Bluma Wellness’ One Plant dispensary in Port St. Luci, Fla.
Photo courtesy of One Plant Florida
Multistate cannabis operator Cresco Labsannounced Jan. 14 that it will acquire Bluma Wellness, a Florida-based, vertically integrated company, in a transaction that company executives say combines two like-minded companies with similar business models.
The acquisition places Cresco in 10 total U.S. states and advances the company’s overall goal of developing a strategic geographic footprint based on desirable regulatory structures and population, Cresco CEO and co-founder Charlie Bachtell tells Cannabis Business Times.
The acquisition is “the culmination of a multi-year evaluation of how to get into the Florida market the right way,” Bachtell says. “We wanted to make sure we [entered the market] in a very thoughtful and appropriate way, and Bluma really presented that perfect opportunity for us, so we’re really happy with it.”
Bachtell describes Cresco as a traditional, consumer packaged goods-focused organization with a “product-first” approach that prioritizes the creation and distribution of branded products into as many retail stores as possible. This differs from other companies’ retail-first business models, he says, which prioritize the opening of as many dispensaries as possible.
“Bluma is arguably the only operator in Florida that thinks about the industry similarly to how we do,” Bachtell says. “They focused on production first, and then they opened very strategic, very thoughtful retail locations as they had product to sell.”
As a single-state operator, Bluma has been looking for a multistate company to partner with in order to expand nationally, especially as cannabis policy reform efforts begin to take shape at the federal level after the 2020 election, says Bluma CEO Brady Cobb.
“You see with the presidential election results [and] the Senate races in Georgia, it was time for us to find an MSO and a partner to be able to expand and be able to take advantage of this opportunity at the federal level that we’re seeing,” Cobb details.
Bluma’s CEO says his company had a lot of suitors looking to enter Florida’s market, but that Cresco emerged as the best partner, “based on their culture [and] their focus on having the best flower and best premium products in any market that they operate.”
“They invested like we did in building out cultivation and … manufacturing so that you could have quality product, and then [focus] on retail,” Cobb says. “Once we had a chance to meet them and see how great of a cultural fit it was, too, it was a no-brainer, and we can’t be more excited to go on this ride with them.”
Bluma currently operates seven dispensaries under the One Plant Florida brand, with eight more locations planned. The company also has 54,000 square feet of cultivation space, with a planned expansion of its cultivation capacity, processing lab and edibles kitchen.
Cobb says that it will be business as usual for Bluma following the acquisition, although the company has a lot of work ahead to expand its cultivation, manufacturing and retail footprint.
Cobb is looking to close the deal by April 1, 2021. “Then, it’s building the expansion of our cultivation facility. We’re looking at doing a large indoor facility at our existing farm, and then also building out a manufacturing house where we can do a full post-harvest process—dry, cure, trim, dry packaging, a full edibles kitchen, a full concentrates lab, full hydrocarbon lab, distillation lab. Getting all of those projects done in 2021 is a key goal, and getting us up to 15 stores is a key goal.”
Editor’s Note: Read the full article about the acquisition here.
Melissa Schiller is senior digital editor of Cannabis Business Times, Cannabis Dispensary and Hemp Grower.
How Does Your Cannabis Fertilizer Recipe Compare?
Features - Cultivation Matters
Researchers compared three fertilizer programs to determine how much of each nutrient cannabis really needs.
Fertilization management can be considered both a science of what plants require and an art of how nutrients are supplied. The major nutrients taken up by plants are nitrogen (N), phosphorus (P), and potassium (K). With these three elements being the heavy lifters, most fertilizer programs focus on delivering NPK to the plant. The other elements included in fertilizers are still essential but generally are provided at constant levels. We evaluated two commercial cannabis fertilizer programs developed by suppliers who were willing to share their recipes and compared each program to our cannabis fertility research program at North Carolina State University (NCSU).
1Source: Landis et al., 2019. Values reported are for greenhouse-grown cannabis mother stock plants, 3 feet in height and just before the time when cuttings would begin to be harvested. Leaves sampled were the most recently matured. Ranges based on six cultivars. 2Source: Short, M. and M. McGinnis. 2020. Unpublished research from field grown hemp of floral material harvested at maturity and analyzed for mineral nutrient concentration. Mean of treatments fertilized with N at 150 lbs. per acre and K2O at 150 lbs. per acre.
Nitrogen (N)
Nitrogen is one of the most important elements for plants as it influences overall plant growth. If provided in insufficient levels, plant growth is stalled. If N levels remain too low, plants will be stunted. The other obvious visual symptom is lower leaf yellowing (chlorosis) (Fig. 1, above). In greenhouse or indoor cannabis production, the typical substrates used hold limited amounts of nutrients. Therefore, if N levels are too low, noticeable symptoms will readily occur on plants in just two or three weeks. Adversely, excessive N levels can lead to lush leaf growth at the expense of flower development.
Figure 1. When nitrogen (N) is limited, leaves initially turn pale green and then chlorotic (yellow). Plant growth also is stunted.
Photo by Brian Whipker
Evaluation. When evaluating fertility programs recommended by two fertilizer suppliers, both Suppliers A and B offer similar scheduled feeding recommendations (Fig. 2A and 2B, below). Both suggest a lower amount of N during the plant establishment stage. Small, newly transplanted plants are primarily developing root systems and will not allocate energy into shoot growth until the roots reach the outside of the pot, which will occur during two to three weeks of growth.
