Hydro Pro

His life forever altered by a major motorcycle collision, Casey Thaxton discovered in his passion within the commercial cannabis industry

Following a debilitating motorcycle accident, Casey Thaxton discovered medical marijuana helped him deal with the stress and pain of recovery.

On Sept. 30, 1998, 21-year-old Casey Thaxton was driving through an intersection on his motorcycle when a Honda Civic failed to yield the right of way and plowed into the side of his bike.

In an instant, the young man’s entire life changed; he went into cardiac arrest and suffered two collapsed lungs, two broken knees, a compound femoral fracture, severed arteries and a major concussion.

“My helmet was split right down the middle,” Thaxton recalls of the accident.

Thaxton had been a personal trainer at the time and was also on active duty military. He was planning to start attending a technical college.

“(The accident) devastated and ruined my life,” he says. “I lost every opportunity I had. It basically killed all my dreams.

“I ended up being at home on mom’s couch at 21 years old, not being able to provide for myself, not being able to work, not being able to do the military like I loved, not being able to do anything really.”

Making matters worse, doctors had prescribed copious pharmaceuticals for his injuries, leaving him heavily medicated around the clock.

“I started out my morning with a 10-milligram Oxycontin, Percocet and two Vicodin,” Thaxton says. “For lunchtime, I would have another two Vicodin and a Percocet, if I needed it. And then at dinnertime I would have another Percocet, two Vicodin and an Oxycontin.

“I was so addicted and I was so grumpy and just miserable and depressed that I was considering taking my own life.”

His mother put him on anti-depressants, which only added to his daily cocktail of drugs, spiraling into a chain of addictions.

He doesn’t know how he managed to pull out of that dark hole, but eventually, he quit taking prescription drugs and swore off all mind-altering substances. Although his body still ached, he refused to take painkillers. He began moving forward with his life and started a heating and air conditioning business.

Abel Garcia moves a bin of leaves at the Prosser Washington farm, which relies on the sweat equity of Garcia and Thaxton to keep costs down.

New Partnership

About 10 years after the life-changing collision, a man named Abel Garcia walked into Thaxton’s office seeking work as an HVAC technician.

During the interview, Garcia revealed that he was a medical cannabis user. He wanted to make sure that wouldn’t be a problem.

Thaxton hired him, and Garcia quickly became one of his top technicians. As the two grew closer, Garcia began urging him to try medical marijuana.

In Washington, cannabis had been legal for medicinal use since 1998. Although Thaxton was reluctant at first, he eventually got a medical card and began a small home grow.

While smoking marijuana didn’t do much for his pain, it did help with stress. Over the years, his pain became manageable, but a damaged nerve in his back still bothered him. When it flared up, Thaxton says, the pain would be almost unbearable.

“It would take my breath away,” he says. “It would wake me up at night to where I couldn’t breathe. I would be sitting there just gasping for air. It was that bad. Like somebody stabbed me right in the back.”

However, he discovered that a homemade cannabis lotion applied to his shoulder could alleviate the pain within about 15 minutes.

“It’s not like it’s numb — the pain’s not there anymore,” he says.

That was the moment that inspired Thaxton to join the cannabis industry.

“I was so dumbfounded and such a believer, I instantly said ‘Let’s do this. What’s it going to cost?’”

Thus, Hydro Pro LLC was born.

After running his own HVAC company for years, Thaxton has had success in Washington’s highly competitive cannabis market.

Operations

Initially, Thaxton and Garcia planned to partner together on a medical grow operation. However, just as they were starting to move forward, Washington voters approved Initiative 502, legalizing recreational marijuana and establishing the framework for a commercial cannabis industry.

Although both men had voted against the bill due to concerns about regulations, they decided to get on board when the legislation passed and began pursuing a recreational license.

“The vote was the vote, and I firmly believe if that’s the way the people vote, that’s what we’ve got to do,” Thaxton says. “So, we just decided, ‘Hey, if we still want to be part of marijuana, whether personal or recreational or medical, we’re going to have to adhere to this law, so let’s just do it.’ And it’s just been history since then.”

They applied for their license in 2013 and began looking for land. The license was approved in July 2015, and their first plants went in the ground two weeks later at the farm in Prosser, Washington.

Since then, the farm has grown rapidly and appears poised for success. Thaxton attributed the farm’s success to several factors, including Garcia’s impressively detailed knowledge of grow practices and voracious appetite for gardening information.

