In late July, Curaleaf closed an approximately $700-million deal to acquire Grassroots Cannabis. The move places Curaleaf boots on the ground in 23 U.S. states with a footprint that includes 88 operational dispensaries and 22 cultivation sites with 1.6 million square feet of current cultivation capacity.
The acquisition makes Curaleaf the largest cannabis company in the world, based on its anticipated $1 billion in annual revenue, a stat touted by the company's executive chairman on CNN Business in July.
And, yes, it’s a big deal on face value, but Curaleaf CEO Joe Lusardi says that the transaction represents a pivot toward the longer-term direction of the legal cannabis marketplace.
For instance, the acquisition provides Curaleaf a sturdy, scaled-up position in quickly growing markets like Illinois and Pennsylvania. Not only are those states rolling in cannabis revenue right now (Illinois saw more than $300 million in adult-use cannabis sales through July this year, according to the Illinois Department of Financial and Professional Regulation), but customers in those markets will be a driving force behind shifts in product category demand and connoisseurship.
Lusardi argues that companies will need to be agile and well capitalized to meet that nuanced demand as different states’ customer bases find their footing. Flower sales dominate in the early days of adult-use legalization, he says, but that market mainstay is often supplanted with rising concentrates sales as consumers learn more about cannabis—which in turn prompts more in-depth concentrates R&D back in the lab.
“Everybody's talking about how Illinois is a great market, but if you don't actually have the capacity to capitalize on it, then it really doesn't matter,” Lusardi says. “And I think what's important about Grassroots is that it was a developed business. It wasn't just a collection of licenses. It was assets that these guys have been working on for half a decade.”
Lusardi and the Curaleaf team homed in on Grassroots because they saw a cultural match that could deliver long-term on the companies’ visions for the industry.
A good understanding of your own company’s values is key to productive M&A.
“The culture of a business is a big factor in how successful you’re going to be with integration and how well the transaction ultimately works out,” Lusardi says. “We really loved the Grassroots team, and they were built really much like Curaleaf—as a vertical business, very entrepreneurial.”
That’s important—not only for the short-term health of the business and its employees, but for the long-term strategy that all M&A deals involve. Curaleaf, intent on developing “the first national cannabis brands” (Curaleaf itself and Select, an earlier acquisition), is building out a coast-to-coast presence to do just that.
“Many of the MSOs have … retrenched into markets where they were performing well or where they have capital to build out, whereas Curaleaf has really continued to keep our foot on the accelerator and expand into more markets—given where we have a strong balance sheet and we can actually take on those projects,” Lusardi says. “And I think that's going to pay for itself—maybe not this quarter, but in the next couple of quarters, you're really going to see that separation as a result of all the work we're doing to put assets online and then invest into developing markets.”
Eric Sandy is digital editor for Cannabis Business Times, Cannabis Dispensary and Hemp Grower.
Fall signals the start of harvest for outdoor growers. It also usually means schools are back in session and families are settling into their routines; however, as we all know, there is nothing routine about life during the COVID-19 pandemic. Professionals in the cannabis cultivation industry have had to adjust to new realities (sheltering at home, virtual learning for many students, state or regional shutdowns, and phased re-openings and re-shutdowns, for example), all the while continuing to operate their businesses under difficult and fluctuating mandates. Teams have had to create new sanitation processes, workflows and spaces for social distancing to protect their workers, and being flexible for employees who feel sick or need to care for children who may not be able to attend school or daycare. All of this creates uncertainty on many levels.
During these times, it is increasingly important to adapt to and support the needs of your employees. The team at Canna Organix, the company profiled in this month’s issue, which you can read here, does that. It looks beyond efficiency and the bottom line when assessing its goals and values. Wendy Bentley, business manager at the Washington-based cannabis cultivation company, says, “We also value everyone’s home life, and we want to give space and support for the inherent things that come up.”
Great people make great businesses, and your team has likely had a lot of things that have come up in the past few months especially. Some cannabis companies continue to hit incredible benchmarks despite the challenging economy, new business requirements implemented on the fly, and personal struggles that individuals are quietly navigating. From conversations with cultivators who are continuing to expand operations and develop new products, to examining monthly sales figures in markets like Illinois and Massachusetts, there are many examples that the industry, as some have predicted, is largely resistant to recession.