Figure 2A (left). A recommended nitrogen (N) fertilizer program from commercial fertilizer Supplier A. Figure 2B (right). A recommended nitrogen (N) fertilizer program from commercial fertilizer Supplier B.
While the cannabis plants are bulking up, both fertility programs recommend 150 parts per million (ppm) N. In our studies at NCSU, we also use between 150 and 200 ppm N at this stage of development (up to about week 10 of growth), and plant growth is robust.
Both fertility regimens remain the same until the late flower stage (after about week 10 of production), when N levels are reduced to between 25 and 100 ppm N. Both companies then curtail all fertilizer applications during the last two weeks of production. Decreasing and then ceasing fertilization allows plants to uptake any nutrients contained in the substrate. Also, if the plant requires additional N, the plant will translocate (move) it from the older leaves to the younger leaves if needed, as N is a mobile element.
Nitrogen uptake patterns by cannabis indicate that most nutrients are acquired during the first half of the growing season and then are translocated, if needed (Fig. 3). A comparison of N levels in leaf tissue with N levels in floral buds found that both were similar in concentration (Table 1). This suggests that providing excess levels of N late in the production cycle will stimulate additional leaf growth, which can lead to lower quality flower buds.
Figure 3. Uptake pattern of nitrogen (N) over the growing season for a seed-based crop of cannabis. Source: J. Heard et al.
Phosphorus (P)
Another major element that affects overall plant growth is P. Its major contribution is stem elongation, contributing to more branching and creating a fuller plant architecture and canopy. When P is limited, plants do not have an extensive branching canopy and exhibit stunted plant growth, resulting in less floral material.
When P is limited, leaf symptomatology may manifest in two different ways, the traditional presentation being lower leaf purpling. This occurs in many other species, especially when the plants are grown under cool and wet conditions, but it’s usually not found in cannabis grown in optimal greenhouse or indoor conditions. Overall purpling has been observed during late flower bud development, and may be attributed to either genetic cultivar differences or if P nutrient stress is occurring (Fig. 4).
The second symptomatology is slight plant stunting, which is followed by olive-green spots developing in an irregular pattern along the leaflets on the lower and older leaves (Fig. 5, at right). As symptoms progress, the spots grow larger and appear sunken and almost wet with some marginal necrosis (death). Over time, chlorotic leaves become severely olive spotted with large areas showing symptoms. Leaf drop occurs with advanced symptomatology.
Figure 4. (left) Lower leaf purpling may indicate a phosphorus (P) deficiency. Note that magnesium (Mg) deficiency has similar symptomatology. Figure 5. (right) Lower leaf brown spotting leading to leaf chlorosis is also a symptom of phosphorus (P) deficiency.
Left photo by Brian Whipker; Right photo by Paul Cockson
Research conducted by Dr. Josh Henry during his master’s program at NCSU focused on optimizing P fertilization rates for ornamental and vegetable plants. In most cases, the optimal range was between 10 and 15 ppm P. Rates from 5 to 10 ppm resulted in more compact plants, while rates below 5 ppm P severely stunted plant growth and limited the overall plant quality.
Phosphorus is a major component of floral and especially the fruiting (seed) portions of the plant, meaning plants require a higher amount of P to meet those demands. Research tracking cannabis nutrient uptake with a seed crop in Manitoba, Canada (Fig. 6, below), identified very early accumulation of P into the plant leaves and stems. Near maturity, P, a mobile element, was translocated by the plant into the floral parts to meet the increased P demand of the developing seeds. This suggests that higher rates of P applied early in the growth cycle would be beneficial to cannabis. Late in the production cycle, plants require and take up limited amounts of P to meet the basic needs of maximizing plant growth and floral yield. This does not mean plants will not absorb the oversupply; but additional uptake is referred to as “luxury consumption,” when tested leaf tissue values reflect those higher levels of P, but those higher levels provide limited, if any, additional benefit.
Figure 6. Phosphorus (P) uptake by seed cannabis over the growing season. Source: J. Heard et al.
Evaluation. Supplier A’s fertilizer program starts with lower levels of P (22 to 52 ppm) and then increases to 196 ppm P at bud set (Fig. 7A), providing lower levels when the plant’s root system is still developing and cannot take up a large quantity of nutrients. The one-week boost of 196 ppm P would load up the system and should ensure that an adequate supply of P is available to the plant for later translocation as the flower bud matures.
Fertilizer Supplier B’s program (Fig. 7B) provides a much higher level of 65 ppm P at the start to aid in root development, then decreases for two weeks to 43 ppm P during vegetative growth. Levels then increase for one week during bud set to 130 ppm P. During the five weeks of bud sizing, flowering is maintained at 196 ppm P, before decreasing toward maturity.
Figure 7A (left). A recommended phosphorus (P) fertilizer program from commercial fertilizer Supplier A. Figure 7B (right). A recommended phosphorus (P) fertilizer program from commercial fertilizer Supplier B.
A pre-charge of P boost during bud set makes sense to build up a reserve in the plant at a time when the root system should be able to utilize (uptake) the fertilizer delivered. Based on the nutrient uptake patterns from the Manitoba, Canada research, the continual high level during bud sizing and flowering does not seem necessary. A lower level as suggested by Supplier A seems more appropriate. A comparison of leaf tissue P levels with floral bud P levels found that floral material had a higher level (Table 1). This would support making sure that adequate levels are provided, but it does not suggest that P fertilization at excessively high levels (>100 ppm P) is warranted.
