Features & Columns

Time for Smart Medical
Marijuana Growth

Collaboration and innovation will be the pathway to market viability.
SUPPLY AND DEMAND: Projections expect marijuana to become a $21.8 billion industry in four years.

Times are changing for cannabis cultivators across the state. To meet the rigorous demands of the Medical Marijuana Regulation and Safety Act (MMRSA), set to take effect in just 18 months, growers who want to be compliant are having to develop new business models, apply for new permits and hire attorneys and business consultants. Many operators are also evaluating their dwindling return on investment.

"The cost of operations for indoor cultivation is starting to outweigh the revenue," says Adam, a Sonoma County cultivator for 15 years who didn't want to use his full name. "The price per pound has been steadily declining over the past 10 years."

In Washington state, where recreational marijuana is legal, prices are dropping for wholesale and retail by about 2 percent per month—that's a drop of more than 21 percent a year. A recent forecast by industry analyst the ArcView Group shows the national cannabis market soaring to $21.8 billion by 2020, with an annual growth rate of 31 percent. This is incredible, but it may mean falling wholesale prices as supply increases.

State policymakers crafted MMRSA in 2015 in part to protect California's environment by incentivizing growers to adopt more sustainable practices. But the lack of available space for indoor growing—there's only a 2 percent vacancy rate for industrial space, according to commercial real estate company Keegan & Coppin—makes running a cannabis business even harder. With the space crunch, where to turn for manufacturing, processing, testing, storage and distribution?

Innovation and increased efficiency are the best path forward. Advances in water catchment and remediation practices can reduce demand on water. Indoor technology has reached a point where closed-loop systems can reuse up to 70 percent of water used in production.

In Boulder, Colorado, incentives are in place to encourage renewable-energy technology, something that's sorely needed in the energy-intensive indoor-cannabis industry.

What does this mean for the Bay Area? Collaboration and innovation between cannabis operators, environmental consultants, advocacy groups, policy makers and local businesses will be the pathway to market viability. Increasing efficiency by blending new technology with old wisdom is a successful tactic for competing in this growing market.

Tawnie Logan is the executive director of the Sonoma County Growers Alliance. Email her at [email protected]