With all of the hurdles of getting a cannabis company off the ground, people who work in this industry tend to be optimistic and adaptable to significant changes, and it’s not surprising that many U.S. businesses are performing well. But as this month’s cover story reminds us, it is equally important keep in mind what people are dealing with at home, to check in, follow up, and to monitor not only the financial health of your business, but the emotional one.
Within the cannabis and hemp industries, the utility of CO2 for extracting cannabinoids and terpenes from dried plant material is widely known and accepted. As an extraction solvent, CO2 is cheap, clean, nontoxic and nonflammable. However, what may come as a surprise (especially to those new to cannabis and/or hemp processing) are the significant cultivar-to-cultivar differences when performing CO2 extraction runs. Extraction scientists should consider several key questions when developing cultivar-specific CO2 extraction protocols.
1. What is the extraction goal?
Prior to creating any new CO2 extraction protocol, it’s important to consider the desired outcome. Is the goal to extract all the desirable compounds from the biomass as quickly as possible? Is terpene preservation or oil fractionation (a separation process) important? The answers to these questions will determine whether you utilize supercritical or subcritical CO2 extraction, or a combination of the two.
Supercritical CO2 extraction takes place at pressures above 1,083 psi and temperatures greater than 88oF when the CO2 has reached its critical point where liquid and vapor coexist. Behaving like a gas, supercritical CO2 expands to fill the volume of the extraction vessel and can freely diffuse through ground cannabis or hemp material within the vessel. Behaving as a liquid, supercritical CO2 has great solvent power capable of extracting a wide range of compounds from biomass with a greater percent yield in a shorter amount of time compared to subcritical. Because supercritical CO2 extraction employs higher temperatures and pressures, terpenes and other more volatile compounds may be degraded or lost during the process.
Subcritical CO2 extraction occurs below the critical point (less than 1,083 psi and lower than 88oF) where CO2 is in the form of a liquid. While subcritical CO2 has decreased solvent power, this can be advantageous, as it allows for more selectivity in the extraction process. Subcritical is ideal for extracting terpenes and other more volatile compounds from cannabis or hemp, and many of the more undesirable components (fats, waxes, and chlorophyll) are not readily soluble in subcritical CO2. This is useful because subcritical extraction is capable of fractionation, producing oils rich in CBD, THC, and other cannabinoids. The cooler temperatures used in subcritical also mean there is minimal decarboxylation that occurs in the process, preserving the acid forms of CBD and THC (CBDA and THCA) that are naturally present in the plant. The major drawback is time—subcritical CO2 extraction generally takes two to four times longer than supercritical to get the same yield.
(The best conditions for using a combination of these two methods will be addressed later.)
2. What is the next step for the extracted oil?
A closely related question to the first one: What do you plan to do with the cannabis or hemp oil once it is extracted? Will it undergo winterization to remove waxes? Will it be distilled? Will it need to be decarboxylated for use in food products or oral dosage forms (capsules, lozenges, tinctures)? The post-extraction processing/purification pathway will help guide in the development of your CO2 extraction process. For example, if you plan to perform thin film distillation on the extracted oil, you could likely get away with doing a higher pressure supercritical CO2 extraction run, which would result in a faster run time, but the extracted oil would be less refined.
3. What is the cannabinoid composition of my starting material?
This question is key when it comes to CO2 extraction method development. Studies have demonstrated that THC, CBD, and other cannabinoids have differing solubility in supercritical CO2, with CBD having higher solubility compared to THC (see “References” sidebar for studies on that subject). While the researchers in these studies determined cannabinoid solubility at a relatively high range of temperatures (greater than 100ºF) and pressures (more than 2200 psi), similar trends in THC and CBD solubility are observed in practice at lower temperatures and pressures.
When extracting using the same parameters for temperature and pressure, we have consistently observed that hemp/CBD-dominant cannabis cultivars extract much more efficiently than high THC cultivars. Of the high-CBD strains we process, total extraction run time is two- to three-fold less than their high-THC counterparts, yet achieves the same yield of raw oil. The raw CO2 extract from high CBD strains generally is less viscous compared to high THC extracts, making for easier recovery and cleanup.
For high THC cannabis strains, we routinely perform a series of CO2 extraction runs spanning both sub- and supercritical parameters to fractionate terpenes and cannabinoids. Performing additional extraction runs on the same feedstock also ensures that you recover as much THCA as possible from the biomass and optimize extraction yield. If you plan to perform some type of post-processing on the extracted oil (as described previously, in the answer to the second question), you can save time by performing a single supercritical CO2 extraction run.