To take this one step further, recent unpublished research led by Paul Cockson at NCSU found that a continuous program of approximately 15 ppm P was optimal when considering plant growth, flower bud yield, and cannabinoid concentrations. Lower P levels resulted in smaller plants with lower yields. Higher P levels of up to 30 ppm P did result in larger plants and flower bud yield, but those flower buds had a lower cannabinoid concentration (most likely due to a dilution effect). We took the typical commercial floriculture approach to fertilization of making it simple by providing a continuous supply of P.
In our research studies at NCSU, we target about 20 ppm P as a continuous fertilization during the entire production cycle. No doubt further research will help determine if varying the rate at key points in the production cycle and providing P at levels of 30 to 196 ppm may prove beneficial. But at this time, based on our research, providing excessively high P levels above 30 ppm does not appear to be a beneficial nor cost-effective fertilization strategy.
Potassium (K)
Potassium contributes to strong stems, energy production in photosynthesis, and is required in the stomates for regulating transpiration. K deficiencies initially result in leaf-margin yellowing, especially the saw tooth of the leaflets, on the lower and older foliage (Fig. 8, below). As symptoms progress, the marginal yellowing will become more pronounced and intensify on older leaves, expanding inward toward the midrib. As symptoms advance, leaflet margins will yellow, and some regions of tan necrosis will develop, especially along the leaflets’ saw tooth margin.
Figure 8. Lower leaf margin chlorosis due to inadequate potassium (K).
Photo by Paul Cockson
Evaluation. With our research studies at NCSU, we target 160 to 200 ppm K as a continuous fertilization during the entire production cycle. While we have not conducted any K rate experiments to determine optimal rates or if they need to change over time, our plants are robust and healthy. Supplier A’s plan start low during plant establishment then maintains a fairly constant rate of 217 ppm K, with one week at 250 ppm K during bud set (Fig. 9A). During the last two weeks of late bud set, K is increased to 357 ppm K. Research with other species has identified a critical window of K demand during flowering and fruit (seed) development. This fertilization program is addressing that possibility. Further research evaluating this program’s advantages would assist in determining if the cannabis industry should adapt to this production protocol.
Supplier B, for the most part, targets similar K levels (193 to 271 ppm K) during the production cycle (Fig. 9B). This program focuses on a preload of K at 271 ppm during the vegetative stage. One notable difference is that Supplier B recommends reducing K to 125 ppm during bud set, while Supplier A increases it to 250 ppm. Supplier B suggests 193 ppm K for late flowering, in contrast to Supplier A’s target of 357 ppm K.
Figure 9A (left). A recommended potassium (K) fertilizer program from commercial fertilizer Supplier A. Figure 9B (right). A recommended potassium (K) fertilizer program from commercial fertilizer Supplier B.
The seed hemp crop K uptake patterns reported by the Manitoba, Canada, researchers also indicate the majority of K accumulation occurs during the first half of the plant production cycle (Fig. 10). This would suggest that the 200 to 300 ppm K provided by both fertilizer programs would be utilized by cannabis plants, especially during the initial growth. A comparison of K levels in leaf tissue and floral bud found similar concentrations in both (Table 1). The pronounced late-season increase of K should be investigated to determine how it benefits overall plant growth.
Figure 10. Potassium (K) uptake by seed cannabis over the growing season. Source: J. Heard et al.
Evaluating Your Fertilization Program
How does your fertilization program compare to what the plant needs over time? The industry uses a wide variation of fertilizer inputs, both with conventional and organic production. The first step is determining the nutritional contribution of each of your fertilizers to calculate how much you are applying. This is especially important when using most organic products, which do not provide that information on the label. Simply mix the nutrient solution at the recommended levels then submit that fertilizer sample to a commercial lab for nutrient analysis. From there, you can evaluate if adequate levels are being delivered.
Cultivators can also evaluate supplemental products to determine, with data, if they are beneficial to plants. Simply stating that it looks like growth is improved with the addition of Product X is not adequate; quantitative comparison data is needed to compare whether including the product or excluding it (with adjustments made to equal out any nutrient contribution of both products being evaluated) is beneficial. If the only primary effect is that it provides more N, P or K to the plant, it may be more economical to just supply additional fertilizer salts to your program instead of adding a more expensive supplement.
By taking these steps and putting your fertilizer program to the test, you can determine if it provides sufficient nutrients your plants need.
Dr. Brian E. Whipker is a professor of floriculture at North Carolina State University specializing in plant nutrition, plant growth regulators and diagnostics. During the past two years, he co-authored eight scientific journal articles on the impact of fertilization with greenhouse species and three disorder diagnostic guides. Dr. Whipker has more than 28 years of greenhouse experience working with growers.
Paul Cockson is a graduate research and teaching assistant at North Carolina State University. He has a degree in plant and soil sciences with a concentration in agroecology. For the past few years, he has worked in the plant nutrition lab at NCSU with Dr. Brian Whipker.
Patrick Veazie is an undergraduate researcher at North Carolina State University.
David Logan is an undergraduate research assistant at North Carolina State University.
