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As California’s regulated cannabis market continues to evolve, it’s become clear that size matters.
According to Headset, a cannabis data, analytics and intelligence firm, two leaders have emerged in terms of packaged flower sales here in the Golden State – Lowell Farms and Glass House Farms, each getting just over 3% of market share. Lowell Farms boasts nearly a quarter million square feet of greenhouse production while Glass House sits at half a million, adding an additional 5.5 million square feet of greenhouse canopy this year. For perspective, with 436 acres in production, Humboldt has just under 19 million feet – likely significantly less by the end of the year.
As the bulk market collapsed, the best way to make a living growing ganja was to sell packaged produce to dispensaries. With the passing of recreational cannabis sales several years ago, everyone knew that bulk jar prices would crash. They have, hastily. What Humboldt didn’t know was that most of what we produced would be for wholesale.
Our egos were perhaps a little inflated as the main producing region of the country for decades. We just didn’t have a lot of competition and many growers felt their products were much better than they were. Our “premium” sun-grown flower has not been popular in the market and instead often garners bids as biomass for extraction.
The current market dynamics have created understandable frustration and fear. People who have been producing for decades are shut out of the market and looking for solutions. One area of growing interest is the formation of cannabis cooperatives. Mendocino just announced one and I suspect Humboldt will follow shortly.
A cooperative is simply a cooperative and self-governing association of people brought together to meet common economic, social or cultural needs. They are common in agricultural production and provide scale and the ability to penetrate markets and gain market share. A well-managed cooperative offers decent wages to producers and can be a viable route that offers small farmers a way to compete with large corporations.
I applaud the concept in theory, but I think the implementation, especially in the cannabis space, will be a challenge.
Management
Many cooperatives fail because they are complex structures with many moving parts and stakeholders – employees, producers, manufacturers, distributors and retailers. Getting and keeping everyone on the same page is a monumental task that few have been able to master. Anyone who is going to manage a Humboldt Cannabis Co-op will need to be an excellent communicator, a skilled negotiator and a shrewd businessman who can see opportunities, then create and drive processes to take advantage of them effectively and efficiently. This person should also have an intimate understanding of the California cannabis market and be knowledgeable about developments across the country and the world. That person is somewhere, but attracting and retaining them can be a challenge. As many cannabis operators are struggling and strapped for cash, a co-op’s funding, legal training, marketing efforts and paying staff may be out of reach.
Quality and consistency
As I’ve written in the past, producing top quality flowers is about genetics, environmental exposure, process and inputs, and day-to-day execution. Genetic selection is of crucial importance. Without the right genetics, no cultivation process can make your flower burst. Layered cuts are out there and if you ever come across one, it can wreck your season. The market currently favors exotic genetics and flavors, preferably purple in color. That may change quickly, but that’s what we have now.
Environmental exposure is also critical to product quality. When temperature and humidity parameters get out of whack, flower quality and appearance suffer. While sun-grown ganja is my favorite, outdoor depths often darken and tan towards maturity. Growing under greenhouse skins or plastic that cuts UV a bit creates a brighter flower that sparkles and is in more demand.
Process and inputs also matter. How you shape and handle plants has a huge impact on flower size and density, as does your amendment or fertilizer regimen.
The daily effort, meaning the intensity and intelligence with which you and your team work, also matters. Teams that do it daily will do better than teams that do it halfway or regularly take shortcuts by avoiding the meticulous and physically taxing processes that separate winners from losers.
If we look at a subset of say 100, 500, or 5,000 farms, there will be a huge variety of environmental conditions and processes involved. A strain produced in one region could be entirely different from the same strain produced in another Humboldt region. This will lead to challenges regarding distribution and retail efforts where quality and consistency are important.
In the case of Lowell Farms and Glass House Farms – both of which are winning the market and claim to produce high-quality craft cannabis of a unique genetic variety – they have centralized production centers, a process that guides the efforts of cultivation and a consistent set of environmental parameters where flowers are grown. Slight process changes are likely made for different cultivars, but in general they will produce similar quality products time and time again.
