When Weed Investments Go Bad, Chad’s Dad Calls the OGs
Ok, so the timeline for recreational cannabis here in California can be simply broken down as follows. In November of 2016, Cali voters passed Proposition 64 by a definitive 57% – 43% margin despite substantial opposition from grassroots advocates up and down the state.
2017 was pretty much business as usual in California as the suits in Sacramento worked to construct the regulatory framework under which the new “legal” (taxed) market would operate. With a deep-rooted medical marijuana market still chugging along after two decades, most of the people who were growing, extracting, cooking, selling, and buying weed continued to do so the same way they always had.
2018 is when the party ended and the industry began as the regulations – some still severely flawed – fell into place and aspects of the new law, like mandatory lab testing and the looming implementation of track and trace software, quickly weeded unregulated products off of regulated retail shelves. 2018 was also “The Year of the Canadians” as a flood of Canuck investment bucks poured over our northern border once cannabis was legalized nationwide in their own country.
Anyone who had made any sort of name for themselves in the Cali cannabis game in the prior decade probably got hit up by at least one eager investor hoping to milk their SOPs for a few Loonies. Speaking from our own experience, these sorts of gentlemen found out pretty quickly that our services and our hard-earned knowledge came at a price that jived with the money they were planning to make and that was always the end of that, eh.
We had our own plan, though, and we knew what we were worth, so we got back to work on our vision.
Not all growers were in such a position or had such a plan and investment groups patiently prodded around until they found people who said they could do what needed to be done for a price that fit the bullshit projections in some PDF pitch deck somewhere back in Toronto. Leases and contracts were signed and checks and clones were cut.
2019 was their year. The year it was all supposed to come together. What did we see last year? Shelves full of boof weed from unrecognizable brands, massive layoffs industry-wide, and another disappointing revenue total from the regulated market.
And 2020… goddamn… from Kobe to COVID we can’t catch a break from the bad news. As we look ahead to the peak and eventual aftermath of this global pandemic and the impact it will have on the economy, every facet of every industry is standing with its hand out to the federal government waiting for some sort of financial assistance, and most of them are going to get it. The Federal Reserve is reportedly handing over A TRILLION DOLLARS PER DAY to keep banks afloat during this crisis and trillions more are being divvied up between American citizens and American corporations in what will surely go down as the biggest government “bailout” of all time. (Don’t get it twisted…. it’s our fucking money to begin with, not some gift from Uncle Sam so you don’t need to thank him.)
Money for restaurants, money for hotels, hell even some money for cruise ships that don’t pay any U.S. taxes… but guess who will not be receiving any of that “bailout” money? That’s right – cannabis companies. Even though we are deemed “essential” in virtually all states that have medical or recreational cannabis laws on the books, the Feds still foolishly keep the plant on Schedule I of the Controlled Substances Act making it against federal law and totally ineligible for federal relief.
As many of these well-funded cannabis grows from 2018 and 2019 face the harsh reality that “saving money” on real experience comes at a real cost, we are convinced that 2020 will see a different sort of bailout hit the cannabis industry, but this one is coming from the bottom up, not from the top down.
PLAYING GOD AIN’T CHEAP & IT’S DEFINITELY NOT EASY
In 2017, MJBizDaily released their Marijuana Business Factbook in which they claimed that the average cost for a large-scale cannabis cultivation operation was roughly $42 per square foot. That number was based on nationwide data and would include big-ticket costs like leasing land or buildings, equipment costs, labor costs, utilities, etc.
However, that number is also the average of all the typical ways to grow weed – outdoor, indoor, greenhouse, and mixed light. When you break out indoor only, that cost jumps to an average of $75 per square foot but even that is deceiving. There are places here in California where your lease alone could be that high before you even get to the rest of the costs… and the risk.
As we know, when you grow cannabis indoors, you get to “play god” a bit by having full control over lighting, feeding/watering, humidity and climate control, and more. When done properly, few will argue that the bag appeal, aroma, flavor, and effects of indoor buds are far superior to those grown outdoors. Keywords: WHEN DONE PROPERLY.
If your business plan for building a large scale grow in the past two years was to hire the cheapest grower you could find and then walk around MJBizCon with them checking items off of your shopping list, odds are that your operation is on the brink by now and you are not alone.
The good news is, after investing hundreds of thousands, if not millions, of dollars into what was supposed to be a surefire thing, its not too late to turn it around. While there are not many buyers or investors looking to bail out struggling grow-ops these days, there is one group of legacy operators who have bridged the gap between the cannabis culture and the cannabis industry.
Beard Bros. Pharms is proud to be partnered with Kulture Global, a full-service cannabis agency that has assembled leaders from all sectors of the industry to provide consultation and insight to brands looking to rise up to the next level.
Already this year we have been mobilized multiple times across California to assess and optimize grow sites from both a construction and cultivation aspect. Permits and licensing on these projects can cost $100k/yr or more (ONE license in Florida sold for $53 MILLION, another for $40M) and you can easily lay out that much again for lights, then again for building improvements, and again for generators and climate control, and again and again.
If all of those zeroes are not balancing out on the bottom line, our team at Kulture has a proven track record of lifting companies out of the red and into the black not only by establishing successful SOPs in the grow rooms but in the boardroom and throughout their entire brand.
Here are just some of the services that Kulture provides to our clients:
· Brand Licensing
· Mergers & Acquisitions
· Cultivation Consultation
· Global Cannabis Scalability
· THC & CBD Brand Development
· Government Policy Framework
· Sales Aggregation
· Content Creation
· Brand Activation
· Design Services
· Event Production
· Social Media Management
· Metrc® Training
· Regulatory Compliance
· 280e Tax Filing
· Cash Management
· Inventory Management
No, the Beard Bros. will not be your bookkeepers! Just like Kulture sought us out for our expertise in cannabis cultivation, you can expect to receive that same level of commitment and knowledge from the people placed in these other roles.
It’s 4th down with a yard to go, you’re down by six with three minutes to play. This is no time to punt and it is certainly no time to quit. We will draw up the play, put the right people in the right positions, and then hand the ball to you to keep the drive alive. Get back in the game with Kulture Global and Beard Bros. Pharms.