Photo © gunuXOX | Adobe Stock

Facing competition from big box stores and cheaper imports — amidst shifting markets, unpredictable weather and inflating costs — greenhouse operators Brian Wheat and Bob Aykens are rethinking their business models. Both fourth-generation business owners, they’ve watched their predecessors adapt over time, but their families would have never guessed that their greenhouses would one day be filled with cannabis.

“One of the key lessons my father always told me is that diversification is key,” says Aykens, who owns Memorial Florists and Greenhouses in Appleton, Wisconsin, with his sister. “We’ve been around since 1923 because we’ve diversified from growing cut flowers to growing chrysanthemums and annuals, and now this is the next step.”

But learning how to grow a new plant can be a risky business fraught with trial and error — especially in the highly regulated cannabis industry. That’s why Wheat and Aykens decided to lease greenhouse space to hemp production, rather than entering the market themselves.

“Our greenhouses were in such disrepair and we were only generating income from three months out of the year, but we didn’t want to sell the land,” says Wheat, CEO and owner of Lafayette Florist, Gift Shop and Garden Center in Lafayette, Colorado. “Leasing seemed like a better option, because at least you’re pulling in rent money, generating some cashflow year-round.”

That doesn’t mean leasing to hemp is easy money. For every opportunity, there are obstacles to overcome, so Wheat and Aykens shared their advice for renting greenhouse space to cannabis.

Vetting partners

“For the last six years, people have been calling me about cannabis,” says Wheat, a master gardener and member of the Society of American Florists. “I wasn’t going to grow marijuana in my greenhouse — for security purposes, for reputation purposes, for a lot of different reasons. It just wasn’t the right fit for our family retail business in small downtown Lafayette.”

Then, Wheat started taking CBD oil for joint problems. Once he learned the difference between marijuana (which contains psychoactive THC) and hemp (which produces CBD), he recognized the crop’s potential. So, he was intrigued when a representative from Front Range Biosciences walked in one day and asked Wheat to meet with Jonathan Vaught, the company’s co-founder and CEO, about leasing some greenhouse space for hemp production.

Other hemp growers offered Wheat a percentage of profits after processing — and although those six-digit numbers were enticing, the uncertainties of sharecropping posed too many risks. Wheat wanted regular rent payments, but when he calculated his costs, the price even shocked him. However, Vaught understood greenhouse operating expenses, as he was already renting facilities across the country. Plus, Wheat’s business — located just two miles from FRB’s lab — offered a prime location, so Vaught even offered to renovate the space to meet his operation’s standards.

“We agreed on the length of the lease and the price per square foot — which, across the country, goes anywhere from $4 per square foot for a greenhouse that might need a lot of repair, all the way up to $10 per square foot if the greenhouse is in great condition,” says Wheat, who couldn’t share specific details, but emphasized that Vaught has been a wonderful partner.

Although rent payments and renovations sweetened the deal, these decisions should be based on due diligence, not just dollars.

“Right now, in the cannabis world, people are willing to invest significant money to retrofit a structure if it’s faster than building a new one,” Vaught says. “But beware of the hype. Vet your tenants and get to know them; make sure they’ve got strong financial models and business plans behind them. It’s a long-term deal, kind of like a marriage, so you don’t want to jump into it overnight. If you do your due diligence, you’ll be able to weed out the ones that aren’t going to be sustainable partnerships.”

Sharing space

Vaught’s renovations to Wheat’s greenhouse included new lighting, environmental controls and security systems with locks and cameras — which ended up benefitting the rest of Wheat’s business.

“Now I can see what’s going on and control the boiler, the air conditioning and the vents from my phone, even when I’m not there,” Wheat says.

But inviting another business into your greenhouse requires careful consideration. When Wheat called his mother to share the news of his tenants — which initially included two other hemp growers in addition to FRB — her first comment was, “You don’t have enough bathrooms.” Six months later, Wheat realized she was right.

Although FRB only brought in six employees, Wheat’s other hemp tenants had as many as 75 people on the property, in addition to Wheat’s 26 employees — which strained the parking situation, the break room capacity and the facility’s four restrooms.

Splitting up energy costs was an even bigger hurdle, since Lafayette Florist only has a single utility meter.

