Flower One’s motto is, “First you get good, then you get big,” says Kellen O’Keefe, the Las Vegas-based company’s chief strategy officer. However, walking through Flower One’s nearly half-million-square-foot headquarters—a controlled environment greenhouse and processing facility with three methods of extraction—poses the question of what the cultivator and processor considers “big.”
Flower One’s defining strategy is to apply the technology and scale of commercial agriculture to cannabis cultivation without sacrificing qualities important to consumers, such as flavor and moisture. As a “seed-to-shelf solution,” Flower One’s other primary focus is on being a “house of brands,” able to meet the production demands of its partnering companies. In addition to its own brand NLV Organics (NLVO), which it acquired in November 2018, Flower One produces flower, extracts, oil, distillates, concentrates, edibles, topicals and infused products for another 14 brands, including Old Pal and Huxton.
After building its flagship facility in about a year and bringing together experts from multiple industries, Flower One harvested its first crop in May 2019, putting its combination of commercial efficiency with boutique quality to the test.
Flower One, frequently referred to as the largest cannabis cultivator and processor in Nevada and listed on the Canadian Securities Exchange, recently reported its preliminary, unaudited financial results. After a half year of harvests, the company reported revenues of $9.4 million, but O’Keefe says the goal is to top that number in the first quarter of 2020. He says one of Flower One’s greatest achievements so far is not only ramping up greenhouse production so quickly, but the company’s ability to form partnerships with brands like Cookies and Heavy Hitters.
“Cookies would only put their genetics in the hands of cultivators that have the highest standards,” he says.
Production Ramp-Up
Before Flower One could operate as a house of brands, it first had to build a house large enough to produce them. One key team member Flower One hired early to develop its cultivation and processing facilities was Salpy Boyajian, founder of NLV Organics and now vice president of Nevada operations for Flower One.
Boyajian, together with her partner, founded NLV Organics in 2014 and was licensed for cultivation and processing in 2016, eventually for both medical and adult use. About a year later, Flower One approached her about an acquisition. She was impressed with the company’s vision.
“The belief or core focus [of] Flower One was being able to do something that wasn’t done in cannabis, which was bringing the world of commercial agriculture with a true cannabis connoisseur-level mentality, where both sides appreciate where they excel and where they need to lean on each other,” Boyajian says. “The core belief of Flower One is bringing those two worlds together.”
Through its acquisition of NLV Organics, Flower One obtained access to more than 100 individual cultivars and the team of scientists, researchers and breeders assembled by NLV Organics, as well as its 25,000-square-foot indoor facility and commercial kitchen.
Flower One began construction on its headquarters before the acquisition was final. The Dennis Group, a design-build firm specializing in food processing facilities for companies such as Dole and Sabra, redesigned and retrofitted the 400,000-square-foot greenhouse that once produced cucumbers, as well as built the new 55,000-square-foot production facility, O’Keefe says.
“By the time the acquisition happened, we were in the middle of designing [the facility], it all happened simultaneously,” Boyajian says. “The speed we were working at to bring this to life was also another thing that amazes us every day. The [processing facility] was fully custom-built, and the greenhouse facility, the only thing left from before is the ceiling. Everything else was fully remodeled and redesigned specifically for cannabis.”
Innovating for Cannabis
Flower One’s greenhouse includes eight flower rooms with more than 80,000 plants hydroponically grown per crop cycle, and the facility’s perpetual system means Flower One harvests about 10,000 plants per week. That translates to a production capacity of 140,000 pounds of dry flower each year.
Tracking cannabis as it moves from seed to sale is a requirement in Nevada, like most states. However, Nevada also requires cultivators to document the whole wet plant weight within two hours of harvesting the plant, Boyajian says. Flower One needed a sophisticated solution due to its scale.
“The challenge was figuring out how to capture that weight and where, due to the sheer volume of plants we harvest on a weekly basis,” Boyajian says. “These unique challenges forced us to develop custom designs and proprietary solutions throughout our post-harvest, drying, and curing processes.”
