Battle lines are being drawn in the cannabis industry. On one side are family farms. On the other are larger corporate entities.
Family farms argue that culture, legacy, environmental stewardship, and decades of sacrifice have earned them a lasting foothold in the industry. Corporate operators argue that scale, efficiency, and improved operations lead to economic growth and more affordable products. Ultimately it is consumers and the marketplace itself who will decide the fate of both groups.
You may recall the biblical account of David vs Goliath. David was a young shepherd boy, while Goliath was a Philistine giant. Saul and the Israelites were facing the Philistines in the Valley of Elah. Twice daily for forty days, Goliath would challenge the Israelites to send out a combatant of their own to face him in single combat. All were afraid.
David, the shepherd boy and least likely to succeed among his family, accepts the challenge, declares victory in the name of the Lord, and strikes down the giant with a stone and sling.
In modern times, this story is used in reference to the underdog – someone, who, facing insurmountable odds, digs deep and finds a way to succeed.
Such is the case currently in the cannabis industry, both throughout California and the broader United States. Family farms, which had a lock on the industry for the last fifty years, have lost their leadership position and many are being forced out of the business. With explosive amounts of indoor and mixed-light flower coming to market, sun-grown farmers simply aren’t finding enough distribution outlets or livable prices for their work. This will likely get worse, not better in the coming months and years.
I, like many other consumers, root for the little guy and purchase locally produced cannabis products when I shop. That said, I understand market forces and am accepting the sad reality that most “legacy” producers will not continue in this business. Corporate domination is real and the end of an era where mom and pop operators made a great living farming ganja is upon us.
Like most county residents I enjoy raising my kids in the outdoors. I regularly decline city jobs in financial markets and cannabis cultivation as I simply prefer living here. That said, I fully realize that the cannabis industry allowed a little community like ours to thrive and flourish economically. Many of us were able to live far better than folks in other remote locations of the country because we made so much money weed farming – literally billions a year sloshing around the area.
Now that the money is going away, life here will change. Folks will leave the area, businesses will close, property values will deteriorate, and things won’t feel so rosy. It is for this reason that I advocate for large-scale cannabis projects here locally. It’s not because I’m a jerk or because I don’t appreciate the efforts or values of family farms and our robust regenerative agricultural community. It’s because our time is largely over, and a new chapter has begun. I dislike this reality but understand change and believe that adopting a more corporate-friendly stance is important for Humboldt’s economic future.
I’ll never forget years ago when rumors of a big box store coming to my hometown of Fortuna were swirling around. A financial advisor at the time, I welcomed the development as our area needs jobs. As a consumer and homeowner, I was also interested in lower prices as the local hardware stores are quite expensive. While I believe in local and enjoy spending money locally, I also believe in competition and price discovery.
One day at the soccer field someone was going around putting fliers on cars about keeping the big guys out of our community. It was handwritten in purple crayon – perhaps for enhanced comedic effect. The point is clear. Humboldt values being different. We value a rural lifestyle – one untarnished by the “evils” of corporate profit and I get it. I too choose to live in Humboldt for the beauty of our natural surroundings and for a bit slower-paced lifestyle. Unfortunately, the immense cannabis revenues that made life here so comfortable are going away – quickly.
Although in Humboldt it is terribly unpopular to speak fondly of corporate operators, corporations have many positive attributes, some of which I’ll explain here.
Corporations tend to have deeper pockets and a greater ability to weather financial downturns. Corporations often keep cash reserves or earmark a certain percentage of profits for savings versus plow back or shareholder distributions. When challenging times come, they draw on those reserves or borrow to survive cyclical economic downturns and live to fight another day.
With greater financial strength comes more security for employees. While it is true that corporations expand and contract the workforce throughout the economic cycle, corporations are less likely to stiff employees on pay, which is common on small pot farms. The market dip of 2017 and 2018 was unkind to many workers in the hills as was last year when many employees were given a blank check. Additionally, in a corporate setting, workers are afforded more legal protections and have recourse for financial or other disputes.
Corporate cannabis farms also offer more work-life balance. Six-day workweeks with long days are common on family farms. Some farms offer a day off every two weeks, while in extreme cases, everyday work is requested.
The larger corporate outfits I have interviewed with offer five-day works weeks with shorter days. Although cannabis farming is rigorous and time-consuming, larger farms tend to have the staffing, organization, and logistics that lend themselves to greater work-life balance.