On March 30, 2020, the U.S. Treasury Inspector General for Tax Administration (TIGTA) released a report that noted the federal government missed out on $48.5 million in tax revenue from cannabis businesses in California, Oregon and Washington that were not in compliance with Section 280E of the tax code in tax year 2016. Projected over five years, that amount came out to $242.6 million in those three states alone.
As a result, TIGTA recommended the Internal Revenue Service (IRS) “leverage publically [sic] available information at the State level and expand the use of existing Fed/State agreements to identify nonfilers and unreported income in the marijuana industry.” As Rachel Gillette, partner and chair of Greenspoon Marder’s Cannabis Law Practice, told Cannabis Business Times in April 2020, “the industry should plan for more audits—not fewer audits—in the future.”
Thankfully, there are a few ways that plant-touching cannabis companies might be able to legally reduce their tax liabilities while remaining in compliance with Section 280E, including leveraging IRC Section 471(c) and the Research and Development Tax Credit.
IRC Section 471(c)
The Tax Cuts and Jobs Act of 2017 modified parts of the tax code, including a section called 471(c), which allows cannabis companies to change their accounting method from accrual to cash. (For more on the difference between accrual and cash accounting, see sidebar below.) The IRS normally would need to approve a change in accounting method. But with the update, which was effective in 2018, the change is “automatically accepted as long as your books and records reflect this change of accounting,” Mike Goral, partner at Armanino, a national accounting and consulting firm, tells CBT. “471(c) provides some leeway [on how] to do your accounting for your books and records.”
The change was a technicality, but it offers a chance for small businesses, defined by statute as a company earning less than $25 million/year, to reduce their tax burden by only paying taxes on money that has been officially transacted and exclude outstanding receipts and bills from their tax filings.
For example, if a grower sends an invoice to a retail company for $50,000 worth of flower products delivered, “normally you’d have to put that $50,000 on your books and … for tax purposes, it looks as if you already got the $50,000,” Goral explains. “Under the cash method, you have to wait until you get the actual cash in order to be able to put it on your books,” at which point the business can be taxed on it.
Goral stresses that while businesses can defer declaring revenue to the next tax year by using Section 471(c), 280E still applies. He also notes that if a holding company operates different licenses, then the holding company’s total revenue cannot exceed $25 million for it to qualify for 471(c). For example, if a holding company operates three licenses under the parent company’s umbrella, and each license reports revenues of $10 million, $12 million, and $5 million, the company does not qualify for a change in accounting method.
Gina Sanders | Adobe Stock
R&D Tax Credit
The R&D Tax Credit is another credit that appears to be available for plant-touching cannabis businesses—but careful planning, corporate structuring and bookkeeping are required.
The R&D credit is designed to reward innovation, according to Daren Shaver, an attorney with California-based Hanson Bridgett. “Any business that is eliminating technical uncertainty in the development of products or experimenting and relying on science to really develop a product [is] a very good candidate for an R&D credit,” he told CBT in December.
That doesn’t mean that simply adding an extra dose of nutrients and noting the effect allows growers to claim those costs as an R&D credit. Rather, expenses relating to breeding programs for the development of therapeutically valuable genetics, equipment modification and/or design that facilitates or improves a manufacturing process, and/or developing novel or innovative consumer products (such as a faster uptake method to increase the bioavailability of cannabinoids) can all be used to apply for an R&D tax credit.
Plant-touching cannabis businesses should structure their corporation thoughtfully, Shaver says. Separating R&D activities from plant-touching activities is crucial to obtaining the R&D credit. For example, if a cultivation company has an employee whose sole job is to oversee and conduct research and analysis, that employee’s salary could be used in applying for an R&D tax credit, Shaver explains. If that employee is a part-time researcher, then the company should keep track of how much of that employee’s time is spent on R&D and only use that portion of the employee’s salary when applying for the credit.
Costs for supplies and equipment also can be eligible as long as the research being done is science-based. Additionally, if the research has applications outside the cannabis industry, that could also increase the chances of getting the R&D credit, according to Shaver.
makibestphoto | Adobe Stock
Be on the Lookout
Federal prohibition continues to be a major hindrance for cannabis companies in a multitude of ways, but that doesn’t mean the industry is without lifelines. Goral advises cannabis companies to be on the lookout for potential opportunities to take advantage of to help reduce their tax burdens while they remain under the onerous requirements of 280E. For example, while cannabis companies are not eligible for the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Securities (CARES) Act, he says they are able to apply for the employee retention credit.
Being aware of the options “could be the difference between staying in business and not making it until next year,” Goral says.
Brian MacIver is managing editor of Cannabis Business Times.
For Michigan's Harbor Farmz, Every Second Counts
Features - Cover Story
Harbor Farmz settles into the Michigan marketplace with a deep bank of genetics, a tissue culture lab and a priority on production efficiencies.
Michael Ward, CEO and founder, Harbor Farmz. All photos by Everett McMillen Cislo
Everyone in the industry told Michael Ward he was crazy.
While his cultivation team at Harbor Farmz planned their first harvest last fall, Ward, the CEO and founder of the cannabis business in Kalamazoo, Mich., heard over and over again that it would take a week to take down a three-tier, vertical-grow flower room. But he was determined to do it faster. Even his own head grower, Chris Teeters, told him it was a leap. The night before the big day, Teeters didn’t sleep.
On Nov. 30, however, the team finished its harvest in six hours: Purple Urkle plants were cut and hung, and the organic living soil was brought out back for composting. The room was ready to clean. The mood was celebratory and, in a way, paradigm-shifting. The possibilities became clearer.
