Otis Gardens survived the market crash in 2018 by restructuring for the future
When the Oregon recreational market collapsed in 2018, growers had a choice to make: close their doors or get better. Otis Gardens chose the latter.
“It forced us to improve on all facets of the business,” says John O’Donnell, president. “It made our team what it is today.”
As a Tier 2 indoor, hydroponic grower in Hood River, the folks at Otis Gardens were used to getting about $3,000 per pound wholesale at that time. The high revenues in that first year helped mask some of the issues within the company, issues that are rampant in the early years of any state market when the cash is flowing and it seems like the product sells itself, especially a consistently well-grown, well-cured and high-testing product like that produced at Otis Gardens.
“The cannabis market in Oregon was super easy,” he says of those days. “Prices were super high so you could afford to be sloppy on the business side.”
But then supply caught up with demand throughout the state and the bottom fell out for growers. Otis was selling pounds for closer to $1,000.
Initially just an investor in the business, O’Donnell, a certified public accountant and commercial mortgage broker, stepped in at that time to protect his investment and “help streamline the business.”
“We went through significant growing pains when that occurred; or just pain,” he says today. “We had to downsize our staff, we had to become as efficient as possible and also really focus on sales and marketing.”
Prices have rebounded some, stabilizing at about $1,400 per pound, but the reorganization and a focus on making sure the company continued to produce a premium product have not only ensured that Otis Gardens would survive, but the company is even looking to expand its canopy and business operations next year in order to keep up with demand.
“It was a challenge,” O’Donnell says with a laugh, adding, “We’re known for high-testers and a quality product — and we’re recognized for that — and, ultimately, that’s why we’re still here.”
Located about 60 miles east of Portland along the Columbia River, Hood River sits in the shadow of Mount Hood. Its water is fed by a glacial stream and the area is historically known for its agriculture.
But the secret to Otis Gardens’ success comes not from its location, but its consistency and control of the growing conditions inside its facility.
From the reverse osmosis process they put the water through to the five proprietary nutrient mixtures they mix with it to the extended curing time and hand-trimming of the final buds, the team at Otis Gardens focus is on creating the highest-quality buds they can.
“That’s the secret: Care and attention,” says general manager Ellie Walsh.
Walsh says she “grew up in a wholesale greenhouse in Ohio” and has always had a love of plants. She has a bachelor’s degree in plant science from Cornell University, a master’s degree in science education from the City University of New York and a Ph.D. in plant pathology from Ohio State University. Hired initially as an integrated pest management specialist, Walsh was quickly promoted to general manager and now oversees sourcing, packaging, processing, inventory and sales, as well as continuing to implement the company’s IPM strategies, including sanitation and beneficial species protocols, scouting for pests and disease and ensuring overall plant health.
According to Walsh, the company currently has 2,400 square feet of plants growing in a coco coir medium and set on a weekly production schedule that results in the company harvesting about 20 pounds of finished product each week, all under the direction of lead grower Pieter Summs. The company grows mostly under 1,000-watt double-ended high-pressure sodium lights, with some ceramic metal halides mixed in, all powered by 100% renewable energy. The company has four or five mostly proprietary cultivars growing at any given time, though it is in the process of expanding with plans for a menu of up to 12 strains in the near future.
Walsh says part of what sets Otis Gardens product apart is the extended drying and curing process. The company keeps the harvested buds as intact as possible and dries them for about 10 days in a room kept at 60% humidity. After that, the stalks are bucked down to individual buds and kept in totes that get shuffled every day for seven to 10 days. Finally, the buds are sealed away in bags with Boveda packs to maintain the humidity levels. They’re allowed to cure for up to four weeks, with the bags being “shuffled and burped” once each week.
In total, it’s about seven weeks of constant attention to go from plant to store shelf.
“We’re constantly keeping track of what our humidity levels are in every part of our facility,” Walsh says. “It’s a lot of work, it’s a lot of interaction, it’s a lot of man-hours.”
But the attention to detail ensures that the consumers can count on the quality of the buds they are buying.
“They know what they are going to get, and they know they’re going to like it,” Walsh says of buyers.
“We’re consistent with our products,” adds O’Donnell. “In Oregon, a lot of it is about the THC count and we consistently have high THC numbers.
“It sets us apart,” he says.
The Business Side
But in an over-saturated market like Oregon’s was in 2018 — where there was a reported seven years’ worth of supply at the current rate of sales — simply having a top-shelf product was not enough to survive. As prices fell across the state, Otis Gardens felt the pinch.
“For a while, it was really interesting because there was no price differentiation between the high end of the market and the lower middle of the market, so we were spending all this additional money to make this high-end product and not get a premium price,” O’Donnell says.
Something had to be done. In March 2018, O’Donnell, with his business background, stepped in and made hard choices.
“Initially, it was getting our finances back on track, actually doing some legitimate bookkeeping and accounting and getting that in order,” he says of his work at the time. “The second was streamlining our expenses. At the same time, it was basically putting our team back together so that it could work efficiently and everyone was happy working together.”
O’Donnell says that at its peak, Otis employed a total of 20 people, which dropped to a low of 12 during the reorganization and is now back to 16, including a sales team, which is new as the company relied primarily on wholesalers prior to the downturn.
“Not only were we fixing the internal side of Otis from a cost and efficiency and team, we were also fixing an issue with sales,” says O’Donnell. “It was not an easy time to sell cannabis.”
But with the business side restructured for success and well-respected, quality buds being produced by the grow team, Otis Gardens not only survived the market collapse, but is now positioned to expand in the new year.
“We’ve been sold out since June, essentially, of our flower,” O’Donnell says. “We didn’t have enough flower to sell.”
The company expanded its facility at the end of 2018 and plans to have new cultivars growing with the goal of a June 1 harvest date. It is also applying for a processing license and expects to develop a line of extracts, vape products and edibles to add to its menu of products. O’Donnell calls the possibilities “limitless.”
And with prices finally stabilizing throughout the Oregon market, O’Donnell looks back at the restructuring as the moment Otis Gardens decided to face its growing pains head on and do what was necessary to survive.
“It hurt. It hurt a lot,” he says. “A lot of cannabis businesses went out of business — and they’re still continuing to — but I think we’re in a good spot.”