Pathogens lurking in hydroponic systems aren’t always obvious—until they adversely affect your grow. Regular and thorough sterilization of hydroponic components helps maintain an optimal growing environment. That includes cleaning those hard-to-reach crannies that are typically overlooked. Cannabis Business Times spoke with three hydroponic growers to learn how they keep their hydroponic systems at the peak of deep clean.

Ian Andrews, Director of Production Operations, Wellness Connection of Maine

As director of production operations for Wellness Connection of Maine, Andrews oversees two neighboring production facilities that total 22,000 square feet of cultivation. Both produce for the company’s four dispensaries. He models his sterilization approach after traditional agriculture, and he emphasizes prevention.

“A big part of growing successfully is forethought and ensuring that everything is well thought-out, well planned, and then well executed,” he says.

Andrews offers the following hydroponic sterilization-related tips:

1. Start with a good design. To prevent problems before they start, Andrews recommends using materials and fittings that block light and are completely sealed. “Never use clear irrigation tubing; it allows light into the line and allows for algae growth,” he says.

2. Design your system for easy cleaning. “If it’s a pain to take apart, your cultivation team will be tempted to cut corners,” Andrews says. “Run anything that you can in straight lines, without too many elbows or too many fittings. [That’s] just more you need to take apart and clean, and places where you can potentially get buildup in your lines.”

3. Try to keep your systems and manufacturers uniform. “Multiple systems and manufacturers add time and complexity, increasing the possibility of some aspect of sterilization to be missed,” he says. “It is very important to keep it uniform.”

4. Give extra attention to plant-touching components. “Things that actually come in contact with the plant or the roots or the root ball—the drippers or the spaghetti lines that go to the drippers or the pots themselves that the plants are in—those are the things that we definitely take apart and sterilize in between each crop cycle,” Andrews says. That process includes a trip through an industrial dishwasher. “We’re actually bringing those [components] up to temperatures where we’re killing off microbial growth,” he says.

5. Ensure your team understands sterilization’s importance. “Create a standard, comprehensive sterilization procedure and train your team to follow it every time,” Andrews says. “Make sure they all understand the ‘why’ behind each aspect of your procedure.”

6. Never take shortcuts in the sterilization process. “All too often, growers are so focused on harvesting and then refilling the room ASAP with the next crop to avoid any unnecessary downtime, and thus the sterilization of key equipment is overlooked,” Andrews says. “It’s essential that this step is included in the turnover of the room, otherwise the time saved will pale in comparison to the weeks of growing lost.”

Jesse Miller, Cultivation Manager, Giving Tree Dispensary – Arizona

As cultivation manager for Arizona-based Giving Tree Dispensary, Miller’s background in plant pathology influences his approach to hydroponic sterilization and the cultivation operation’s 5,000 square feet of canopy. Miller emphasizes preventing circumstances that can lead to pathogen problems.

Nutrient reservoirs are constant priorities. “Keeping that reservoir clean is extremely important because that’s the source to all of your plants,” Miller says. “During harvest week, there are no plants in the rooms for a few days and we do a deep clean to start everything fresh.”

Miller offers these sterilization-related tips:

7. Keep your nutrient solution moving. “If it becomes stagnant, you can have algae and bacteria and fungi sitting in there, growing,” Miller warns. “Having it circulated with a circulator pump and having it aerated—adding air stones and a bubbler—is very important.”

8.Use a chiller system to control nutrient temperature. “Hook a [chiller system] up to your circulator pump so that you’re maintaining a perfect temperature for the solution. If it’s too warm, you can have certain organisms growing that you don’t want,” Miller says.

9. Avoid using oils in irrigation lines. Miller says oils can lead to blockage and harmful growth in irrigation lines. “Sometimes people will irrigate with oil in order to get rid of root aphids or something like that,” he explains. “I would recommend never to run anything like that through an irrigation system, because it’s very hard to get out.”

10. Breakdown fertilizer buildup with an acid flush. Flushing lines with a pH-down, phosphoric acid solution (near 3 pH) to break down salts is part of Miller’s post-harvest deep clean, but he cautions not to use a solution with a lower pH than that. He once tried a solution below 2 pH, and let it soak in lines overnight. “When I came in the next day, it had corroded all of my plastic manifolds, so when I turned the irrigation on, it basically exploded,” he says. “That would be something not to do.”