As everyone in the industry knows, time moves fast around here. Harbor Farmz is out to prove something in Michigan’s rapidly expanding marketplace—that craft cannabis can be produced at a scale and a speed that lifts the bottom line and surprises even the most probing connoisseurs.
“As we get better at our efficiencies in planting, transplanting, taking down a room, cleaning a room—every time we can get a day back, it adds up quick,” Ward says. “And you extrapolate the time gained over this many rooms. It adds up quickly.”
Ward walks through the Harbor Farmz facility, training his hazel eyes—framed by shocks of salt-and-pepper hair—to the plants and scanning from floor to ceiling, stopping to talk with staffers about air flow or moisture measurements, doing his best to be heard through the requisite face mask that obscures his mouth and closely cropped beard. The building, all 36,000 square feet of it, includes 11 flower rooms—each one 480 square feet (and one dedicated to research and development). The first harvest was a big step, but now Harbor Farmz is enmeshed in a perpetual harvest cycle. The hurdles keep coming. As goals are achieved, time moves even faster.
Careful attention is paid to each plant throughout its life cycle at Harbor Farmz.
Walking through the facility in the team’s distinct, bright blue uniform, it seems like Ward relishes the pace of it all. There’s a certain centripetal force at Harbor Farmz: The team of 35 employees hews to Ward’s vision for what is possible in the cannabis industry. Assembled from their own diverse backgrounds, the team has gathered in Kalamazoo to test hypotheses and deliver a unique suite of genetics to the Michigan marketplace. There are things in this building, Ward promises, that Michigan hasn’t seen yet.
“I’m not just hiring cannabis-specific people,” he says. “By using other people’s skill sets and bringing their skill sets to cannabis, it really changes the game. I’m the redheaded stepchild of cannabis. I haven’t been a grower for 20 years, but I understand how to grow.” The double meaning of “grow” is not lost on the staff, which has tripled in size since late last summer.
In one flower room, Ward draws close to a Crunch Berries plant and inhales its sweet, gassy scent. Around him, a mix of Lemon Breath, Kimbo Kush and Purple Urkle stand tall and mighty. They’re about 10 days from harvest. Until then—and long after each plant has come down—every second counts.
Every week, Ward drives nearly three hours into Kalamazoo on Monday morning and leaves for home and family in Chicago Friday afternoon. He begins his weekdays by scanning the facility’s internal system on his computer over a hot cup of coffee. He and his team can monitor the entire Harbor Farmz building from anywhere. “I review the data history from the night before to make sure we do not have any temperature or humidity spikes,” he says. Then, it’s time to head to the office and get closer to the details.
The Harbor Farmz facility is located in Kalamazoo’s Davis Creek Business Park, a former brownfield refinery site that sat dormant and methane-ridden for more than a decade. It’s another reminder that cannabis can galvanize local economic development.
Before all of this came to be, Ward spent the past 21 years working with his father and brother at the family’s fourth-generation precision metal stamping business in Evanston, Ill. He says that the lessons he learned there—how to integrate economies of scale and granular workflow management into sweeping business models—are the same tenets around which Harbor Farmz orbits.
“I really understand manufacturing and production and movement,” he says. “Every time somebody touches something, it costs money. Every time you move that pot, I’m adding cost to this room. So, if you look at it in that approach, it’s always: How can I eliminate those costs and create better profit margins?”
A good example of this is the auto-potting machines that his team uses when transplanting crops.
“I asked myself, ‘How do we fill 324 pots?’” Ward says, referencing the three rows of three-tiered shelves in each of Harbor Farmz’s flower rooms. “I mean, imagine you’re going out back and you’re going to fill 324 pots for your patio or something like that. How are you going to do it?”
The answer was simple: twin auto-potting machines fill veg- and bloom-sized pots with the right amount of soil—with only the push of a pedal. There’s no human sloppiness to the process, and the soil is sent off for composting after harvest. The pots themselves are cleaned in an industrial-grade pot washing machine for sterilization and reused. This was one decision that ultimately removed hours and hours of labor.
But it took a long time to get to the point of charting transplant workflows. First, Ward needed to get into the industry.
Illinois clearly was shifting toward some sort of progressive cannabis policy in the mid- to late-2010s, but it was the long-running legacy of Michigan’s caregiver system and the impending switch to a regulated adult-use marketplace that seemed like a more attractive play. Ward and his longtime friend Mike Insco, now the director of cultivation for Harbor Farmz, began scouting Michigan municipalities that might be inclined to allow cannabis within their borders. In the early days of the state’s regulated medical cannabis market—in late 2016 and early 2017—this was no easy task.
It’s a common motif in new markets, the issue of whether individual local jurisdictions will “opt in” to the industry and allow sales within their borders. In Michigan’s medical landscape, the difference was particularly strident. It took a local ordinance to allow cannabis business activity in a given municipality, and in 2016, shortly after the medical cannabis market took off, opt-ins were few. “Seventy-five percent of the battle is finding someplace to be,” an accountant in the industry told mlive.com in 2017. When the state’s voters approved an adult-use market in 2018, the same local tension reappeared. As of December 2020, some 1,400 municipalities, or more than 75% of the state’s jurisdictions, have kept the door closed to cannabis sales, according to data from the Michigan Marijuana Regulatory Agency.