“I had to sit down with the tenants and say, ‘If you aren’t going to put in your own meter so we know exactly how much gas, water and electricity you used, you’ll have to agree with our assessment,’” Wheat says. “People can get angry about their share of energy costs, so you better come up with a plan before you go down this path.”

Educating the community

When Wheat started leasing to FRB, an elderly customer who’d been shopping with him for several decades quickly shared her disapproval.

“She poked me in the chest and said, ‘You sold out to the devil’s cabbage,’” he recalls. “She was mad because she couldn’t go into the greenhouses where we used to keep 20,000 geraniums. I tried to explain that we’re helping our family business survive. I could have sold the land and bulldozed the greenhouses, but I didn’t do that.”

Overall, the pushback from customers has been minimal, because Wheat made deliberate efforts to educate the community about the new crop on his property and why he decided to lease space to hemp production.

“It’s vital for anybody who’s thinking about doing this to be totally open and honest with your employees and your customers, because if you’re secretive, then they think you’re hiding something,” says Wheat, who crafted an explanation letter (available at here).

Early on, Wheat also met with the city manager and chief of police to preempt any concerns. They asked him to install shade curtains to mitigate night-time lighting that might bother the neighbors. In terms of regulatory requirements, FRB held the necessary hemp licenses, which reduces the burden for their greenhouse landlords.

Aykens agrees that transparency is key. “You have two options: You can keep it quiet or be vocal about it,” he says. “We got ahold of the media and hosted a hemp lunch-and-learn, and it created a huge buzz in the community. The key was educating the consumer that hemp does not have THC. That took away a lot of the stigma.”

Memorial Florists used to grow 60% of its plant material, so when Aykens began entertaining this idea, he met with key growers who supplied the rest to ask if they could make up the difference. That means “customers haven’t seen a difference in quality,” he says. “Instead of having hundreds of each variety of coleus, we’ve got maybe 20 on-hand at a time.”

If customers balk at the limited selection, Wheat offers to pick up special orders from growers. “We’ll go that extra mile because we don’t want our hemp rental business negatively impacting our customers,” he says.

Profiting from opportunity

For Aykens, the hardest part has been adjusting to the change of scenery in greenhouses once filled with colorful blooms, that have now become seas of hemp green.

“I’m used to walking in our growing facility and seeing color,” he says nostalgically. “But we’re in business because we need to be profitable. We need to make sure that the people who work for us have good jobs, and that means we’ve got to have a good bottom line.”

Thanks to hemp, he’s now seeing green in more ways than one. “We’ve become more profitable as a company and our bottom line has changed substantially because of it,” he says.

Of course, operators must weigh the pros and cons that hemp rental can have on their facilities and their reputation. For vexed greenhouse owners like Wheat, year-round leasing “helps cashflow in slow retail times” by generating income from structures that sat empty.

“If you operate with the right amount of caution, it can be incredibly lucrative,” Vaught says. “There’s a good opportunity to monetize your property through the right partnerships.”

The author is a freelance writer based in Cleveland. She is a frequent contributor to GIE Media horticulture publications.

While the national cannabis market has changed drastically since 2012, when Washington state and Colorado first legalized adult-use cannabis sales, at least one thing hasn’t changed: The industry is very much still amidst a significant boom, with no signs of slowing.

According to the most recent State of the Industry report from our sister magazine, Cannabis Business Times, greenhouse production is trending upward, increasing 4% from 2016 to today. But cannabis cultivators are shifting away from indoor/warehouse operations. Indoor operations once were a standard for cannabis production: 80% of research participants reported growing indoors in 2016, the first year of this study. That number has dropped by 21 percentage points during the past three years — with 59% of cultivators reporting growing indoors this year.

The number of growers who cultivate in greenhouses seems to be on a slight rise compared to prior years: 38% of 2019 research participants stated they grow in a greenhouse, up four percentage points from 2016.

And cultivators are planning to expand in the coming years. This year, 85% of cultivators studied indicated plans to expand their operation’s square footage for growing cannabis. In 2018 and 2017, that figure was 77% and in 2016, 71% of participants indicated any expansion plans.