11. Don’t recycle irrigation water to other growing zones. “If you’re recirculating water and using it on different zones of your growing operation, you could be recycling and transferring diseases to other zones of the facility,” Miller says. He keeps every room on its own irrigation system.

12. Treat recirculating water with a UV sterilizer. “When you’re recirculating your reservoir, you can have that water constantly transferring through a membrane with UV light. The light is breaking down the cells of all types of organisms that could infect your plants. That is really effective with killing fungi and bacteria,” Miller says; however, he notes, “one challenge is that it can also break down elements in your fertilizer recipe—iron specifically.” Micro-dosing supplemental nutrients to offset deficiencies may be necessary.

13. Don’t forget your tank. “Every once in a while, someone needs to get inside the tank and do a deep clean. Even if you have aeration, there’s a good chance you’re still going to have some sort of residue buildup on the walls of the tank,” Miller says. “We use a couple of different things: hydrogen peroxide and then a product called Physan 20, which is an algaecide, fungicide, bactericide and viricide.”

14. After cleansing, do a thorough flush and water check. Miller recommends a thorough flush with clean water after using any cleansing product in your system. “Make sure you collect that water and that you’re checking the quality of the water coming out of the lines before you start to irrigate the plants,” he says.

Mike Meyer, Head of Cultivation, Lucy Sky Cannabis Boutique – Colorado

As head of cultivation at Colorado-based Lucy Sky Cannabis Boutique, Meyer oversees 50,000 square feet of cultivation, which supplies Lucy Sky’s four dispensaries and wholesale customers across the state. With approximately 10,000 plants on hand at any one time, Meyer stresses that strict sterilization procedures are essential to success.

“Just because it’s not visible to us doesn’t mean that we don’t have different types of microbes and different types of pathogens and molds and mildews. So we have a list of things that we do every time—after we harvest the room, then the post-harvest room cleanup, and then going forward into the growing cycle itself, all the way through,” he explains.

The following steps top Meyer’s checklist:

15. Sterilize irrigation lines. Meyer recommends two products for sterilizing irrigation lines between crops. “The one that I use is ZeroTol 2.0. It’s a BioSafe product that is hydrogen dioxide and peracetic acid,” he says. “The one that would be used more commonly and that is also safe is hydrogen peroxide (H2O2), preferably a commercial use that has a higher concentration than what you would normally buy in the grocery store.”

16. Perform a weekly root flush. Meyer recommends a weekly root zone flush. “In terms of sterilization, it’s imperative that you clean up your lines so that you don’t have any types of buildup of algae, biofilms or waterborne pathogens,” he says. By adding ZeroTol to the mix, “you’re able to kill any potential pathogens that may be present,” he adds.

17. Always put safety first. Meyer emphasizes employee safety and utilizing proper safety equipment as sterilization priorities: “Ultimately, it’s healthy people, healthy plants. We don’t want anybody to get hurt.” Standard operating procedures for sterilization include step-by-step protocols for every procedure, including protective equipment. “It’s important that we have proper eye protection, proper respiratory care and proper coverage for your skin, arms, hands,” he says.

18. Don’t become complacent. “It’s easy to become complacent [with sterilization] and think, ‘I’m not seeing any detrimental effects. I can probably skip this that one time.’ That’s where problems start happening. And once you have a problem, it takes twice as much effort to get rid of it,” Meyer says. “Sterilization is imperative. ... It’s really important that you have a tight protocol and that you have a strict regimen.”

Jolene Hansen is a frequent contributor to GIE Media Horticulture Group publications.

The tail end of 2018 wasn’t great for Canadian licensed cannabis producer (LP) Aurora Cannabis’s stock prices— but then, the end of the year wasn’t kind to anyone’s stock. Volatility across markets caused almost all of 2018’s earnings to vanish in a span of a few weeks, especially for companies listed on the Dow Jones and the S&P 500.

