Retail sales for legal marijuana are growing so big and so fast that the industry has to supersize their operations. Growing and producing marijuana products is now happening on an industrial scale.
Retail sales in the U.S. from 20 jurisdictions were $6.5 billion, but according to Greenwave Advisors, that number is projected to grow to $30 billion by 2021. In order to meet the demand for customers, the growers and makers of infused products have to scale up their operations. More automation, more square footage and the ability to manage this fast growth are separating the mom and pop shops from corporate cannabis.
Berto Torres, Chief Operations Officer at GFarmaLabs in California, has been with the company since it started with four grow lights and a 3,000-square-foot canopy. It now has 700,000 square feet. Torres said the company's growth boomed after they made the jump to branded products and specifically after they won a Cannabis Cup award for chocolate truffles in 2014. “It created so much demand, we had to scale up,” he said. “We needed to organize ourselves and run and function like a normal corporate company.”
For example, it used to take two to three employees a day to make 800-1000 pre-rolled joints. Now Torres has a Futurola machine that automates the process and those same employees can now produce 8,000 pre-rolled joints a day. The company now has 100 different SKUs of products it produces from cannabis-infused beverages like its popular lemonade to its bestselling pre-rolled cannabis flower called G Stiks.
Of course, success in the cannabis industry immediately comes with accusations of “going corporate.” “We were accused of selling out by having a consistent product,” said Torres. “I think we're one of the few companies that have been able to create a successful blending of both worlds.”
One company that is helping the cannabis industry increase in volume is Convectium. While some industrial equipment companies refuse to work with the cannabis industry, Convectium has jumped at the opportunity. “If this was a stagnant industry, slow growth would be okay. Cannabis is growing so fast, you get passed by if you don't automate,” said Danny Davis, a Managing Partner at Convectium. He added that a laid back chill attitude in this business won't work. “Aggressive is a solid attitude to have in cannabis.”
For example, when it comes to filling a cannabis oil cartridges for vaping some small companies fill them by hand using a syringe. Davis said it takes a company an hour to fill 100 cartridges in that manner. His machine can fill 100 vape cartridges in 30 seconds. “The demand for machines is five times what it was from one year ago,” he said. “We truly believe that the only way to scale is to add technology and standardization.”
Davis said there are many operations that are resistant to change. “They don't trust technology,” he said. “Many of the companies out there are primitive, even the big ones, but they will learn they had better scale quickly.”
Kiva Confections is one of the biggest infused edible companies in California that has successfully grown. Cofounders Kristi Knoblich and Scott Palmer started with a couple of workers and now Kiva employs 85 people, with products in 1,000 dispensaries. The business began in their kitchen, but the fast growth has them moving to a 30,000 square foot facility. “We're looking at large scale equipment to prepare for the recreational market,” said Palmer. Kiva is also in Nevada and Arizona and has plans to expand to Colorado, Illinois and Hawaii.
Teewinot Life Sciences creates cannabinoids for the pharmaceutical industry for testing purposes. They too are prepared for growth.If any of them succeed, then the supply chain has to scale as well. “The testing could only require 100 grams,” said Jeffrey Korentur, Chief Executive Officer of Teewinot. “However, a successful test could cause the pharmaceutical company to need more. We can scale to patient populations ranging from tens of hundreds to thousands.”
Growing facilities are getting bigger as well. Bright Green Group in New Mexico has plans for a facility with almost 6 million square feet or 100 football fields that can cultivate 40 million medicinal plants. AmeriCann will have the largest grow facility in Massachusetts, with a 53-acre tract in Freetown. The company started with 1 million square feet and got approval to expand another 30,000 square feet.
The days of local growers selling out of backpacks to dispensaries wasn't that long ago, but it is definitely over. Growers must produce large volumes of consistent flower. Producers must be able to sell branded product that is the same from state to state and meet the demand of hundreds of dispensaries. Scaling up will be the new challenge for the biggest players in the marijuana industry.