In 2017, the average square footage that cultivators said they planned to add in the next two years was 22,300 sq. ft. In 2018, that figure increased to 27,400 sq. ft. This year, the average is 39,700 sq. ft., growing by 12,300 sq. ft. compared with the previous year and by nearly 18,000 sq. ft. compared to 2017.

In addition, nearly a quarter of participants (23%) plan to add 80,000 sq. ft. or more for growing cannabis in the next two years.

Starting on 3 acres in Bourbon County, Kentucky, in 2001, brothers Art and Ken VanWingerden steadily built ColorPoint into the one of the largest greenhouses in the U.S. By following their immigrant parents’ vision of adaptation and innovation, the VanWingerdens implemented some of the industry’s most advanced automation, software and sustainability practices as they expanded to over 5 million square feet of environmentally controlled facilities.

Now, instead of producing 80 million ornamental bedding plants each year, ColorPoint’s greenhouses will be home to hemp.

The company announced in May that its Kentucky facility would transition entirely to hemp production through a merger with hemp producer AgTech Scientific. Simultaneously, ColorPoint sold its 3.6-million-square-foot Illinois facility to Red White & Bloom, a Michigan-based subsidiary of Canadian medical marijuana producer, MichiCann.

“A bright new future lies ahead for ColorPoint and its employees as we transition to this new industry,” says Steve Sloan, senior director of mergers and acquisitions for ColorPoint. “Converting to hemp sets us up for a profitable future.”

Shifting the business

Although this shift represents new opportunity, it’s in response to the severe obstacles surrounding ColorPoint’s traditional business. Crunched by stiff competition and shrinking margins, ColorPoint executives began looking for alternative crops and new revenue streams several years ago. They added indoor plants, orchids and perennials to their production of annuals, mums and poinsettias before looking toward the emerging cannabis industry.

“Our core business became tougher and tougher over recent years,” Sloan says. “Irrespective of our best efforts, our margins consistently continued to shrink to a frighteningly low level. We had little choice but to pursue higher margin options to stay in business.”

Opportunity emerged two years ago, when AgTech approached ColorPoint about producing hemp clones for its network of farmers. This budding relationship blossomed into an indoor trial grow in 2018, and then following the passage of the 2018 Farm Bill that legalized hemp cultivation, the two companies decided to merge in early 2019.

“Art and Ken VanWingerden, co-presidents of ColorPoint, liked how hemp could maximize our space utilization and improve our product and market diversification, all while increasing sales,” Sloan says. “We realized that working together catalyzed our individual strengths, and it made sense to merge.”

Growing a new crop

In 2018, ColorPoint KY committed 7 acres of greenhouse space to trial hemp, producing roughly 200 clone liners for AgTech. Although the crop had plenty in common with the plant material that was previously produced there, hemp presented several unique challenges for ColorPoint’s growers.

“Some growers were a bit apprehensive because all they had ever worked with were bedding plants,” says head grower Chad Cagle, who has been at ColorPoint since 2008. “But everyone sees this as a great learning experience doing what we love: growing. We’re excited about being on the forefront of growing something new.”

To execute a successful trial and a smooth transition into hemp, ColorPoint’s growers relied on their experience growing ornamental plants.

“Hemp is similar [to traditional bedding plants] due to its basic needs of nutrients, water and light. For example, its photoperiod management is very similar to garden mums,” Cagle says. “But hemp is different due to the lack of scientific knowledge about the plant and its needs. We have much more to learn.”

ColorPoint teamed up with university researchers to understand the nuances of producing hemp, as they adjust their growing facilities and practices to optimize the operation.

“Retrofitting the greenhouse will be an ongoing process,” says Cagle, who manages a team of 82 growers. Initial renovations included additional grow lights and fans for circulation, as well as “buttoning up blackout sections for light leaks” and adding more automation for sticking the cuttings, he says.

To make the most of these small adjustments in the greenhouse, ColorPoint’s growers have also had to hone their approach to growing.

“We currently cannot use any crop protections. No chemicals are labeled for hemp in Kentucky, which has made us develop new sanitation protocols to stay as clean as possible,” Cagle says. “We watch the environmental controls more closely to prevent the climate that makes pathogens and disease run rampant. Hemp has forced us to be at the top of our game with biological control.”