Despite the end-of-year frenzy on the public exchanges, Aurora still made 2018 its best year yet. In 2018, Aurora announced that its liquid assets exceeded CA$500 million (US$374 million); that it invested large stakes in CanniMed and The Green Organic Dutchman, two other publicly traded Canadian LPs; that it won the public bid to supply Italy with medical cannabis (through the country’s Department of Defense); and that it received its official cultivation license for its more than 800,000-square-foot hybrid indoor facility (named Aurora Sky) located near Edmonton International Airport—and these were only the January headlines.

Aurora’s goal is simple: Become a global leader in cannabis and cannabinoid production. To achieve that goal, the company is building itself on four pillars:

1. The use of high-level automation in cannabis cultivation to streamline processes, reduce costs and maximize return-on-investment (ROI);
2. Access capital via public markets and deploy shareholder capital intelligently and rapidly to create a fully integrated cannabis company;
3. Capture a significant portion of Canada’s consumer market to establish Aurora as a respected consumer brand; and
4. Rapidly establish a global footprint in the American cannabis market to assume a leading global position.

Big Bet on Tech

Aurora Sky is the crown jewel of Aurora Cannabis’ North American portfolio and in a class of its own as a CA$150 million (US$112 million) hybrid indoor cannabis cultivation facility. From ground level, it looks like any other large commercial property or hangar near an airport. Travelers landing at or departing from Edmonton International Airport will get a better sense of what makes this facility unique in cannabis—the building’s glass roof.

This design, created in collaboration with Larssen Limited (which Aurora purchased in November 2017 and re-branded to Aurora Larssen Projects (ALPS)), allows Aurora to harness the sun’s power while maintaining the same number of high-pressure sodium (HPS) lights and using the same sophisticated environmental control system (ECS) as an indoor facility.

Cam Battley, the company’s chief corporate officer (CCO), says, “The objective of creating this … concept in cannabis cultivation is to ensure that we have an absolutely optimal environment for plant health and high yield.”

At scale, the Sky facility will produce more than 100,000 kilograms (220,000 lbs.) of cannabis per year. (Currently, Aurora Sky is operating at about 25-percent capacity with one mother room and four flower rooms licensed for sale by Health Canada.) According to the company’s most recent pro forma, it cost Aurora CA$1.45 (US$1.08) to produce every dried gram of cannabis it sold in Canada during its first fiscal quarter of 2019. Battley says that figure likely will drop to less than CA$1 (US$0.75) once the facility is fully operational. (The mean cost per gram across the cannabis industry was US$1.29 in 2017, according to Cannabis Business Times’ 2017 “State of the Cannabis Lighting Market” report.)

What helps keep those costs down is the Sky facility’s “unprecedented” level of automation and technology in the cannabis industry, Battley says. That automation and technology also allows Samantha Olivier, Aurora Sky’s lead cultivator, to oversee the facility’s current stock of 200,000 plants (with more on the way as the company waits to receive more sales licenses from Health Canada) with a team of just six employees.

One such piece of technology is a robotic crane that sits above the canopy in the rooms. The crane can reach across a 34,000-square-foot space—the size of each of Aurora Sky’s mother and flower rooms—and move plant tables to the front of the room, where one of the six crop scouts can do their work.

“It would be very hard, for example, for a crop scout to reach [all] 30,000 plants per room. I'd have to have a massive team for that,” Olivier says. With the robotic arm, “Once you identify something, you just bring the table to the front and then you can walk around and check individual plants. Instead of having to look one by one down the rows, you’ll go straight to that table that has a problem to be fixed.”

Connected to the crane are infrared and ultraviolet cameras that periodically photograph every table. Those photos run through a specialized software that compares them to pictures of healthy crops and crops infected with various pests and diseases. “The cameras and our software are far more sensitive than the human eye and [are] able to cover the entire canopy, not just the plants that are closest to walkways,” Battley says.

Plant anomalies are flagged for review, and a crop scout will conduct a manual inspection if necessary. To conduct that manual inspection, a scout simply types the table number into the crane control system and the table is brought to him. This system eliminates the need to leave ample work space throughout the canopy, allowing Aurora to fit 30,000 plants in a 34,000-square-foot room.

