Washington’s path-breaking experiment in legalized marijuana is about to hit home, with the planned launch this week of Clark County’s first legal pot-growing operation.
Having gone through a rigorous state inspection, Vancouver resident Brian Stroh is just about ready to power up his indoor operation, called CannaMan Farms, in an Orchard’s industrial district. Stroh expects to receive the all-clear for his business within the next couple of days.
“Then, it’s a matter of paying the invoice (about $1,000) for my license,” he said.
CannaMan is expected to be the state’s third marijuana-growing operation since Washington voters passed a recreational pot law in 2012. The law legalized possession of up to one ounce of pot for people 21 and over, and opened a whole new market for marijuana growing, packaging and selling. It also created a potentially lucrative new source of state tax revenue with the imposition of a 25 percent excise tax on wholesale and retail sales of marijuana.
But state legalization, which conflicts with federal laws against marijuana use and sales, has opened many unknowns, said Stroh, 41. The former mortgage-lending officer said he considered every aspect of the business before taking a $100,000 risk with his own financing to get started.
“It’s a strange new world,” he said. “This wasn’t something I took lightly.”
After researching the industry, Stroh pulled together a business plan to produce and package pot long before Initiative 502 was on the ballot.
His CannaMan Farms will grow plants and then process them to sell the dried flowers, most likely in foil bags with tear-away openings and zip-lock tops, like the kind used for dried fruits and nuts. CannaMan’s smallest marijuana packs will be about 3 or 4 inches wide by about 6 inches tall. The largest, one full ounce, will be packaged in quart-sized bags.
Upon receiving his license, Stroh will have a 15-day, no-questions-asked window to bring inventory into his 2,000-square-foot growing facility. He’ll start with a group of “mother plants” in one room of the four-room operation. From the mothers, Stroh and a handful of employees will take plant starts to grow in the operation’s three adjoining flowering rooms, set up to force the plants to bud when they receive precisely 12 hours of light and 12 hours of darkness per day.
Stroh expects it will take eight weeks for the flowering plants to produce buds filled with THC or tetrahydrocannabinol, the principal psychoactive element of cannabis.
That should give CannaMan enough time to grow, package and sell its marijuana to legalized retail stores, which are expected to open across Washington as early as May or June. The state’s Liquor Control Board, in charge of setting up Washington’s legal marijuana industry, has not yet announced who will operate the lottery-selected 334 licensed marijuana stores. The list will include up to 15 sites in Clark County.
“We will have product ready when those stores open,” Stroh said.
When he’s fully up and running, Stroh expects to have six full-time and part-time employees. He hopes to be profitable within six months of operation, growing and selling about 500 pounds of cannabis annually. Estimated wholesale prices run between $1,500 and $2,000 per pound.
He expects demand for store-bought marijuana will outstrip production early on because of state rules that limit all pot production to 2 million square feet or 40 metric tons of usable marijuana and 40 metric tons of production for concentrates.
It’s just not enough space for production to meet consumer demand, according to Stroh, who said Colorado ran into a similar problem when the state opened its first marijuana businesses this year. In the first month, the state’s recreational pot sales reached approximately $14 million, translating to roughly $2 million in taxes, the Associated Press reported.
Stroh spent a week in Denver observing Colorado’s launch of legal recreational marijuana sales.
“If Denver is any indication, it will be in short supply here by the end of the summer,” he predicted.
But that’s just where CannaMan needs to be in order to make money.
Stroh expects to harvest the buds from his flowering plants every two weeks from one room inside the operation’s main building, a converted ’70s-style house, and two growing rooms inside 40-foot shipping containers outside the facility.
The walls of the growing rooms are covered with white plastic to reflect light in the enclosed environment. A system of four electric power panels will supply electricity to the operation’s complex system of grow lights, fans, pumps and a carbon dioxide supplementation system to pump additional carbon dioxide into the growing environment.
“It supercharges” and makes the plants grow faster, Stroh said. “They (the plants) don’t have the open air to draw their CO2 from, so we supplement it.”
He expects his operation’s electricity bills will run between $700 and $1,000 per month to create an equatorial environment for marijuana plants in rectangular beds hand-made out of lumber. The beds are lined with plastic and equipped with a sophisticated irrigation system.
Stroh said those who already consume illegal marijuana just might experience sticker shock the first time they visit one of the retail stores, which the state expects to start opening this summer. He said legal pot prices will be higher than the price of illegal marijuana, due to a 25 percent state tax imposed at every level of exchange.
He will have to charge the tax to processors or retailers who buy the product from him and in turn, the retailers will charge the tax to consumers.
“It will be more expensive for sure,” Stroh said. “It’s a new potentially lucrative weapon in the state’s arsenal to balance the budget.”
He expects prices to level out with increasing production.
“Once you get economies of scale, the cost to produce it drops and at the same time, those who sell it illegally will probably see costs increase,” he said. He expects that legal sales will gain that price advantage within a year to 18 months.
As for his biggest competitors, Stroh said there just aren’t many right now. As one of the first legal growing operations, he feels he is getting up and running ahead of the pack and he doesn’t feel CannaMan will be threatened by illegal growers and sellers, either.
“Competition? There just isn’t any, because you have a captive supply and excessive demand,” he said.