3 tips for reducing production costs

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As in any business, if you can control your operating expenses you increase the likelihood of being profitable. While this theory holds true for cannabis production, careful consideration of operational expenses can often take a back seat for newly licensed producers.

In countries and states with newly instituted regulations, the first producers to become licensed will likely find themselves profitable right away, no matter how inefficient their production might be. Demand is high and licensed producers are few, creating an environment of premium pricing and fruitful revenue streams.

However, as any industry and marketplace matures with the inevitable influx of competition, the increase in supply will begin to lower prices. Case-in-point, a pound of medical cannabis in Colorado sold for $6,000 just two years ago. Today, the average price has dropped to $1,280 per pound and many are forecasting a drop even further to $500 per pound within the next 4 years. Thus, companies that cannot produce dried product for $250 per pound will go out of business, a drastic wake-up call for many producers that currently cultivate at production costs nearly six-times that figure.

Consider these three tips in your search for ways to reduce the cost of production:

1.   Use Rolling Benches: It’s no question that state-of-the-art commercial grow rooms are expensive to build and operate. The cost of installing and running lights, HVAC, dehumidification and CO2 supplementation can be astronomical. Therefore, grow room designers are incentivized to create floor plans that utilize every square foot of available space. However, many modern grow rooms have wide aisles or excessive empty space near the entrance and walls. Inefficient use of this vacant space can cost the operator an average of $1,500 per square foot annually!

To help remedy this situation, ornamental greenhouse growers began using rolling benches decades ago to eliminate wasted aisle space. Ornamental flower greenhouses can be expensive to operate, most needing heat during seasonal fluctuations, reducing the profit margin on poinsettias, Easter lilies, and hanging baskets. Therefore, the need to maximize every square foot of production space is paramount, and a simple cost-saving technique like rolling benches can have a significant impact on the bottom-line.

A typical cannabis grow room will utilize 4-foot wide stationary grow benches with 18-inch wide aisles, allowing employees to access plants for pruning, scouting, and harvesting. By adopting rolling or mobile benches, precious aisle space is reduced to one “floating aisle”. With a gentle nudge, a grower can move a 40-foot long bench full of plants approximately 18-inches to the right or left, choosing exactly where in the room to create an aisle. This increases the efficiency of the grow room or greenhouse by cultivating in previously unutilized space.  

 

2.   Automate Your Irrigation: Hand watering plants is a time-consuming process, and needs to be repeated every 2-3 days. Depending on variables such as water pressure and nursery pot size, each irrigation can take 5-10 seconds per plant. When you consider that a 100,000 ft2 facility usually has about 16,000 flowering plants on site at any one time… at 5 seconds per plant per irrigation, that’s 22 hours of labor required just for watering!

Automating your irrigation practically eliminates this task. The grower simply determines the strength of fertilizer they want to use and the duration of time they want to irrigate their crop. This information is entered into a computer program that controls a fertilizer mixing system. Fresh water is mixed with concentrated fertilizer and is pH balanced prior to being sent through plumbing out to the selected grow room. Inside the room, piping brings this water to the bench top, and thin “spaghetti tubes” deliver this nutrient directly to the plant.

Since most commercial operations grow just one variety per room, usually all plants in a given flower room will require irrigation at the same time. As long as the grower is in the room to double-check that the irrigation is actually occurring, no more work is required. This frees the cultivation team to dedicate their time to other pressing activities, or allows the cultivation manager to operate the facility with fewer personnel. As an added benefit, most automated fertigation systems recycle fertilizer runoff providing the company additional cost savings on water, water purification, and fertilizer.
 

3.   Make Your Own Fertilizer: Cannabis-specific fertilizer is expensive to buy, but inexpensive to make. Typically, these “specialty” fertilizers are not special at all - they contain the same essential plant nutrients as every other liquid fertilizer on the shelf. What makes them stand out are the gimmicks and claims that often over-promise, under-deliver, and unfortunately, leave the end user paying a premium. A gallon of concentrated liquid fertilizer costs pennies to make, but regularly sells for $30-50 USD. Commercial-scale cannabis producers can easily spend upwards of six figures a year on fertilizer costs, while mixing your own could reduce this expense by 95%. Any competent cultivation consultant should be able to provide a fertilizer recipe, and many cultivation books and websites have nutrient recipe calculators. The ingredients in these mixes are very common and can be sourced from most greenhouse supply companies.

Mixing your own fertilizer carries the additional benefit of ensuring consistency and regulatory compliance. There are many boutique cannabis fertilizers on the market and it’s difficult to guarantee the consistency of these products. While I’d like to believe these fertilizers are prepared following Good Manufacturing Practices, I’m confident that many are mixed in some dude’s basement.  In addition, these products offer fantastical claims because they contain ingredients that are not plant minerals and therefore are not required to be included on the product label. Chemicals called ‘Plant Growth Regulators’ have been detected in some cannabis specific fertilizers, which encourages stout plants and massive flowers but are not registered for edible crops because they are believed to be carcinogenic when ingested. As laboratory testing is mandatory in most states and countries where cannabis sales are legal, a failed test could trigger a recall or worse - loss of the cultivation license. 


Adopting any one, or all three, of these techniques will help reduce your operational costs and ensure that your business will stay competitive within an evolving marketplace.

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