4. How do I develop/optimize a cultivar-specific CO2 extraction method?
Most manufacturers of CO2 extraction equipment will provide a set of basic parameters for both sub- and supercritical extraction in their operating instructions. While this is an obvious starting point, we have experienced great success systematically changing time, temperature, and pressure settings to achieve optimal extraction results. To ensure you know how the change is impacting the extraction run, only change one parameter at a time and clearly document the times, temperatures, and pressures observed. With this information, you will be able to correlate method parameter changes to changes in yield and cannabinoid potency. Don’t be afraid to experiment! Most CO2 extractors operate over a wide range of temperatures and pressures, and it is helpful to collect extraction data covering this range—the ideal parameters for your cultivar may not align with predictions.
While we expect and routinely observe extraction differences between hemp/CBD-dominant cannabis cultivars and high-THC cultivars, we have also noted cultivar-to-cultivar differences within each class. We have witnessed substantial differences in extraction efficiency/oil potency between numerous high-THC cannabis cultivars run using the same extraction parameters. In some cases, these differences were overcome by increasing the extraction pressure or run time, while in others, we re-extracted the same biomass to strip out the remaining THCA.
In comparing extraction efficiency cultivar-to-cultivar, it is very helpful to monitor cannabinoid potency in the extracted oils as well as in the spent hemp/cannabis feedstock. This will help determine when the extraction run is complete as well as determine which parameter changes result in a higher potency oil.
Dr. Rachel Loeber, Ph.D., is chief science officer at Minnesota-based Leafline Labs.
This article is the third in a five-part series by Resource Innovation Institute (RII), a nonprofit that works to advance resource efficiency in cannabis cultivation. In Part I of the series (available at bit.ly/CBT_Resource_Guides), we introduced the “LED Lighting for Cannabis Cultivation and Controlled Environment Agriculture Best Practices Guide” and “HVAC for Cannabis Cultivation and Controlled Environment Agriculture Best Practices Guide,” which were examined by 29 peer reviewers. Key terms introduced in the article are italicized and described in more detail in the guides at ResourceInnovation.org/Resources.
The next two series installments will feature snippets from RII’s Best Practices Guides to highlight more important considerations for growers and the supply chains serving them.
Reducing production costs by optimizing resource efficiency and conveying that sustainability story are becoming central factors in the valuation of cannabis cultivation operations.
While the controlled-environment cultivation industry does not yet have enough information to fully understand the energy consumption of grow facilities using various methods and equipment, recent research reveals new insights into the carbon impacts of cultivating cannabis in greenhouse environments.
How Do Greenhouses Operate?
Many consider greenhouses an environmentally superior and less energy-intensive way to grow plants because natural light can be used for a portion of the grower’s target daily light integral (DLI) for their cultivars. However, there are trade-offs with heating energy use, building envelope integrity and quality, and environmental control with greenhouses due to their unique construction.
When greenhouse building envelopes are designed to let in the sun, they incorporate materials and construction methods that make them more sensitive to their location’s ambient conditions than indoor facilities. Their geographic latitude impacts the length and strength of available daylight, and ambient conditions include outdoor air temperature and relative humidity (RH).
“Greenhouses” can take many forms. From ventilated polycarbonate structures with no thermal curtains to tightly sealed and well-insulated, high-performance buildings with large skylights, these facilities can range widely in how they perform in various climates.
Infiltration, when outside air enters a building, is higher in ventilated greenhouses and lower in sealed greenhouses. Higher infiltration in ventilated structures makes them more sensitive to outdoor temperatures and humidity than sealed structures. The primary driver of infiltration is how leaky the construction is. Outdoor temperature plays a role, as does greenhouse size, but those influences can be all but eliminated if the envelope is well sealed.
Infiltration can be measured using the air leakage rate in air changes per hour (ACH); a lower ACH means less infiltration of outdoor air into a building. For example, an ACH under 1 means a half air change per hour. According to RII research and industry data, sealed and ventilated greenhouses may have these infiltration rates:
Sealed greenhouses: 0.3 – 0.5 ACH
Average ventilated greenhouses: 0.5 – 3.0 ACH
Leaky ventilated greenhouses: 3.0 – 6.0+ ACH
How Greenhouses Use Energy
Like most cannabis operations, greenhouses in colder climates use energy primarily for horticultural lighting. Energy also is used for heating, ventilation, air conditioning (HVAC), dehumidification and the control systems responsible for maintaining target environmental conditions.