Kalamazoo, a brewery-friendly college town in the southwestern corner of the state, opted into the medical cannabis program early and arranged a zoning structure for the new industry.
In September 2019, Harbor Farmz broke ground on its cultivation and manufacturing facility. The next year, 2020, had plenty of surprises in store.
It’s not enough to say that the coronavirus pandemic has upended the cannabis business—the crisis and its attendant economic uncertainties have turned the entire world upside-down. But for Harbor Farmz, the timing could have been worse. The team was only just getting started, working with the city of Kalamazoo to convert its medical cultivation licenses to adult-use in the summer of 2020.
Harbor Farmz CEO Michael Ward examines plant cuttings in the tissue culture lab.
As the world was adapting and mostly staying indoors, Ward was able to focus on getting into the building in the first place (which happened in July) and then implementing short- and long-term plans before his products landed on shelves at dispensaries. As always, Ward’s mind was on the ticking clock hovering just out of frame.
“We’re focused on, first of all, eight-week strains,” Ward says after the company’s first successful harvest. “We want to turn these rooms every eight weeks. And every eight weeks puts me at around five and a half turns a year, per room. When I built this business model, I based it on three and a half. So, in a very short period, we’ve been able to ramp up exactly what we want to do by picking the right cultivars for yield, vigor and speed of growth. And for marketability.”
Teeters echoes this carefully calibrated mix of high-grade cultivation and business savvy.
“My biggest goal is to crush yields,” Teeters says. “This is business. [I want to] grow top-tier cannabis and still maximize production and yields. If we harvest the Purple Urkle this month and then we harvest Purple Urkle in two months, my expectation is that I have a better harvest two months from now than I did previously—consistently progressing.”
The team’s second harvest, on Dec. 7, took four hours. Seconds and minutes were already being lopped off the bottom line of these crop cycles. The whole team could feel a sense of accomplishment, a sense of focus.
“After we completed the first harvest, we gathered together to discuss what we can do better and how we can streamline the process,” Ward says. “One thing that really contributed to the reduction in time was doubling up on the hanging ropes for dropping plants down to be weighed. By adding two more lines to drop plants, we essentially tripled productivity.”
Of course, the ramifications of the coronavirus pandemic are felt throughout. Face masks are worn by all staffers. Visitors are screened for their temperature. It’s one thing to air-five a fellow employee, but it’s another thing to want an outlet for all the good news and accomplishments.
“We can’t celebrate anything for the most part,” Mark Milliman, Harbor Farmz’s president and longtime friend of Ward, says. “And we will celebrate success in the new year. Success is coming at a big level. We can feel it. … Unfortunately, we can’t do anything. I mean, we can’t even—it’s too cold to even assemble outside, nor would we be that foolish. But when this is all over and done, I certainly want to make sure that the culture of the company understands that we will celebrate success.”
Protecting the plant’s roots is a critical component of a successful transplant.
For Teeters, success is a process of blending inventory management acumen with his decades of growing cannabis in California and elsewhere. He cut his teeth in the West Coast scene long before moving to Michigan and running a medical provisioning center. Sales started sliding in the early days of the coronavirus lockdown before owners sold the business. His path brought him to Harbor Farmz on the cultivation side.
It’s pattern recognition on Ward’s part, too: You need the business acumen and the cultivation expertise to match up culturally and financially.
As a CEO settling into a new industry, Ward is not the kind of guy who sits behind his desk. He doesn’t stop for a midday break. (“Lunch is a distraction that just slows my day down,” he says.) He enjoys walking room to room, inspecting the plants and fine-tuning air flow numbers.
“I am sure the grow team loves this, but I can assure you I find everything,” he says. “With 20-plus years of working in a manufacturing facility making millions of parts being held to a millionth-of-an-inch tolerance, I can most likely find a flaw in almost anything. From a mishandled branch, a broken branch, PM, IPM issues ... not much gets by me anymore.”
A lot of this comes from the work that Ward put in before ever approaching the state for licensing. He spent four years criss-crossing North America and touring facilities of all stripes. “I took the best and left the rest,” he says, thinking back to the conversations with growers and industry stakeholders that led him to the present.
Arranged on shelves in the brightly lit tissue culture lab at the heart of the facility are minuscule cuts of Crunch Berries, Stardawg, Lemon Breath, ChemDawg, Cookies, Mythical Blueberry #3 and Hana Mama, an elusive Korean cultivar Ward says his friend’s mother grew for decades in Maui. The diminutive scale of these cuts belies the importance of the lab: It is here where the long-term vitality of Harbor Farmz takes root.
Deb Sweeney, tissue culture lab director, says that cannabis has provided a natural outlet for her microbiology background and years of experience in the pharmaceutical industry. She uses a gel-based media unique to each cultivar, tending to meristems and nodes, monitoring their growth to ensure consistent development without unwanted genetic surprises. It can take months to stabilize an individual cultivar.
The meristem is a type of tissue found in plants, where undifferentiated cells divide and grow. These small cuts of plants are held in clean containers and used for micropropagation. It’s an efficient and expedient way to generate a good understanding of a particular cultivar, all the better to hone its genetic advantages for plant health and for the broader consumer market. With that process humming along within the facility, an in-house tissue culture lab is an asset that can provide tremendous returns down the line.
Harbor Farmz employees work methodically to take down a flower room for harvest.