Salary and Benefits
Well-established corporate farms also value highly skilled employees. When entertaining offers I see much more attractive compensation and benefits packages coming from larger, corporate operators. Competitive salary, dental, medical, and vision coverage, as well as corporate retirement plans are common. Paid time off, sick leave, and travel reimbursement are also offered regularly.
While I myself work on a family farm and always have, these benefit packages are enticing and common in a highly competitive corporate environment. Unfortunately, such offers are rare on small farms.
Charitable contributions are also common in the corporate sector. U.S. corporations gave away approximately $20 billion last year according to Philanthropy Network. In fact, I read just today that a well-established cannabis company is matching up to $1,000,000 donated to the Last Prisoner Project – truly awesome stuff that needs to be acknowledged.
In addition, companies often pride themselves on many thousands of volunteer hours per year, helping different causes in the communities in which they operate. While it’s true that family farms in the cannabis industry have also been generous over the years, outsized profits fueled that generosity and falling prices are now crimping charitable inclinations.
My Two Cents
I agree that corporate scandals are real – insider trading, environmental damage, worker abuses, and illegal activities have obviously plagued the corporate sector. They have also plagued small family farms. The most appalling and most egregious cases of environmental, legal, and employee abuse I’ve seen have been at the hands of underperforming, cash-strapped small farms. While I truly believe that many of the bad actors have gone and that the remaining farmers in Humboldt are kind, loving people who honor employees and the environment, there is nothing about one’s corporate structure, funding mechanisms, or size that makes one superior or inferior. It is about morals, values, conduct, and deliverables.
I believe it’s an inherently egotistical, or perhaps fearful position to say that corporations are evil and that small operators are superior, either morally or in terms of farming process. Large farms also touch every plant and care for them exquisitely in a growing number of cases. They just perform plant-facing activities with dozens or hundreds of employees, not two. Some high-end greenhouse and indoor installments utilize rain catchment, recycled water, and solar power making them far more environmentally friendly than folks draining the creeks and burning diesel.
Many corporate entities are ethical and just and are doing their part to improve lives through economic growth and sustainable business practices. Anti-corporate views are understandable to some extent but are often short-sighted, selfish, and protectionist. Maintaining the status quo and preventing business development will only hasten our county’s economic collapse and prevent our area from staying on the map as a global production hub for cannabis. Conversely, a host of million square foot greenhouse grows will bring hundreds of millions of investment dollars to our area and put thousands of displaced farmers back to work.
Unlike the story of David and Goliath where the underdog triumphs over the larger, evil aggressor, I doubt that cannabis farmers will experience the same. Cannabis will be increasingly produced, packaged, and sold by larger, well-funded corporate entities. National legalization will only hasten this trend as that’s when the really big money will enter the fray.
Additionally, corporate operators will form strategic alliances with other corporations. Mutually beneficial business-to-business relationships will dominate the industry and leave most family farms behind. Working with one large producer is much easier and much better for cost control and predictability than sourcing products from dozens or hundreds of small ones. This reality, perhaps more than any other promises to be the demise of the vast majority of small farmers. Consolidation up and down the supply chain is underway and will intensify significantly moving forward. This will benefit a very small number of highly valuable takeover targets and will force most others out of business.
Small farms enjoyed fifty years atop this industry, but sadly that is over. As soon as CNBC, the supposed leader in business worldwide, showed $5,000 pot plants out of Mendo in 2014, the beginning of the end was born for many of us. Competition is only just beginning and without truly killer stuff and an exceptionally unique story or value proposition, most of us will fade away in the coming months.
High value, niche distribution will allow some to remain in the game, as will celebrity endorsement, regular press coverage, and vertical integration. A few successful farms will ring the register by selling their operation and or processes to a larger entity, but for most, troubled times are here and the end game is in sight. It breaks my heart every time I receive a message about another farm closing, but such is life…change is the only true constant.
Aside from getting famous, going viral, or having awesome friends in distro, radically boosting yields and quality while shredding costs is the only path forward for producers. Go get yours.
I’m rooting for us all!
Jesse Duncan is a lifelong Humboldt County resident, a father of six, a retired financial advisor, and a full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a no-cost platform that helps small farmers improve their cultivation, business, and financial skills. Please check out his blog, his Instagram at jesse_duncann, and connect with him on Linkedin.