Processing potential

After ColorPoint’s indoor trials proved successful, executives decided to convert the entire operation to hemp production. Starting in August 2019, ColorPoint’s 1.8-million-square-foot greenhouse in Kentucky will produce over 200,000 hemp cuttings per day, year-round.

Just as it took farmers decades to perfect the process of growing common crops like soybeans, Sloan expects ColorPoint’s learning curve to span the next several years.

“Hemp has not traditionally been grown indoors, so we are truly pioneering a new field,” Sloan says. “Within the hemp industry, they often refer to this time being like the Wild West with lots of promise, ambiguity and plenty of failure.”

This year, ColorPoint plans to plant over 5 million hemp clones on more than 1,500 acres of outdoor fields within 15 miles of the greenhouse. The company rolled out detailed standard operating procedures to ensure compliance and consistency across its network of farmers – promising “less risk (and) more opportunity for farmers with guaranteed payouts throughout the season,” according to a press release.

The operation received both a hemp grower license and hemp processor license from the Kentucky Department of Agriculture, making it a vertically integrated company with full production capabilities.

A 50,000-square-foot extraction and manufacturing facility broke ground October 2018, with completion slated for August. The facility in Bourbon County, Kentucky, will process 2,000 pounds of hemp per day at first, scaling up to 14,000 pounds per day by 2020.

Looking to the future

Through the summer, ColorPoint will fulfill its obligations to ship legacy products to legacy customers, “providing the same exemplary quality products and customer service that we have always provided,” Sloan says. But by August, both ColorPoint facilities will be completely transitioned to hemp.

Sloan says this transition holds promise, not just for the business but also for its employees — noting that “most employees will continue in their current positions, and many will advance into new opportunities.” So, the 113 full-time employees at ColorPoint KY, which had over 340 workers at peak, will play a pivotal role in the company’s transition. Plus, many seasonal workers may move into fulltime roles, as projected growth gives way to new positions.

Across the organization, from the greenhouses to the executive offices, ColorPoint’s team is enthusiastic about the opportunities that lie ahead with hemp.

“There’s a huge interest all over the world about this plant and its possibilities,” Cagle says. “That makes it exciting for everyone to get involved and be leaders in this new part of our industry.”

The author is a freelance writer based in Cleveland. She is a frequent contributor to GIE Media horticulture publications.

Photo by Paul Wellman

In the heavily regulated and scrutinized cannabis industry, Graham Farrar, founder of Glass House Farms, says it’s important to do better than what’s required. Implementing sustainable practices like a state-of-the art water reclamation system and beneficial insects is important to Farrar and good for the environment, but it’s also good for business.

Glass House Farms operates a cultivation facility in greenhouses once used for orchid and Gerbera daisy production in the Carpinteria Valley in Santa Barbara, California, an area with a rich horticultural history and booming agricultural industry, where cannabis, avocados and strawberries are cultivated in the ideal climate and fertile land that’s surrounded by the San Ynez Mountains to the east and the Pacific Ocean to the west.

Glass House is close to opening its second site, a 355,000-square-foot operation which, like the first, will be in repurposed greenhouses and run on a perpetual harvest system, where the team will plant and harvest cannabis continuously. The company is awaiting the county’s final approval, but otherwise, the facility is ready to go. Also in the works is a new retail venture for Farrar, a serial start-up founder. The dispensary is called The Farmacy and will highlight local Santa Barbara brands. In this interview, Farrar explains what it means to be a craft cannabis producer, how he distinguishes his business in one of the largest cannabis and tourism markets in the U.S., and shares future plans and predictions. Graham Farrar emphasizes that Glass House Farms’ cannabis is both sun-grown and ocean-grown.

Michelle Simakis: How did you get started in cannabis cultivation?

Graham Farrar: I grew up in Santa Barbara, which is where we live now and where both of our farms are, so this is hometown for me. I actually come into this as a tech geek more than an agricultural geek, so I guess I’m an ag-tech geek now. I was one of the original people at Sonos, which is a pretty cool wireless audio system that some people know. It’s a public company now.