“You really want to have the cleanest, most audacious, most optimal way to grow,” Sweeney says. “You can take one teeny tiny meristem and grow it all the way to a mother plant. So, instead of taking clones from all different mother plants, you can actually take clones from one meristematic mother plant, and, ultimately, they’re going to be the cleanest, best-looking plants.” That goal is on the horizon—only because of the initial investment in Harbor Farmz’s tissue culture lab.
It also serves as a genetic bank, where Harbor Farmz can clean and house its own library of exclusive phenotypes and lease shelf space to other Michigan businesses interested in cleaning and storing cuts for posterity.
Because these are immature plants, too, they exist outside the scope of METRC’s track-and-trace system. “The amount of money you save on energy and labor keeping 700 plants in a Petri dish as opposed to 700 plants in 15 mom rooms—the expenditures on that alone are astronomical,” Teeters says. “When they come through these meristems, one, we’re certain that they have no systemic issues, and, again, it’s going to be a much more vigorous plant than it was when it came in as a clone.”
He mentions a cut of Triangle Kush that he’d held onto for more than 20 years at this point, and the genetic drift has slowed its growth and stunted its finest qualities; bringing it through the lab and working on its meristem culture, however, that genetic lineage is revived once it returns to soil. “It’s going to grow like it did in 1992,” Teeters says.
The genetic bank gives the company some serious room to stretch. What the Harbor Farmz team is preparing in its arsenal is a wide-ranging library of genetics that simply aren’t seen in the Michigan market. And they won’t show up on shelves until they’re just right.
In the company’s R&D flower room, dubbed “F11,” Kyle Russell, Harbor Farmz’s director of breeding and genetics who was once a registered caregiver in Michigan’s medical program, scans more than 60 cultivars presently blooming. He’s pheno-hunting, watching for different characteristics to sprout from different seeds. The best phenotypes will make it to the mother room. It’s a meticulous process that guides downstream cultivation plans.
“You bring them in F11, you see and understand how they’re going to grow during the full cycle,” Ward says. “And you can see some showstoppers right out of the gate.” He points to Rainbow Runtz plants of different sizes—one coming in a little on the short side, but another coming in with striking color and full-bodied flowers.
It’s this process, soup to nuts, that will help Harbor Farmz stake its claim in Michigan. To use the insights gleaned from tissue culture to produce high-quality cannabis products at scale—that will demonstrate the core of Ward’s business model.
Sweeney says her goal from the beginning has been simple: “From meristem to mother.”
In mid-December, Ward reported that meristem mothers were now growing in Mother Room 2. “Mission accomplished!”
On Dec. 9, nine days after that first Purple Urkle crop was cut, the Harbor Farmz team is back at it for their third harvest. It’s a sunny morning in Kalamazoo, and the staff starts cutting plants at 8:30 a.m. As the day progresses, the scissor lifts go up and the plants come down.
By 11 a.m., they’re done. Two and a half hours.
“We’ll be back and running in this room by Friday,” Ward says, walking among the team and scouting the cleared-out flower room. It’s Wednesday.
Celebrations will come, as Milliman described, but this rapid-fire improvement—an almost exponential difference in the time spent on harvest—is a testament to Ward’s early projections. If this is how things are going in late 2020, pandemic and all, Ward says, can you imagine what comes next?
“I just think that we are not even close to scratching the surface of where we are with the full potential of this team,” Ward says. “They’ve been so nervous, and because they’ve been dealing with the unknowns, because they’ve been working out the kinks with facility issues in a brand new building, we haven’t really allowed them to let the reins out.”
There’s a clear excitement in the air about the flower coming out of Harbor Farmz. And then there’s the processing lab.
Tissue Culture Lab Director Deb Sweeney helps to oversee the early phases of the production cycle.
Shelves of non-infused gummies lay in experimental phases, the products of ongoing tests and recipe adjustments to perfect the products that will also shuttle out of this facility and into the Michigan market. Each harvest brings this side of the building closer to its inevitable buzz of activity.
Nick Wallace, lab director, says that the key to this high-demand segment of the business is extraction efficiency. He is a chemistry graduate of Michigan State University, and he spent time in the early medical days working with caregivers to dial in their concentrates for patients. Now, at Harbor Farmz, the same experience applies: It’s just at a whole new scale.
“That is what pushes you to the next level—to be able to really maintain your efficiency, have no waste and to really get your full value out of the product,” he says, describing the techniques involved in stripping every last bit of THC, whether 2% THC or 20%, off a batch of plant material.
He and Ward pull a sheet of diamond-riddled live resin out of a chiller, another product of the team’s hydrocarbon process. “We really take the time to grow all the crystals as slow as possible to preserve all the flavors,” Wallace says.
In another room, the Harbor Farmz ethanol extraction equipment is set up for gummies and vape carts. Here, a one-man operation could rip through 1,200 lbs. of plant material each month. That’s just the start of it. And, already, as Ward scans the room and plots his projections further in the future, he begins thinking of the best way to get from the present moment to the point where concentrates are flying out of the building. The shortest distance between two points is a straight line, of course, but that’s rarely the most efficient route.
“Honing in on the most efficient way of doings things—that’s the bread and butter for me,” Ward says—and although the mask is on, his eyes communicate a smile.
Eric Sandy is digital editor of Cannabis Business Times, Cannabis Dispensary and Hemp Grower.