For Olivier, the biggest challenge with managing the increasingly large canopy is getting her team to stomach losing a plant. “For example, if we have a plant that is drier than the other ones, we have to remove that plant, and people feel so heartbroken. I say, ‘Look, it's one in 30,000!’” Olivier says with a chuckle. “I'm trying to create this culture that the company is a large-scale production environment, and the [team members] are so attached to this plant.” She notes, however, that a dedicated workforce is a good problem to have.

Olivier’s task to create that culture is not going to get easier. Once fully licensed and operational, Battley estimates the size of Aurora Sky’s entire production team—including harvesting, post-harvest processing and other ancillary groups—at 400 members. That might seem like a lot for one facility, but, as the CCO is quick to point out, “that is only three times more than our Mountain facility [a 55,000-square-foot facility near Calgary], which has 125 people, but the production is 20 times that of Aurora Mountain.”

Those 400 team members will be responsible for overseeing and processing approximately 100 harvests per year, according to company estimates, as each of the 24 rooms will be harvested up to six times per year. Following a standard 60-day flowering cycle, that means a flower room must be harvested roughly every 3.5 days.

“We believe that we've invented the first 21st-century cannabis production concept,” Battley says.

Turbulence in the Market

Aurora Cannabis needs that production capacity to catch up with the demand created by Canada’s newly legalized adult-use market that launched Oct. 17, 2018. Much ink was spent detailing Canadian consumers’ complaints about supply shortages, poor-quality cannabis and incomplete or incorrect deliveries. Those complaints were no surprise to Battley.

“For months in advance of consumer legalization, I've been speaking coast to coast, reminding people that we should not expect perfection on day one,” Battley says. He expected the larger LPs to take the brunt of the responsibility for any rollout issues—they have been, after all, among some of the most publicized companies in Canadian media for the past year—but he adds that the early issues are no one’s fault. Rather, they are simply part of the process.

“What we're doing is something quite remarkable in that we [are] establishing a brand-new, nationwide, very complex … retail system with 13 different jurisdictions and different rules. It's to be anticipated that there will be some bumps in the road,” he says.

Demand during the launch of the adult-use market was “definitely higher” than anticipated, Battley says. State-run websites were out of stock and crashing within hours of opening sales, and provinces with brick-and-mortar operations, such as Alberta and Quebec, saw eager customers wrapped around stores, with some visitors waiting upwards of four hours to make a legal cannabis purchase. Battley believes that is a hopeful sign as “it's indicative that people do, in fact, have a willingness to migrate from the black and gray markets to the legal and regulated one at the existing price points, including taxes.”

Through its various brands and distribution partnerships with other LPs, Aurora launched approximately 250 SKUs into the adult-use market. Early sales reports have the company excited, as well. Internal reports showed that Aurora’s sales accounted for roughly 30 percent of total sales on the Ontario Cannabis Store’s website during the first days of legalized sales. Meanwhile, in British Columbia, products made by Aurora or its subsidiary MedReleaf were the province’s top-four sellers. In order:

1. Tangerine Dream-San Rafael ’71/MedReleaf
2. Blue Dream-Aurora Cannabis
3. Great White Shark-San Rafael ’71/MedReleaf
4. Pink Kush-San Rafael ’71/MedReleaf

Amid Canada’s new adult-use market craze, however, Aurora remains determined to prioritize its medical patients, some of whom have been with Aurora since the LP’s 2013 launch.

“Registered patients are a commitment, and you have to maintain that variety of product on your medical … menu to ensure that patients have access to the different products that they need,” Battley says. As such, Aurora did not create product reserves ahead of legalization, instead only making available the product that each province’s distributor ordered. Now that it has completed its first shipments, Aurora is evaluating what new orders it can fill while keeping the priority on its registered medical patients.

When the market will stabilize, though, is anyone’s guess, Battley says, pointing to the facts that nearly every LP is expanding and new licenses are being granted make such predictions difficult to make. “But a reasonable estimate,” he adds, “is that this will take a number of months to reach equilibrium.”

Of the People, For the People

To fund its expansion projects and acquisition deals, Aurora went public.