Cultivation processes are generally exothermic, meaning they need to reject excess heat into the outside environment.
Several sensible (dry) loads and latent (wet) heat loads, the amount of heat and moisture, respectively, need to be removed from greenhouse air to attain optimal conditions:
- Passive solar heat gain: The sun adds sensible heat regardless of whether facilities are ventilated or sealed.
- Building envelope: How leaky or well-insulated a greenhouse is substantially affects sensible heating loads in colder climates where weather conditions are more extreme. In warmer climates, poor building envelope integrity can also impact latent heating loads.
- Evapotranspiration: The moisture from both plant transpiration and evaporation from water in cultivation spaces is a large source of latent heat.
- Horticultural lighting: Lighting is both an energy end-use and a source of sensible heat.
Temperature Controls for Greenhouse Environments
The environments inside both ventilated and sealed greenhouses traditionally are controlled using both hydronic (water-based) and convective (air-based) HVAC systems. Most greenhouse heating systems use fuel, not electricity; typical heating equipment used includes unit heaters, under-bench heating, forced hot air, and radiant heating systems.
Ventilated greenhouses: Traditional ventilated greenhouses use end-wall ventilation fans operated in stages and evaporative cooling wall systems installed on the wall opposite the ventilation fans. These systems pump water onto pads, and as air passes through the media, it is cooled via evaporation. Ventilation equipment and/or roof vents are typically employed to reduce humidity and cool cultivation spaces, and dehumidification equipment is not commonly employed.
It can be a challenge to meet target environmental conditions with coarse controls because many ventilated greenhouses rely on outdoor air and relatively simple fan systems for cooling and dehumidification. Because ventilated greenhouses do not often use mechanical cooling or dehumidification equipment, cultivators are unable to precisely control the conditions to the varying environmental targets for different weeks of flowering.
Field data demonstrates operating conditions regularly vary +/- 10 degrees F from the target temperatures and 10 percentage points from the target relative humidity values. Temperature differences of 7 degrees F have been recorded between the intake and fan (exhaust) ends of the same greenhouse bay, meaning cultivars are experiencing wide temperature variation across cultivation spaces.
Sealed greenhouses: High-performance sealed greenhouses use much different equipment for HVAC and dehumidification due to their sealed nature. While these greenhouses benefit from sunlight (compared to indoor facilities) and improved environmental control (compared to ventilated greenhouses), they must manage solar heat gain using mechanical systems. These tightly built facilities use mechanical cooling systems similar to those used by indoor operations, including commercial-grade hydronic and convective cooling systems. Sealed greenhouses also dehumidify using the same equipment as indoor facilities, such as standalone portable dehumidifiers and integrated HVAC and dehumidification (HVACD) systems. HVACD systems can provide conditioned air to better match the loads of the space, providing greater environmental control. Centralized HVACD systems can leverage sophisticated automation systems, providing precise control of supply air conditions to match the dynamic loads of the space.
Sealed greenhouses are more capable of achieving target environmental conditions because they make use of mechanical cooling and dehumidification equipment, more sophisticated HVACD controls and strategies, and are less sensitive to ambient conditions due to less outdoor air infiltration and better thermal performance than ventilated greenhouses.
Sealed greenhouses can also operate with enriched CO2 atmospheres (because they are sealed), while ventilated greenhouses can only hope to introduce supplemental CO2 during cold weather months, when ventilation is reduced or eliminated as cooling needs are reduced. However, reducing ventilation to either preserve heating energy or operate enriched CO2 can often result in high humidity.
The Greenhouse vs. Indoor Energy MixA year-long study of cultivation facilities in Boulder, Colo., assessed how greenhouses use energy. The study gathered electricity consumption and demand data of several greenhouses at 15-minute intervals; monthly energy bills and fuel delivery data; and annual production data, along with a complete inventory of facility equipment and modeling.
The study compared Boulder’s facilities to the performance of indoor and greenhouse facilities in RII’s Cannabis PowerScore Ranked Data Set across North America to understand how greenhouses compared to indoor operations when measuring energy and carbon emissions impacts. The researchers found greenhouses in Boulder typically use less electricity and more fossil fuel on average than indoor operations (which should hold true for greenhouses operating in other cold climates).
