Cannabis companies are going big in 2021. That growth, however, needs to be managed effectively and sustainably.
One of the most challenging elements of any new business is understanding how to make money. That seems elementary, but once the ribbon is cut and the lights are turned on, many businesses are suddenly aware of the constant expense of keeping the doors open. For cannabis growers, the margin that matters isn’t on the retail side. Today, the competitive nature of the market means prices are lower than ever, and even smaller markets, once isolated, are turning into a fight to get products to consumers at ever-lower prices.
Market share matters, but the long-term success of the company is determined on the grow table. Consumers simply don’t understand just how energy-intensive cannabis production can be. One the retail floor, they see a price tag; they don’t see the energy cost, the product margin, or the long-term environmental differences between two products grown by two different companies.
Increasing margin also improves the sustainability of the product and the long-term competitiveness of a company. That’s because so much of the cost of cannabis production comes from energy. One county in Colorado tried to examine just how much more energy-intensive cannabis is. For example, they found that a 5,000 square foot grow facility demands 41,808-kilowatt hours per month; the average home requires just 630.
In a sense, the legalization of cannabis in most US states and the possibility of federal legalization in this administration is creating a perfect storm. Just as the world needs to find new ways to reduce their energy consumption to meet climate goals and fight climate change, we’ve essentially unleashed one of the most demanding energy industries in the history of the planet.
States are working to limit the amount of energy that goes into growing. For example, Massachusetts has introduced legislation that limits the amount of power used per square foot, lowering the threshold from 40-45 kilowatts to 36. Maine is offering growers state grants that can be used to invest in more energy-efficient equipment.
We’re at a point in the cannabis industry where we all need to evaluate our role in the direction of the planet and the economy. We have an outsized footprint on energy consumption that will only become more pronounced as legislation opens up more products and new markets. A decade ago, cannabis production was already reported to demand 1% of the country’s energy consumption. In California, that number has long-since eclipsed 3%. We need to decide whether our industry is justifiable as we cross the 3 or 5 or 7 percent mark nationally; if we’re going to keep growing, the priority should be on sustainability first, then expansion.
Let us evaluate and improve your cannabis facility. Let’s talk.