It became one of the first cannabis companies listed on a stock exchange after completing a reverse takeover to join the Canadian Securities Exchange (CSE), a junior exchange in Canada, in 2014. Afterward, the LP quickly fortified its stock-exchange presence: In 2016, Aurora joined the Toronto Venture Exchange; in 2017, the Toronto Stock Exchange (TSX), and on Oct. 23, 2018, under the ticker “ACB,” the company started trading on the New York Stock Exchange (NYSE). (Aurora, like Canopy Growth, can be listed on the NYSE because it is not a U.S.-based firm and, as such, is not violating U.S. law by cultivating cannabis.)

A top benefit of going public, according to Battley, is mandatory disclosure requirements. “It forces any company to operate in a far more disciplined and transparent fashion,” he says.

Aurora’s quarterly financial filings include information that most cultivators are loath to share. Information such as revenue, expenses and debts are required by exchanges. But others, such as kilograms produced, kilograms sold and “cash cost to produce per gram of cannabis,” are metrics that Aurora submits to investors voluntarily to provide them a better understanding of the company’s inner workings.

“We believe that's a good thing because this is a very new, young industry,” Battley says. “One of the critical challenges for the company and the hope to lead on a global basis is to evolve very rapidly from startup to grown-up. That means being measured on a consistent basis, being able to compare to peers, and establishing ourselves as rapidly as possible on the same basis as mature industries.”

Comparing Aurora’s growth since it began public trading to other mature industries is not fair because Aurora is a startup in a fast-growing market, but that comparison does reveal how the company, and the cannabis industry, has evolved in just two years. When it was first listed on the CSE, Aurora’s market cap was US$52.4 million (at today’s currency exchange rate). At press time, Aurora’s NYSE market cap was around US$6 billion, a more than 11,350-percent increase.

The company put some of those funds toward advancing cannabis-science research. Currently, Aurora has 40 clinical studies completed or underway, Battley says, in addition to seven pre-clinical studies. The cannabis producer’s research partners include McGill University, University of Saskatchewan, University of Toronto, the Ontario Brain Institute and Mount Sinai Hospital. With these partners, and others, Aurora conducts studies on the potential benefits of cannabis for cancer pain management, osteoarthritis and epilepsy, among other conditions, as well as attempts to identify genetic markers to gauge an individual’s receptivity to cannabis medications to better dose products.

That research is important to serve Aurora’s more than 67,000 registered patients. But Aurora also has nearly four times as many shareholders (approximately 250,000) as patients. Battley says managing shareholders’ hunger for a return on investment and patients’ needs for safe and consistent medicine is part of the balancing act that comes with being listed on an exchange. Some might view those needs as competing, but not Battley. “Our shareholders need us to create a valuable company and to secure a position as a global leader in this space,” he says. “A way to do that is by being very, very good at your business.”

Think (and Act) Globally

Those public funds have also allowed Aurora’s executives to think beyond Canada’s borders, Battley says. “The access to capital has allowed us at Aurora to create what we believe is the most integrated cannabis company globally, with divisions that cover everything from facility design and engineering to the cultivation of both cannabis and hemp, to derivative products to distribution networks in Canada and internationally.”

Stated simply, Aurora’s global plans go beyond being first to market as new countries develop their medical or adult-use cannabis programs. The company is looking to establish cultivation and production businesses in multiple markets and tailor those businesses’ practices to those environments.

For example, Aurora’s acquisition of Uruguay-based cannabis cultivation and processing company ICC Labs grants the Canadian LP access to the Latin American market and allows the company to produce—at lower costs—higher-margin cannabis derivatives (such as isolates or distillates) that can then be sold anywhere in the world that allows imported cannabis products. Meanwhile, the Aurora Sky facility model, with its use of automation and robotics, can be replicated in more developed countries and still manage to produce cannabis at less than CA$1 per gram.

To be competitive on cost on a global scale, Battley says there are two choices: “Either produce in countries with a lower-cost labor or produce in developed countries with the use of a great deal of high technology. We're doing both.”

Beyond cost, Battley says Aurora has gone to great lengths to ensure quality on a global scale. The company owns two of the six Canadian facilities that are EU-GMP certified (the same certification required to run a pharmaceutical laboratory in Europe): Aurora Mountain and MedReleaf-Markham. EU-GMP certification also allows Aurora to export into the German market.

