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.