13 Cultivation Considerations for New Cannabis Companies or Expanding Businesses
Special Report - Cultivation Startup & Expansion Guide
Expert advice on key growing, post-harvest and business practices to help cultivators prepare for success.
To help growers achieve ongoing success, I’ve compiled a list of common cultivation challenges they are likely to face. From breeding to business planning, here are some key tips cultivators should consider to reduce risk and maximize profits in their operations.
Infection Prevention 101
Experienced growers have read or have been told many times over to quarantine clones before introducing them into a pest- and disease-free environment. But I still hear about very large-scale facilities being infected with broad or russet mites due to the introduction of infected clones. Some growers and facility employees also don’t completely decontaminate themselves or change attire after working in a quarantine environment.
TIP 1: The best solution to avoid infecting your facility when introducing new genetics is to use tissue culture for all specimens you introduce to a clean environment. Tissue culture, or meristem culture, is the only way to guarantee you are starting with clean stock.
TIP 2: The next best option is to have an off-site quarantine environment, which allows for compartmentalization so that new specimens are separate from others. Some quarantine those genetics at the same location at which they grow or in close proximity, but that is risky, as they should never be in close proximity unless they are deemed completely pest and disease free.
TIP 3: Lab test any specimens that are pest and disease free for powdery mildew and record them microscopically. Review the video on a large screen so you can more easily detect pests as well as their larvae, eggs or feces. This is a critical step because broad mites or russet mites can be devastating to an operation.
TIP 4: The only sure treatment once an outbreak is confirmed is to destroy all plants, disinfect the entire facility and start from scratch—hopefully after successfully preserving the genetic library via tissue cultured specimens.
TIP 5: Another entry point of infection is typically from the fresh air intake. Greenhouse growers must incorporate and use bug screens as a pre-filter, then at the very least sterilize the air by utilizing UV air sterilizers.
TIP 6: In addition to UV air sterilizers, both greenhouse growers and indoor growers should use HEPA filters on all incoming air whenever possible. Filtering and sterilizing all recycled air can help prevent mold and mildew from proliferating in cultivation areas.
Sustainable Solutions
Sustainable production can help growers reduce costly waste and differentiate themselves in a crowded marketplace. Wastewater recycling is one of several sustainable practices growers can consider in their operations. Unfortunately, some growers may take shortcuts and reuse untreated water because they’re limited on what equipment they can use due to space or financial constraints. But reusing unsterilized water is a recipe for disaster; it can throw off your pH and nutrient levels or spread disease throughout your crop, as it only takes one plant to infect the water supply.
TIP 7: Growers should always properly filter and sterilize their water prior to re-application. They should filter recycled water through reverse osmosis before using it. Then, sterilize the water using UV sterilizers or ozone.
TIP 8: If sustainability is a priority for you, whenever possible, use recycled materials in packaging and irrigation lines.
As demand increases for recycled packaging, we will likely see an increase in the availability of recycled materials across the supply chain.
Drying and Curing Best Practices
Bud density is a major factor in the drying and curing stage. Small buds dry faster than large ones, meaning if you wait for the large buds to completely dry, the small and medium buds will be overdried. Overdried buds have fewer terpenes available, as they evaporate along with the water during the drying process, making the buds less flavorful and aromatic than they could potentially have been, resulting in a lackluster consumer experience.
TIP 9: Sort through large, medium and small buds to gain better control of the drying rate of each. Also, if cultivators separate and dry by bud size and then recombine each batch as it dries over the curing stage, the final result is typically a more homogeneous and uniformly dried product that has maximum terpene preservation (if all other conditions are met).
TIP 10: Make sure the buds are properly stored, as THC degrades rapidly when exposed to oxygen, light and heat, the primary enemies of THC. Even when properly stored, cannabis has a six-month shelf life, after which THC begins to convert to CBN. Not to say this cannabis is necessarily bad, but it has passed its peak THC and terpene content.
Growers who are stocking cannabis for longer than six months should store it in subzero temperatures in oxygen-free containers (where the oxygen is displaced by gaseous C02 or nitrogen).
THC in concentrates also rapidly degrades and converts to CBN. This, in turn, applies to all products manufactured from a distillate, including all edibles. While a gummy is on a shelf, the THC within is in a constant state of degradation/conversion.
Understand Desired Genetics
Is your product destined to be sold as flower? For extraction? To be used in specific product formulations?
TIP 11: Growers should select genetics that suit their specific requirements, meaning if their intent is to produce a specific product, grow a plant that produces elevated levels of that compound, whether it’s a cannabinoid or terpene. If growing for flower, then the so-called “bag appeal” of a given cultivar becomes important, and you should be looking for genetics with “traditional” bud structures.
TIP 12: When breeding, select genetics based on lab results and data. Let lab results be a companion to observations when breeding for desirable traits. When scouting phenotypes, take notes, keep records and document (with photos and/or videos) the prospective cultivars to be bred to accumulate as much data as possible to aid in the selection process.
TIP 13: Breeding takes a lot of time and effort, and the payoff isn’t always what growers hoped it would be. Have a clear objective when selecting which cultivars to cross or when breeding the same cultivar with itself. There is no reason for taking a scattershot approach to breeding without a desirable outcome or at least intended beneficial traits in mind.
Cannabis Business Times’ interactive legislative map is another tool to help cultivators quickly navigate state cannabis laws and find news relevant to their markets. View More