Breaking apart vertical integration | Hashish Trade Journal

Editor’s Note: This is an excerpt from Chapter 10 of From Seed to Success: How to Build a Great Cannabis Grow Business in Record Time by Ryan Douglas. Douglas is the founder of Ryan Douglas Cultivation, a cannabis growing consultancy. From 2013 to 2016, he was a master grower at Tweed, Inc., Canada’s largest licensed medical cannabis manufacturer and the flagship subsidiary of Canopy Growth Corporation.

Growers should consider specializing in just one phase of the cannabis growing process. The industry has been heavily focused on vertical integration, and some regulators require licensees to control the entire cannabis value chain from cultivation to processing to retail. This requirement is not always in the best interests of the consumer or business and is likely to change as the industry evolves. Not only will companies specialize in each step of the value chain, but they will also find further segmentation among growers who focus on just one step in the growing process. Cannabis companies looking to position themselves for future success should identify their strengths in the plant production process and specialize in just one part.

Ryan Douglas, Former Master Tweed Grower and author of From Seed to Success: How to Build a Great Cannabis Grow Business in Record Time

Elsewhere in commercial horticulture, specialization is the norm. The begonias that you bought from your local gardening store are unlikely to have lived in this greenhouse all their lives. It is more likely that the factory moved between specialists in the production chain for some time before landing on the retail shelf. A grower usually takes care of the production of stem plants and acts as a root station for vegetative cuttings. From there, rooted cuttings are delivered to a producer who takes care of the plants during the vegetation phase. Once they are of a reasonable height for flowering, they are shipped to the last grower to flower and sell to retailers.

Cannabis companies should consider emulating this model to ensure competitiveness in the future. In the US, federal law does not yet allow interstate transportation of THC-containing plants, but the process can be broken down into states where vertical integration is not required. If we look forward to full federal legalization in the US, we should expect companies to abandon the vertical integration model in favor of specialization. In countries where cannabis cultivation is legal nationwide, entrepreneurs should think about specializing from the start.

Cultivators who specialize in breeding and genetics could sell seeds, root cuttings, and tissue culture services to commercial growers. Royalties could be a recurring source of income after the first sale of seeds or young plants. Outsourcing propagation activities to a specialist can result in consistently clean root cuttings that arrive certified disease-free and amount to around ¼ of the in-house production costs. Not only does this free up space in the recipient’s greenhouse and save money, but it also eliminates the risks associated with traditional mother plant and cloning processes. When a mother plant becomes infected, all future generations will have the disease, and the time, money, energy, labor, and space required to maintain healthy stem plants are significant. Growers who focus on large-scale cultivation should outsource this critical step well.

From Seed to Success: How to Start a Great Cannabis Grow Business in Record Time

Advanced growers could specialize in growing seeds and root cuttings into mature plants ready to bloom. These growers would develop this starter material into healthy plants with a strong, vigorous root system. They would also treat the plants with beneficial insects and inoculate the crops with various biological agents to reduce the plant’s susceptibility to pests and disease. Plants would stay with this grower until they are roughly six to 18 inches tall – the appropriate size to initiate flowering.

The final stage of the process would be the flower grower. In monetary terms, this is the most valuable phase in the cultivation process, but also the most expensive. This facility has the right lighting, plant support infrastructure, and environmental controls to ensure that critical growth parameters are accurately maintained throughout the flowering cycle. The breeder would be an expert in dealing with late-stage insect and disease outbreaks, and would be cautious about not applying anything to the flower that would later appear on a Certificate of Analysis (COA), which would render the crop unsaleable. This final phase would also cover all harvest and post-harvest activities – since shipping a finished crop to another location is inefficient and could potentially damage the crops.

As the cannabis growing industry normalizes, the process by which the product is made will also normalize. Entrepreneurs looking to shape a future in the industry should focus on one stage of the cultivation process and excel in it.

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