“We believe that in order to sell product into the European market going forward, companies will have to be able to meet that standard,” Battley says. “That regulation will serve as, effectively, a barrier to entry against the companies that cannot meet that level of certification.”

Aurora is on its way to global dominance, neck-in-neck with its main competitors, Canopy Growth Corp and Tilray. To date, Aurora has either cultivation facilities or production labs in Australia, Brazil, Canada, Cayman Islands, Colombia, Denmark, Germany, Italy, Malta, Mexico, Poland, South Africa and Uruguay. It also possesses additional sales agreements with nine other countries, meaning Aurora (or one of its subsidiaries) has a presence in 22 countries at press time.

But one market remains the company’s white whale: America.

“We are engaged in every permissible way right now,” Battley says. While Aurora can’t open a cultivation facility on U.S. soil without losing its exchange listing or suffering some other fatal consequence, it has entered into licensing agreements and invested in various areas of the cannabis industry through its spin-off investment firm, Australis Capital.

Many of those deals improve Aurora in both the short- and long-term. For example, Aurora’s licensing deal with California pre-roll maker Wagner Dimas allows Aurora to bring the U.S. company’s pre-roll technology into its Canadian facilities. Concurrently, Australis invested in a 15-percent stake of Wagner Dimas.

The Wagner Dimas deal is exemplary of Aurora’s calculated approach to international expansion: It grants the LP early access to the American market by allowing the company to establish itself in the production line. It also serves to increase profits, as pre-rolls are “higher value-added, higher margin products than dried flower,” Battley says.

Even Aurora’s plan for how to re-consolidate with Australis Capital is laid out. Aurora has a 10-year option to purchase 40 percent of Australis—the first 20 percent at IPO-share price and the other 20 percent at current market rate.

“So we have put a great deal of thought into the U.S. market,” Battley says.

That said, no other country has a cannabis industry like America’s (mostly because America has developed 33 different programs), which makes predicting the impact of federal legalization on market trends difficult, according to Battley.

“The U.S. will be very distinct from others in the world,” he says. “It will be a very competitive market, and like in any competitive market, we will see a variety of business strategies executed upon, and we'll see which ones are most successful in the long-term.”

As it plays the long game with America, Aurora’s global expansion will continue. As Battley says, “The vision remains to establish ourselves as a global leader operating in every market … where cannabis is legal on whatever basis, whether CBD only, whether the full range of medical cannabis product and, ultimately, [in] additional markets that choose to evolve their own legal consumer system. We have a unique opportunity to do that.”

Brian MacIver is senior editor for Cannabis Business Times and Cannabis Dispensary magazines.

Having personally grown cannabis and consulted in three different countries (Canada, U.S. and Colombia), I can affirm that moving into an international market is not always seamless. Cultural, environmental and governmental challenges may outweigh the benefits of expanding internationally. Consider the following questions and tips as you decide whether launching a cannabis operation on foreign soil is the right move for your business.

Will this opportunity present an elevated safety risk to you or your employees?

1. Determine the political stability of the region where you are considering doing business. As cannabis legalization spreads to Asia, Africa, Central America and South America, concerns surrounding gangs, drug cartels and civil war become more prevalent. No cannabis opportunity is worth being kidnapped.

2. Consider elevated risks of establishing cultivation sites in countries or regions where natural disasters are common. Earthquakes, hurricanes and severe flooding are common to many regions that are otherwise ideal for cultivating cannabis. Caribbean islands are subject to annual hurricane threats and flooding, while earthquakes are common to Colombia.

3. Verify if the country in question presents an increased risk of human disease. Yellow fever occurs in parts of Africa and South America, and malaria is found in more than 100 countries. Stay up to date on vaccinations and take any preventative medication your doctor recommends.

4. Familiarize yourself with native wildlife that could pose a threat to your cultivation team. Venomous snakes, spiders and scorpions can be real concerns for outdoor cultivators. On two different occasions, I have seen caiman (small crocodilians) in bodies of water bordering Colombian grow sites. While not a major threat to humans, startling a caiman could mean bad news for your ankle.