Figure 1 shows the breakdown of energy use from electricity and all fuels used in different systems in Boulder greenhouse facilities. Natural gas consumed by greenhouses in colder climates for heating loads, on average, can make up 47% of the total MMBtu, with electricity used to power the lighting, HVAC, fans and other production area systems accounting for the other 53%. When looking at greenhouse electricity use only, lighting energy load was found to account for 61% of greenhouse electric energy use, with HVAC energy loads driving 29% of greenhouse electricity consumption.
Figure 2 shows the breakdown of energy use allocated to different systems in Boulder indoor facilities. Natural gas can make up as little as 2% of the total MMBtu consumed by indoor operations in colder climates, with electricity for lighting driving 69% of total energy use, compared to 32% for greenhouses. HVAC energy loads contribute nearly the same amount in indoor and greenhouse facilities.
Because greenhouses use sunlight for plant cultivation, electricity demand can be reduced in the middle of the day as solar radiation increases. The peak electric load from greenhouses in the Boulder study was recorded between 8 a.m. and 9 a.m., when electric lighting is turned on, but the morning sunlight is still intensifying. Once the sun sets, electric load increases again until lights are shut off overnight. Facility electric load is intimately linked to solar radiation, and generally as solar radiation increases, greenhouse electric demand decreases.
Greenhouse gas (GHG) emissions from fuel consumption are higher for greenhouses in colder climates. When greenhouses use fuel-based heating systems, as the Boulder greenhouses do, when heating degree days increase (meaning the facility experiences more hours of colder weather), natural gas consumption increases. The amount of cold weather and fuel used may change depending on where the greenhouse is located, but the relationship between greenhouse fuel use and outdoor conditions will always exist.
How Do We Measure Sustainability?
How do we define and measure cannabis cultivation operations’ sustainability, and determine which operations are the most environmentally friendly? One important step is to verify or challenge past assumptions using data that is available.
To enhance sustainability claims and business valuation, greenhouse operators, like those of all cultivation facilities, should balance electricity and fuel costs with their carbon impacts. The site-specific GHG emissions from any industrial operation are dictated by the regional electric utility generation assets and grid transmission losses, in addition to the carbon content of delivered fuels used for processes. Some fuels, like propane and fuel oil, have higher GHG emissions (measured using equivalent carbon dioxide (CO2e)) than other fuels, like natural gas. Given the large amount of fuel used by greenhouses, the carbon footprint of this consumption is important to understand.
The Boulder study concluded that, on average:
- Greenhouse productivity in grams/MMBtu of site energy was 15% better than the indoor facilities. (Note: Highly efficient indoor cultivation is also possible—the study found the productivity of the best-performing indoor facility was 25% better than the best-performing greenhouse); and
- Greenhouse grams/lb. CO2e was 71% better than the indoor facilities.
How is it possible that greenhouse site energy productivity is only 15% better, but the emissions are 71% better? It comes down to the energy mix used on-site, and the fuel used to generate the electricity that serves the facility.
If you were to compare the emissions of two greenhouses with identical site energy productivity, one based in Boulder and one based in Massachusetts, the Massachusetts facility would produce nearly 50% less CO2e. This is due to a large portion of Boulder’s electricity generation coming from coal-fired generation facilities, while Massachusetts electricity is generated largely through renewables and natural gas, according to data from the U.S. Environmental Protection Agency.
Toward Sustainable Greenhouse Cannabis Cultivation
We see from this sample of projects that the electric savings achieved through leveraging sunlight and outdoor air ventilation in the cultivation process are largely offset by heating needs in cold-climate ventilated greenhouses. However, while greenhouse facilities’ average productivity in grams/MMBtu of site energy was slightly better than that of indoor facilities, greenhouses’ CO2e emissions were substantially lower. For this geographic region with this electric grid, and viewed through the lens of CO2 emissions, greenhouses far outperform indoor facilities.
Regardless of the location of your greenhouse, high-performance sealed greenhouses can maximize your productivity and reduce your CO2 emissions. It is important to understand the role of geography (infiltration, ambient conditions, sunlight) and the source of electricity serving the facility when assessing the performance and emissions of any new greenhouse facility, or when assessing existing facilities for energy, productivity, or emissions improvements.
Gretchen Schimelpfenig, PE, is the technical director of RII and manages the organization’s Technical Advisory Council.
Nick Collins, PE, is a member of RII’s Technical Advisory Committee and a contributor to the “HVAC Best Practices Guide.”
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