To measure the plants directly after harvest but keep them moving through production, Flower One implemented a “tote elevator,” which moves the plant from the cultivation area to post-harvest, all while weighing and capturing data from each plant and reporting that information to the state.
“Without a system like this, there is no way you can do what we’re doing at this level,” she says. “It’s a must.”
Automating that system and transporting the plants to a second floor also helps prevent cross-contamination, as plants seamlessly move from one step to the next. Plants then make their way down a conveyor belt with 10 workstations on each side and anywhere from three to four people at each station, who then process, buck and trim plants.
Leveraging Ag Technology
Attaining consistency at that scale is another challenge, and some machines and systems used in commercial agriculture have crossed over better than others. For example, the automated irrigation and feeding system adopted from one used in hydroponic tomato production has improved the company’s efficiency, enabling it to grow thousands of plants at a time, O’Keefe says.
“We believe that the high-tech greenhouse in particular is the solution to providing the highest-quality cannabis at the lowest possible price point,” O’Keefe says. The company reports it produces at 44 cents per gram. “I believe the success of our brand partners like Old Pal, [which is among the top selling flower brands in Nevada], are indicators that people are in fact looking for that value. The greenhouse gives us the opportunity to lower the cost substantially compared to indoor facilities without comprising the quality.”
Through trial and error, the company has learned not everything in cannabis can be automated. Initially, Flower One tried adopting a machine used to separate tomatoes and berries by size to make the cannabis sorting and drying process more efficient.
“What we were trying to do was … [utilize] very high-tech drying rooms that were going to be able to dry the cannabis to a perfect degree of moisture, and in order to do so, the cannabis needed to be sorted based on size of the bud,” O’Keefe says. “So small buds would dry much, much faster than very large buds, which contain a lot more moisture and water, for example. That was the perfect concept in theory, and I want to say that over time that concept might return and might find itself in cannabis again, but it requires the drying rooms to perform and function at a capacity that currently no one in cannabis has been able to do.”
Flower One experimented with using the machine while the buds were wet, but has since abandoned that plan and transitioned to more traditional methods of hanging, curing and burping the plants.
“That’s again where the balance comes into play, between how to treat something that’s a boutique crop that ultimately retains that bag appeal and preserves that smell and look that cannabis consumers have come to expect, while also being able to produce at scale with the size and technology constraints,” O’Keefe says. “Some things have worked incredibly well, and other things have not worked as well and have forced us to rethink certain things we do with the plant after harvest. That’s just the reality of it. ”
Trimming is another labor-intensive post-harvest process for which the company uses a blend of machine precision and human touch to perfect, Boyajian says.
“I call it ‘manicuring,’” Boyajian says. “To me, a manicure is that detailed level. There’s definitely different levels of trimming and manicuring that we do based on the product, but at its base, we still have the minimum expectation of what a flower should look like regardless of the brand, regardless of the tier, the class. You have to make sure you have all the sugar leaves off, and you have to make sure there’s no stem in there.”
Depending on the cultivar type and its final use, the company may decide to machine trim, or use a combination of machine and hand trimming, or only “manicure” the flower, she says. For example, buds that are sold as flower may get a more detailed post-harvest treatment than those that will be used in extraction. Brands also dictate their preferences, and Flower One accommodates them, O’Keefe says, which allows the company to create products at various price points.
“Cookies, for example, which is more of a connoisseurs’ product or a premium product, … needs to be very, very meticulously hand trimmed by professional hand trimmers, as there is a very, very picky connoisseur that is going to be looking at the flower and judging it much more critically than somebody that buys Old Pal,” he says. “A very [inexpensive] product, for example, like Old Pal, might be machine trimmed and not necessarily get hand manicured, and that value is then exchanged back to the customer in a much cheaper product.”
Flower One and its brands work together to determine those processes, product specifications and formulations to create consistent products, O’Keefe says.
