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Inefficient cannabis growers will go out of business eventually
In November last year, Canadian retail and greenhouse solutions provider VRE Systems hired Ron Berkhout as a Sales Executive. The former sales manager of Gavita Canada brought in 10 years of experience serving producers and thought leaders in the cannabis market. We spoke with Ron about the current challenges that his customers are facing.
With over 35 years of experience in serving flower and produce growers with technological solutions, VRE is a preeminent company in the North American greenhouse industry. Ron Berkhout joined them to translate that knowledge and experience into the upcoming legal cannabis market.
Ever since the legalization of recreational cannabis in the states of Colorado and Washington, he sees that the industry has emerged from small-scale indoor grow spaces towards bigger greenhouse operations. As running these larger operations is something completely new for most entrepreneurs in the cannabis industry, a demand has sprouted for proper guidance and education on horticulture technology.
"More companies enter the marketplace, competition increases and the prices of cannabis are under pressure. While a cannabis plant is a fairly easy crop to grow in comparison to a rose crop or tomato plant, many cultivators are not yet familiar with using efficient technology to optimize their production processes."
Berkhout confirms that this inefficiency has already placed some of the first companies out of business in Colorado, where cannabis wholesale prices are 20-25 % lower since the legalization 7 years ago. "It is just a matter of supply and demand. Companies who are growing in an inefficient way are going out of business".
The sales executive explained that he and his team at VRE are available to help growers make the right decisions and consult with them on how the right technology and automation can help them to produce more efficiently. He can offer information on bench systems and screen installations, to complete turnkey greenhouse projects, including advanced automation and a dedicated transport system.
But convincing operators in the cannabis space to invest in these systems is not easy. "Many operators only see the initial cost of automation and technology, and they often think it's too expensive. It is important to show them the numbers and put down the details in black and white."
As an example, Berkhout mentioned the watering of plants. "Don't be surprised when you walk into a cannabis greenhouse and you see people watering 6,000 plants by hand. Not once, but sometimes even twice or more times per day. We try to explain them the benefits of using a dedicated automated drip irrigation system, from companies such as Priva, for example."
Other solutions Berkhout introduces are efficient transport related technology like growing benches and monorail systems. "Just like in any other greenhouse operation, one of the main drivers of production costs is labour, so this is where you need to start. Some entrepreneurs come from a 20 square meter basement and are moving into a 10,000 square meter greenhouse in which they want to do everything the way they were already used to. It is a matter of changing their mindset and informing them on how things can be done more efficiently."
Also in terms of energy usage, cannabis growers need to keep their “ducks in a row” and manage their energy usage in detail. Berkhout affirmed that many of the cultivators are warehouse and indoor-minded growers who work in completely closed environments without daylight. This needs to change, as cannabis does extremely well growing in an indoor greenhouse that utilizes sunlight.
"Moving away from indoor basement or warehouse growing is much more efficient; less energy is required to control climate and humidity. When using the right energy screens and curtains, growing in a greenhouse can cut 40% of the production cost compared to indoor growing without sunlight. We all know that sunlight is the best light there is, so why not take advantage of it when its there."
With Canada's proposed legislation to permit the recreational use of marijuana throughout the country by July 2018, the pace of investments has not slowed down yet. However, Berkhout affirms that "Investing in cannabis also means taking big risks. Yes, cannabis will become recreational, we all know it is going to happen. It is just a matter of the exact date. A government can always change their plans, you never know."
As a result of the expected legalization, several Canadian produce and plant growers, such as Village Farms in British Columbia, have recently announced a conversion of their operations into cannabis production. Also Leamington, Ontario-based Aphria is currently building a 100+ million dollar greenhouse project to expand their cannabis production.
"These companies have their advantages as they are experienced greenhouse growers that are familiar with running large-scale operations. That puts them years ahead and everyone else is starting to see that", said Ron. "On the other hand, cannabis is not the same as cucumbers. For them it requires a lot of homework too."
Ron is confident that the industry will further develop as more experience is gained by cultivators. "It is not the case that knowledge is missing, because there are a lot of smart people working in this industry. It is just a matter of educating growers about new opportunities and making them familiar with new technologies."
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