5. Learn a second language. If you don’t speak the local language, and locals don’t speak English, prepare to have a translator with you at all times. Local translators' pricing will vary depending on the local economy, but they are preferable to bringing one with you as they will better understand the local slang. Clear communication can prevent dangerous situations. Before heading out to explore on your day off, it’s a good idea to ask locals about the safety of the area that you will be visiting to avoid any crime hot spots.

Does pursuing this opportunity make business sense?

6. Identify whether the country in question will allow for medical and/or recreational sales. Obviously, both is best.

7. Seek countries whose regulations allow for export as well as domestic sales. Canada, Lesotho and Colombia currently allow for export. But a small island with an inexpensive labor force may not be a great business opportunity if export is prohibited and the local population is small.

8. Dig into regulations that restrict cultivation. If laws will limit cultivation area or plant count, building a profitable business may be a challenge. Based on my experience in the domestic Canadian market and export-focused Colombian market, domestic producers need at least 20,000 square feet to compete locally, and international producers should aim for a minimum of 100,000 square feet.

9. Be clear if regulations allow for both high-CBD and high-THC cultivation. Although CBD is found in everything from medicine to cosmetics, there is tremendous supply competition on a global scale. Legal THC production is much less common and, therefore, much more profitable.

10. Understand what form of cannabis you can export. For example, South Africa is permitted to ship dry flower, while Colombia may only export oil.

How much will this start-up cost? How soon will you earn your money back?

11. Anticipate substantial pre-cultivation costs. Licensing, lobbying, translators, legal fees, accountants and consultants will consume a lot of money before even one seed is planted. Set aside at least $200,000 USD for these initial expenses.

12. Budget about $2M USD for buying land, building greenhouses, acquiring genetics and hiring. That number will fluctuate greatly based on the size and scope (e.g., outdoor vs. greenhouse) of the operation. Big operations should plan to raise much more.

13. Get a handle on the hidden costs of doing business. Operating expenses such as electricity and fuel can be surprisingly expensive in many countries. Commercial cannabis growers in Puerto Rico pay double the electrical costs of any U.S. state, while fuel prices in most European countries are twice that of the U.S. or Canada. Cannabis taxes and exporting fees could be prohibitively expensive.

14. Research international market demand. If exporting, what will be the “going rate” for wholesale product? Will you be globalizing your own brand or providing white-label products to larger companies?

15. Research local market demand. How much are consumers willing to pay on the domestic market? For a starting point, look to local pricing of illicit cannabis.

Where should you put down roots?

16. Allow differences in elevation, temperature, weather and solar radiation to dictate the appropriate growing structure. A commercial cannabis operation in Canada won’t look anything like a commercial cannabis operation in Laos—and it shouldn’t.

17. Guarantee a reliable water source for your cultivation facility. Well water is preferable to river water, but anticipate utilizing some form of water treatment, such as reverse osmosis equipment, regardless of the source.

18. Ensure that your cultivation site is accessible. If you plan to build a greenhouse in a rural location, make sure roads leading to your site can support heavy vehicles such as 18-wheelers and that heavy rains won’t render roads impassable.

19. Locate your operation away from chemically intensive crops. Each country has its own pesticide regulations and standards. Herbicide and pesticide drift from neighboring farms can severely damage cannabis or render it unsaleable.

20. Take advantage of the sun. While indoor grows may be appropriate for cold climates or urban areas, outdoor grows in sunny or tropical regions can eliminate the need for greenhouses altogether.

Where should your money be spent?

21. Staff your cultivation team with the local workforce. Low labor costs are one of the driving reasons to cultivate in another country.

22. Contract greenhouse builders who are experienced with large international projects. A company from Colorado that specializes in hoop houses may not have the breadth or know-how to build a tropical greenhouse in Thailand.

23. Identify a local general contractor (GC) to manage all construction. You’ll go crazy trying to learn building codes and local idiosyncrasies surrounding construction. A reliable GC will help you avoid getting ripped off.

24. Be creative when sourcing high-volume inputs, such as grow substrates. Shipping soil halfway across the globe can be costly. Consider local materials that can be blended to create appropriate grow substrates, such as coco fiber or rice hulls. Most of the world’s coconut and rice production occurs in South American and Asian countries, so commercial growers in these regions can save money by utilizing by-products of these industries.