“It’s about the delicacy and the balance between the legacy art of small-scale cannabis cultivation, the boutique craft and the detail that goes into [that], and how you apply and mix that with large-scale cultivation techniques,” O’Keefe says. Just as the goal in agriculture is to feed people at a reasonable price, “we believe cannabis should be accessible to everyone at more reasonable prices, and we believe that legalization over time should lower those prices.”
Extraction Efficiencies
In its newly built processing facility, Flower One operates three extraction labs: CO2, ethanol and butane. Thomas Rosengren, director of extraction and production, was hired early on to oversee this facility. Offering multiple methods of extraction has several benefits, according to Boyajian and O’Keefe.
“[Our extraction offerings] also speak to our vision originally as a company, as being the ‘house of brands.’ One of the things that we said from day one when we started the overall design is that we wanted to be able to do it all,” Boyajian says. “We have every process under the moon and stars in our facility. Because it was all about being able to serve the brand partners that we’d be working with so that we can bring basically anything their hearts’ desire and anything their brains can think of to the cannabis industry right now. … We don’t have to say, ‘no.’ ”
Operating three labs comes at a cost, she says. However, using multiple methods, in addition to being able to offer more variety, also increases efficiencies, O’Keefe says.
“You can effectively pull or accomplish all of the things out of a singular method, but it takes a lot more work and a lot less efficiency and yield when you start to do so,” O’Keefe says. “For example, CO2 is best for pure terpene extraction, whereas the ethanol extraction is better for extracting cannabinoids and distillate. Volatile, or LPG or butane extraction is best known for preserving flavor profiles and full spectrums that are the favorite of connoisseurs, so live resins.”
Brand Partnerships
After Flower One reaches an agreement with its partner brands, it takes two to six months to launch the products in Nevada. The timeline depends on a variety of factors, O’Keefe says, including the type of products produced and state regulatory approvals. Choosing brands is another part of the equation, he says.
“We want to partner with people we believe we can get along with and see eye to eye with and trust as our partners, that’s first and foremost,” O’Keefe says. “But we’re also looking for brands that have achieved some level of success and therefore have created demand within the marketplace. Typically, that requires them to have achieved some success in their individual markets where they have originated from and have some pent-up demand or are able to create that in the Nevada market.”
Companies must be willing to promote their products through marketing, advertising, merchandising and more in Nevada, as well, O’Keefe says. Although Flower One only serves the Nevada market for now, it is looking at potential expansion opportunities.
New Markets to Explore
Before joining Flower One, O’Keefe was senior vice president for business development at MedMen. When asked about what he has learned during his tenure in cannabis, he says one lesson that comes to mind first is “growth for growth’s sake is not necessarily a good thing.”
“Two things really distinguished Flower One from any other company I had come across in the industry,” he says. “First and foremost was the culture. It was tangible and something I have not seen anywhere else in the industry. The other was Flower One’s commitment to executing in a single market prior to taking on multiple states. I believe this strategic approach and discipline are part of what separates Flower One from the rest.”
Another goal is to make the company “cash flow positive,” O’Keefe says. Revenue projections are between $8 million and $10 million for the first quarter of 2020, and so far, cannabis sales have increased 11% month over month, according to a preliminary 2019 financial report.
O’Keefe says the company is now in a position to explore new markets. Wherever the company lands, cultivation and manufacturing will continue to be the focus, O’Keefe says.
“Bringing Flower One to other states is a given,” he says. “The question is about where we can be most strategic and opportunistic given the current market conditions and growing number of distressed assets available across the country. I think there’s a lot of exciting things out there that were created by the unfortunate situation in cannabis where a lot of organizations got too big too fast and now are scaling back and restructuring. As a result of that restructuring, we think there are going to be some pretty significant opportunities for Flower One. Not to get excited about somebody else’s troubles, but at the same time, we think it’s a great time for Flower One to start thinking about what’s next for us.”