After Sonos, I started a company called iStoryTime, which made apps for kids, right when the iPhone first came out, so basically narrated, interactive story books. Then I helped start a company called Elite Garden, which is a [wholesale nutrient] business in the cannabis space. I’ve been a longtime believer, in terms of the societal- and health-, the good-for-the-world-side of cannabis, and had personal grows for years and years. I just think that regulation is a much better approach than prohibition. It’s stupid that we are tearing apart families. Give people access, and they will find ways it benefits them. My line is: if you think you don’t like cannabis, you just don’t know how you like it. Because Glass House Farms operates on a perpetual harvest system, the staff works full-time, year-round.

Simakis: Why did you opt to launch Glass House Farms in 2015 in a converted Dutch greenhouse, and what did the industry and California look like at the time?

Farrar: Obviously California’s medical market is [more than 20] years old, and it is still the epicenter for cannabis. We started Elite, which was built on the foundation [that legalization] was going to happen, and it was going to move out of people’s garages and closets and into traditional agriculture. A lot of our customers were in Santa Barbara County because there’s a bunch of really good greenhouse infrastructure here. … And it’s the horticultural fundamentals that drive the good places to grow cannabis because at the end of the day, it’s a flower. [Santa Barbara has] greenhouses, water, good climate, labor and accessibility to big markets. We’re an hour and a half from L.A., right off the 101 (Pacific Coast Highway), right next to the ocean. It’s a great climate. And so we basically got an introduction to the forefront of professional agriculture for cannabis.

Simakis: Will you only sell product that you grow and produce, or will you have a mix of different brands?

Farrar: We will highlight our brands and really all of the Santa Barbara brands. We’re going to have a whole local section. We’ll be kind of like a wine store where they might have wines by region. But the goal is to be the best dispensary it can be, not be a marketing arm of our farm. We’ll certainly highlight it, but we’re not going to only have [our products].

Simakis: You mentioned highlighting local products, and you emphasize on your website the fact that you are from Santa Barbara County and that you are producing “craft cannabis.” Why is that important to you and what does “craft” mean to you?

Farrar: We’re going through an interesting transition, right? To me, craft cannabis means we love the plants and the people who work at the farm. [In traditional agriculture], there is a lot of seasonal labor and part-time workers, and you hire them when you need them, and as soon as you’re done, you send them home. We’ve got a set up where we’re on this continual harvest, so our team is always doing all segments — planting, harvesting, trimming, cloning — they’re always there. Currently, we harvest about every five days, which means we plant every five days, and it means that they’re always drying and trimming. We have a team of people who are all part of a family; they are full-time employees. They have health benefits. We pay more than minimum wage. They have sick days and paid time off. We do employee appreciation lunches once a month. Because they are part of us and our team. That is part of being a craft producer. We’re trying to do it bigger than many people, but we’re not losing touch with the quality that we want to be part of.

Simakis: How does your water reclamation system work?

Farrar: We actually are putting in these new ultra-filtration units, which are sterilized kidney dialysis filters, so literally medical-grade filters that they use, and then they can’t be used for people anymore. So they are sterilized, and then we pass our [water] through them. They filter out bacteria and viruses; they take out the pathogens from the water, leave all the nutrients and the water, and we blend it back in and we reuse it until it’s all gone, which is awesome for our water usage and awesome for the environment because we’re not throwing away stuff that still has value.

We’ve always been recapturing our water. We did it before you needed to, and we have a tendency to do [things before they are required]. We were testing before it was required and using our internal track-and-trace system before METRC was required. [Water reclamation] is not technically required, but the reality is there is an immense amount of oversight for cannabis. People vastly underestimate how much regulation there is in the cannabis industry. Cannabis makes organic look dirty.

Simakis: Have you made improvements to this system at your new farm?

Farrar: We have this really cool new system at the new farm where the entire floor is like Gore-Tex at the top, and then engineered layers of sand and then an impermeable membrane at the bottom so you could spray a fire hose on it and it goes down through the Gore-Tex layer. We don’t want humidity in the greenhouse, and the Gore-Tex doesn’t let the humidity come back out through the sand. [Water] collects in the middle, and [then is pulled] out of the greenhouse. And then it goes through the ultra-filtration units and then gets recycled back into the next irrigation cycle.

Editor’s note: This interview has been edited for length, style and clarity.

Michelle Simakis is editor of Cannabis Business Times and Cannabis Dispensary magazines.