25. Use growers and consultants experienced with high-profile cannabis start-ups. Many countries have been cultivating cannabis for decades, but not within a legal, regulated framework. Recruit head growers from the U.S., Canada or Europe to assure Good Manufacturing Practices (GMP) and to prevent non-compliance issues in the future.

Ryan Douglas is the owner of Ryan Douglas Cultivation, LLC. He has worked in commercial horticulture for 20 years and specializes in legal cannabis start-ups.

Welcome to Volume 5 of Cannabis Business Times. It’s hard to believe we are entering our fifth year of publication. In that time, our team has produced 32 issues, 3,200 pages of content and hundreds of articles—not to mention the thousands of articles available on cannabisbusinesstimes.com—to help you be successful in your cannabis endeavors.

In honor of Volume 5, I want to share the five biggest things I’ve observed about the cannabis cultivation industry since I first started covering cannabis.

1. It’s dichotomous. This industry’s roots are buried deep in history, counterculture, devastation from the failed drug war, advocacy and passion. These roots have been cultivated through generations, and they are often at odds with the current groundswell of “big money” sweeping in and profiting from legalization. It’s an extreme version of big-box retailers taking over Main Street, only this Main Street often led to incarceration and its aftermath.

2. It’s volatile. Stock share prices, cannabis wholesale and retail prices, zoning restrictions, regulations, compliance requirements and tax laws—they can all change in the blink of an eye.

But another volatile area that doesn’t receive as much publicity is leadership and staffing: It is one of the most significant variables to account for. It’s not unusual to encounter companies who have had several head cultivators in a year. Finding and keeping qualified employees is a huge challenge. As Bloomberg reported Dec. 2, 2018, “The chief executive officer of Aphria Inc. had just hired 50 people to work in the pot producer’s greenhouse in Leamington, Ontario and by the end of the first week all but eight had quit.” And the impact of that mass exodus? Aphria was “forced … to dispose of almost 14,000 cannabis plants in the quarter ended Aug. 31 after they weren’t harvested in time, costing it nearly $750,000 (C$1 million),” Bloomberg reported.

3. It’s a magnet. Everyone wants in. This is good news for those looking for investors. ($718 million was invested in cannabis cultivation and retail businesses in 2017, according to Forbes, and that number will skyrocket when 2018 figures are assessed.) But such an influx of capital draws comparisons to the dot-com era and the California Gold Rush: It makes the industry more competitive and all-the-more volatile.

4. It’s creating jobs. The heavy turnover rates and the challenges they create in many industry segments are caused by a good problem: the increasing number of cannabis jobs. According to the Bloomberg report, “Between them, eight of Canada’s largest cannabis companies are now actively recruiting for approximately 1,700 positions.” On a larger scale, a 2017 “report from New Frontier Data projects that by 2020 the legal cannabis market will create more than a quarter of a million jobs. This is more than the expected jobs from manufacturing, utilities or government jobs, according to the Bureau of Labor Statistics,” per Forbes.

5. It helps our communities. Cannabis legalization has addressed many civil rights issues, and will continue to do so moving forward. The tax revenue cannabis brings to city and state governments is often allotted for initiatives such as combating opioid addiction and funding public education, among other similar programs.

The industry is maturing fast, and its members are proactively choosing to join non-required local initiatives to make positive changes in their communities.

The vertically integrated Verdes Foundation in New Mexico provides funding to many organizations, including: Epilepsy Support & Education Services, Inc., New Day Youth & Family Services, Wildlife West animal sanctuary and Students for Sensible Drug Policy. In Colorado, producer/retailer Lightshade partners with 12 local charities that fight homelessness and hunger, among other initiatives. Vertically integrated Caliva in California partners with and educates local wellness practitioners (doctors, nurses, etc.) to help them expand their pain-solution offerings and increase their cannabis patients’ quality of life. Cultivators, such as Colorado-based LivWell, are sponsoring highways. The Canadian cannabis giant Aurora Cannabis dedicates employees specifically geared toward the company’s corporate responsibility efforts. (You can learn more about Aurora in our cover story this month.) And the list goes on.

Here’s to another year, and even more lessons, in this crazy, but wonderful industry. May your businesses and communities thrive!

Happy New Year!