Here in the hills, if we have shitty spring or fall weather, or hot, dry summer days, the quality of our produce can suffer. It will be increasingly difficult to gain space on store shelves without the quality and consistency that ever-demanding retailers and consumers demand. As the retail business consolidates with fewer and fewer larger operators with multiple storefronts, they will source product from reliable producers who can provide the consistency and volume they need to succeed in their brand and differentiate themselves.
For me, a successful cannabis co-op will need to homogenize processes, inputs, and processing techniques in order to be successful and gain lasting traction in the marketplace. If certain areas of Humboldt lend themselves well to the production of exotic varieties, this is where they should be produced. If others are growing OG or Sour, they should be grown by co-op members in those areas. A processor must prune all flowers to ensure consistency. A transformer that cuts bare while another leaves more resin leaves will similarly hurt distribution and sales efforts.
One thing I promise is that radically different expressions of the same genetics will hamper sales and market penetration efforts and be a losing proposition. On the other hand, offering 10,000 pounds of a consistent, high-quality bloom from the same spot will turn heads and allow Humboldt to score effectively and stay on the map.
Retailer Relations
In terms of building relationships with retailers, Humboldt has it all wrong. Again and again I see all over Instagram how stupid dispensaries and budtenders are for focusing on high THC products and ignoring things like terpenes.
First, calling or insinuating that others are stupid is childish and arrogant… it certainly won’t help us to make friends or gain influence. It alienates others and makes us look bad. Rather, we should seek to understand current market realities and retail and distribution needs and work diligently to meet them. Trying to “educate” the masses can be a meaningful tactic, but it can also cost you your business if you continue to swim against the tide. While I respect having basic principles and philosophies and serving as an educator and disruptor in business, the way we do it needs to be more tactful.
We may worry about terpenes and the entourage effect as seasoned consumers and sun-grown farmers, but not everyone does. Although in a medical context this focus makes more sense, I think we are fighting a losing battle, especially in the context of adult-use markets. Like it or not, a lot of people use drugs to get high. In my personal experience, I get better results from smoking an 89% live resin cartridge from my friends at BEAR than from smoking a joint. Also, I can take a puff from a canister and get lifted when I have to hit a joint multiple times before getting the same effect. Financially, it’s much more efficient for me too.
Am I wrong for this?
Am I stupid when I go to a dispensary looking for high THC products, which I do every time?
Will someone telling me I’m wrong change my decisions or make me feel comfortable with that person?
I am a fan of markets. I believe that the markets, or the collective wisdom they represent, are “right”. Questioning them or arguing with them can make us feel righteous or like we have a cause, but that doesn’t make a whole lot of business sense to me.
As we embark on a county-wide journey to secure our economic future and maintain the farming lifestyle that many of us cherish, a cannabis co-op may indeed be part of the solution. A cooperative that fully understands market needs and demands, is adept at honoring others and creating winning business relationships, and that puts consumers first can indeed gain ground. With a focus on product quality, consistency, high volume, and unique genetic strains, a Humboldt Cannabis Cooperative can gain a foothold in California and beyond.
Failing to implement this correctly will cost valuable time and energy that our community cannot afford to waste. With fresh frozen prices at $35-50 a pound, I expect the outdoors to bring in $250-350 a pound this season. With mixed light at $700-900 before the tsunami of greenhouse produce hits the market in the coming months, it promises to be another tough year. Without quickly changing the equation and finding a way to get our ganja to market, many farmers face their last trick.
My heart is with us and I send you my best wishes!
Lots of love,
Jesse
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Jesse Duncan is a permanent resident of Humboldt County, father of six, retired financial advisor, and full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a free platform that helps small farmers improve their growing, business and financial skills. Please check out his blog at, his Instagram at jesse_duncann and connect with him on Linkedin.
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