Long Road to Retail: Chapter 2

20150630_142645By John Strieder

Immersed in the long process of launching a marijuana cultivation business, brothers Brett and Keith Sprau are hanging in there.

Right now, they’re waiting on their big grow building. The 17,000-square-foot greenhouse is under construction in Pueblo, Colorado for their company, Colorado Leaf. They’ve picked their first 20 strains. They’ve hired a book-smart head grower, someone who knows “not just how it grows, but why,” Brett says. They expect to have plants growing in early October.

“So far it all seems to be going on pace,” says Keith.

But they’re also starting to feel a little antsy. Keith, the founder, has now been without a paying job for over a year. Brett, meanwhile, was a freshly-minted law school graduate coaxed by his brother to give up the lawyer’s life and get growing. They aim to take advantage of a 2014 shift in Colorado law that allows marijuana cultivation without a retail component. They’ll be wholesale distributors to independent retail stores. It will take about 10 to 12 weeks for the plants to reach maturity. Then, after a natural-dry time of about a month, they will have salable product.

Since the wholesale concept is brand new in Colorado, they have to set up a distribution network themselves, from scratch — one of many hurdles they are staring down right now as they approach their October kickoff.

 

The facility comes together

The construction of the Colorado Leaf greenhouse has not been without its hiccups, but the structure is coming together.

“I really feel like we are putting up the state-of-the-art greenhouse up here,” Keith says.

The building will feature:

There’s no established industry standard to tell them what equipment they need or how to design their building, and likewise, there are few models for starting a legal marijuana cultivation company. “There’s unfortunately not a grocery list,” Keith says.

Neither brother has a background in growing marijuana. To get up to speed, Keith attended a four-day cannabis cultivation class, but beyond that, he says, the process has been trial and error. A license to grow plants for personal medicine served as their research and development account.

Even their architect didn’t completely understand what their greenhouse needed, they say. They’ve had to adjust the specs as they go, changing the location of the door and adjusting plans for trench drains and air filtration rooms.

Their project manager, Dan McCraw, of Pueblo West contractor Latcon Corp., has won the day, Keith says. “Luckily our project manager has been on the ball, catching things before anybody else does. That’s our saving grace so far.”

Yes to tables, no to ovens

When equipping the building, the brothers made one notable decision they say will make them a lot of extra cash. Instead of putting young plants on tables separated by walking aisles, they bought rolling bench systems. Growers will move them around to maneuver through the greenhouse, so aisles aren’t needed, and this means an extra 1,200 square feet for plants. They’re trying to maximize the dollar potential of every square foot.

“When you walk in the greenhouse, it’s going to look like a sea of green,” Brett says.

Meanwhile, they won’t be using ovens to cure their plants. A natural dry takes about three to four weeks. With an oven, it can take as little as three days. But it’s not for them, Brett says. “We’d rather have as much control over the look, smell and taste as we can.”

Going organic

Some of Colorado’s best-known growers tout themselves as organic, and why not? Organically-grown marijuana has advantages for buyer and seller. There’s the higher price point, of course, and the brothers point out a few more: it tastes better, it’s better for you and the environment, it’s reassuring for medicinal buyers who want health-conscious plants and there’s little to no wastewater, they say.

Inspired by his experience managing bars and restaurants, Keith plans to plant strains the way craft microbreweries make seasonal beers. He plans to bring to market strains that customers haven’t seen in years, introducing them a couple times a year, then pulling them from the market. “This industry is like the craft beer or wine industry,” he says. “You’re going to see weed snobs.”

Cannabis connoisseurs will appreciate a plant grown without pesticides or salts, Keith notes.

Of course, a true organic label doesn’t currently exist for the cannabis industry. The National Organic Program is headed by the USDA, which does not recognize cannabis as a legal crop. There are several third-party companies that certify cannabis with programs based on the National Organic Program. Right now, the state offers a limited amount of oversight. The new, Denver-based Organic Cannabis Association lists certification as one of its objectives.

Keith is optimistic about where Colorado Leaf will fit into the organic picture. “There’s a lot of growers doing organic, but there’s not a lot of organic growers doing it a very, very high-quality level. I think we’re one of the first people doing that.”

The county

The brothers praise Pueblo County for being helpful and easy to work with. When they were looking for land, only four counties in the state allowed direct cultivation of marijuana. Pueblo wasn’t their first choice — they had originally considered Park and Grand counties — but cheap land and less-restrictive regulations ultimately won them over. And local officials have not made them regret it.

“Pueblo County is pushing for this industry,” Brett says. “I haven’t seen them deny a license yet.”

The Pueblo planning and development department has been particularly great, he says, something the brothers experienced when the department was reviewing their architectural plans. “We needed 10 parking spaces and handicapped spaces. She (director Joan Armstrong) sat down and started marking up the plan. She signed off in an hour,” Brett says.

The Pueblo planning department also gave them a heads up a week before the public meeting to review their application, so they could be prepared. “It all comes down to tax dollars. They need that money,” Keith says. “Somebody is going to do it.”

What’s next?

Colorado Leaf has to set up its distribution channels from scratch. So far so good, as of August: they will be providing 100% of the product for a Pueblo retailer that is moving from medical into retail, and they will be supplying a Durango store that plans to shutter its growing operations in December. The Spraus need to secure 10 to 20 clients total.

They are already planning for growth beyond that. Brett is familiar with the economic value of interns from his law school days, and Colorado has its own cannabis college, Clover Leaf University, that might offer an inexpensive source of student help.

Their experience building the operation from scratch has inspired them. Since there is a lack of quality information for how to start a growing operation, they say they could sell their new business model to other growers, or they could franchise out a package of knowledge that includes everything from the equipment they chose to the genetics of their strains.

“Our 10-year plan is to expand to other states,” Brett says. They’ve already been approached by investors in other states looking for a brand. But right now, their focus is on Colorado. They will begin to consider opportunities in other states next year, he says, as laws change around the country.

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