentum of legalization nationwide. However, the achievement of legalization creates new problems, primarily for the people who grow the plant we all love so much.

Legalization transformed an underground industry into a burgeoning commercial market with complex regulations, an unpredictable licensing process, and heavy taxes. With new players entering the market and established players scaling their operations, competition is up and the price per pound is down. Whether you’ve been growing for 20 years or are new to the game, ensuring your operations are efficient, agile and ready to adapt to unforeseen changes is essential to compete and thrive in the new market reality of legal cannabis.

Commercial cultivators don’t need to look far to understand where to focus their optimization efforts. Two expenses account for up to 73 percent of all operational costs: Labor and Energy1.

Labor of Love

Labor is the largest expense in commercial cultivation, accounting for nearly half of production costs. Cannabis cultivation requires a skilled team to support the growing, maintenance, harvesting, and processing. As the industry has matured, many businesses have taken on more production space and larger teams, making it more challenging to manage daily activities and maintain accountability. Increasing team efficiency by improving communication methods and streamlining daily activities will enhance your bottom line.

Here are some tips to boost labor efficiency:

  • – set clearly defined goals and communicate them to the entire team. Employees need to know what they’re working towards and how to get there;
  • – develop standard operating procedures (SOPs) so tasks are understood clearly and performed consistently;
  • – ensure all employees receive quality training;
  • – use software to manage daily operations and schedule tasks. Software provides a lot of benefits such as productivity tracking and performance analytics.

Finally and perhaps most importantly, create incentives for great work. Everyone needs to be recognized for working hard. When you track employee productivity, the goal is to reward those who excel and offer training to those who need help.

Energy Drain

With half of commercial cultivation done indoors. the energy needs are substantial. Operating high-wattage lights, HVAC, dehumidifiers and ventilation for long stretches of the day costs big bucks, especially in states like California where energy is expensive. Here are some tips to improve energy efficiency;

  • – servicing equipment regularly to ensure optimal performance;
  • – setting light schedules to run during off-peak hours, when energy costs are much cheaper;
  • – replacing traditional lights with high efficiency LED lights; or
  • – leveraging renewables such as solar power.

With the industry advancing rapidly, commercial growers are realizing that it’s not as easy to manage 50,000 square feet of canopy as it was to manage 5,000. By streamlining operations, investing in your team, and leveraging technology, commercial growers can ensure a prosperous future.

Three Ways Cannabis Cultivators Can Innovate with Data in 2019

Photo courtesy of NextLight

In 2018, Americans continued to use their voting power to express support for cannabis across the nation. Michigan became the 10th state to legalize recreational use, while Utah and Missouri became the 30th and 31st states to legalize medical cannabis. Millions of Americans now have access to legal cannabis and they’re loving it – lots of it. The medical market is poised to grow from $10 billion in 2018 to nearly $26 billion by 2025. Meanwhile, sales within adult-use markets are projected to double from 22 percent in 2018 to 44 percent in 2025.1 This is putting pressure on cannabis cultivators to scale effectively to meet demand and continuously innovate in order to compete successfully against current players, new entrants and established brands from other markets that all want to join the “green rush.”

Cannabis growers can up the ante and remain competitive as the landscape changes around them by leveraging data analytics to make strategic improvements to their operation.

1. Ditch the whiteboards. Replace them with technology and industry-specific solutions that can optimize cannabis farm operations through automation. Let’s face it, the cannabis industry isn’t the most sophisticated when it comes to data collection and analysis. Most growers are still tracking data manually via whiteboard, transcribing that data into notebooks and then at some point – maybe – it makes its way into Excel, where it sits until someone tries to make sense of it. When you automate data collection you always have current information about your business, your crop, and your team. This also provides valuable historical data that, when analyzed, can provide insights into what aspects of your business could be improved.

2. Use software for team and task management. Growing quality cannabis requires substantial time investment and as cultivation operations scale, teamwork is paramount. The result is that labor comprises nearly half of cannabis production costs.2 There is great opportunity to reduce costs by making simple improvements to daily operations. Upgrading communication tools and using software to automate task management keeps employees productive and operations on track. Software tools also allow you to derive insights with respect to team performance and labor expenses. This can be used to substantiate investments into your business, such as identifying the ROI of upgrading to an automated watering system by determining how much time your team spends on watering tasks each month. It can also be used to compare employee productivity and efficiency, allowing you to make strategic HR decisions, such as identifying employees that need additional training.

3. Know your key performance indicators. You’d be surprised what some simple data analytics can reveal. Measuring even basic key performance indicators (KPIs) such as batch data, productivity data, environmental conditions and operational expenses tells you a story of what’s happening with your business and how to improve it. Tracking and analyzing data related to KPIs allows you to make informed decisions to recreate your most productive batches, reduce operational costs, and improve your bottom line.

Cannabis farmers are on the precipice of a new frontier and efficiency has become an essential focus. Through continuous data tracking and analysis, cultivators can reduce costs, find inefficiencies, consistently deliver quality product, and increase their competitive advantage. With the green rush on full throttle, only growers who think strategically and continuously innovate will make it to the finish line.