“He’s read Jorge Cervantes’ ‘Medical Marijuana Bible’ cover-to-cover probably five times,” Thaxton says.

Hydro Pro has also benefited from a commitment to sweat equity and old-fashioned frugality, which helped the business owners start the company without accumulating a crushing amount of debt. Thaxton and Garcia invested about $30,000 up front and vowed from the start to make their business live within its means.

“We didn’t need help from anybody,” Thaxton says. “We could physically build everything ourselves.”

The partners spent four days a week building out the farm themselves and didn’t buy anything they didn’t need. They saved “a little bit here, a little bit there” and it paid off.

By the very next year, Hydro Pro’s outdoor farm had 450 full-term plants and more than 2,000 pounds of finished product for wholesale. The Tier 3 farm is limited to 30,000 square feet of growing canopy, according to state regulations.

Thaxton and Garcia have an ambitious long-term growth plan that includes an extraction lab for producing oils. In the meantime, all profits will be reinvested back into the farm.

But like any business, Hydro Farm has faced its share of challenges. One of the biggest, Thaxton says, was predicting the market.

When Washington launched its regulated cannabis industry, the vast majority of growers overestimated the wholesale price of cannabis, which has steadily been driven down by market forces.

Initially, Thaxton and Garcia projected wholesale prices would be about $6 a gram, based on widely accepted street values that averaged $10 a gram.

Instead, with licensed producers and processors outnumbering retailers by a ratio of about 3-to-1, Washington’s wholesale price per gram fell to $3.48 in late December, according to data from Cannabis Benchmarks. Only Colorado, at $2.71 per gram, has a lower wholesale rate among states with regulated cannabis markets. As of the end of 2016, according to Cannabis Benchmarks, wholesale prices in Washington had fallen 12% since early September, but the price appears to be rebounding from its year-long low of $2.74 per gram in mid-November.

“So, you’ve got all these people in the business that thought they were going to get, you know, $4 or $5 a gram and their expenses are $3.51 a gram,” Thaxton says. “So, some of those people have gone out of business.”

Thaxton blames poor planning by government officials for lower-than-expected prices.

“There needs to be many more retailers than growers,” he says. “It’s just simple math. If you’ve got 50 growers and one retailer, well the retailer decides what he wants to buy and therefore he dictates the price.”

While a high level of competition makes it challenging for growers to succeed, it ultimately results in lower prices and more choices for consumers, which has allowed Washington’s legal cannabis industry to grow from about $5 million in monthly sales in 2014 to nearly $90 million a month in 2016.

Thaxton and Garcia were smart to keep Hydro Pro’s overhead so low that it could still be profitable, even if wholesale prices fell to $1 a gram.

“But that was like a doom-and-gloom, worst-case scenario,’” Thaxton notes. “And here we are.

“I would say probably 50% of growers are starving because $1 to $2 a gram is not enough money when you were thinking you were going to get at least $4 or $5.”

Looking Ahead

But it’s not just competition and the “absolutely foolish” high tax rates, according to Thaxton, that are putting pressure on growers.

On top of everything else, illegal and unlicensed operators have impacted the regulated industry, although it’s difficult to gauge how much.

“I don’t think it’s possible to know those numbers because we really don’t know how many people are selling right now on the black market,” Thaxton says. “But I can guarantee you that it is astronomical.”

Thaxton suspects that the number of people growing without licenses has increased since recreational marijuana became legal, because the stigma has been reduced and people are less afraid of consequences.

“I mean let’s be honest,” he says. “Nobody’s getting arrested for illegal growing or non-licensed growing. It’s obvious too. I mean, I can I tell you five people I know right now that are growing that never even thought of it before.”

However, Thaxton believes quality and consistency are two ways producers can distinguish themselves. While the quantity of marijuana on the market is high, the amount of high-quality product is not, Thaxton says.

“Right now we’ve got a real big problem with people that are focusing on volume, but I’m telling you, the marijuana connoisseur at the end of the day is going to get fed up with inconsistent product,” he says. “If your name is attached to a piece of dry dirt, you’re not going to have a very good reputation.”

Yet, it’s difficult to predict what kind of impact quality and consistency will have on the industry. Like with wholesale pricing, the regulated market is simply too new to project accurately.

“Do I think that that’s going to eventually harm the business?” he says. “I don’t know, because this is a business we’re pioneering.”

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