Setting their own course

Fairwinds Manufacturing is something of an outlier. It is one of the highest-grossing marijuana producer/processors in the state of Washington, but unlike nearly every competitor, it does not actually sell marijuana.

“Right out of the gate we decided we weren’t going to be a flower company,” says co-owner and chief technology officer James Hull. “Everything we grow, we extract and put that into our product, whether it’s a topical, a capsule or a vape cartridge.”

In fact, for some of the products, cannabis takes a back seat to the myriad other herbs that make up the formulations.

“Cannabis is just one of our ingredients, and sometimes it’s not the main ingredient,” says co-owner and CEO Wendy Hull.

In a state where the medical marijuana market has all but been eliminated by recreational, adult-use retail stores, Fairwinds was designed to be, and remains today, a wellness company. As a rule, it does not aim for the highest-THC numbers possible, but instead looks to treat concerns many people have using natural herbs — including cannabis — as medicine.

“We knew we wanted to make wellness products,” Wendy says. “We weren’t nearly as interested in getting people stoned.”

And the strategy has paid off for Fairwinds, which is now available in more than 330 stores across Washington and is one of the top 10 producers in the state in retail sales, according to Headset, a cannabis analytics company. In June, Fairwinds ranked seventh in the state, according to Headset’s analysis, with all-time retail sales numbers topping $42 million.

“I think a lot of companies underestimated how big the wellness community really was,” James says. “And it’s going to get bigger and bigger. That’s what’s driving the massive growth (of the industry).”

As the market expands, Fairwinds is looking to expand with it, both to new adult-use states and into the burgeoning national CBD marketplace.

Fairwinds grows its cannabis in a full hydroponic system using rockwool as a medium.

THE NICHE

Fairwinds separated itself from the pack early in Washington’s recreational market. Instead of making its name by chasing the ever-higher THC numbers and crystalized flower that dominated the first year of sales in the Evergreen State, the company zagged when others zigged, diving fully into being a wellness brand.

“One of our early goals was to be able to produce very consistent, healthy wellness products that would really change people’s lives,” Wendy says.

“We filled a niche that wasn’t necessarily there,” James adds. “We’re not chasing trends in the marketplace, we’re identifying problems and challenges and we’re formulating products around that.”

Fairwinds started with CBD-rich vape cartridges, capsules and tinctures, all aimed at helping consumers, such as the company’s Deep Sleep blends, one of the first medical products available in rec stores. But it was a microdose-infused coffee that helped the husband-and-wife team gain national attention.

“It’s the product that put us on the map,” Wendy says of the Catapult Coffee line.

Soon after, the company introduced its Flow CBD Deep Tissue topical gel. It has since introduced a cream version of the product as well. Both routinely place in the top 10 best-selling topicals in Washington and, due to relatively high price points, are among the highest-revenue generating products on the adult-use market. Each jar contains 146 milligrams of CBD, 4 milligrams of THC, a mix of terpenes and essential oils and a handful of other natural ingredients, such as white willow bark, which contains salicin, a chemical similar to aspirin.

“It was unlike anything else on the market,” James says of the Flow gel. “We put a lot of time into making sure we had the formula.”

Wendy calls Flow a “gateway product” and an “awesome introduction for cannabis non-users and non-believers” because its effectiveness helps reach a demographic that may not have considered cannabis as an option. But even she admits the company was surprised by the response. So far in 2019, the cream is the third-highest revenue product in the state while the gel is fifth, according to Headset. In 2018, the Flow gel was the highest-revenue product in Washington.

“We had no idea that was going to be one of the No. 1 products on the market,” she says.

All aspects of the Fairwinds cultivation facility were designed by James Hull and are automated so the company can replicate its results with each harvest.

THE GROW

It may be known for its processing and formulation, but at Fairwinds, everything begins at the grow.

Located in Vancouver, Washington, the company’s 8,000-square-foot building was entirely designed by James, including the HVAC system, the chilled-water cooling system, a water reclamation system and the electrical schematics. A mechanical engineer by trade, James says he set up the entire facility to be a “technology development center” with an emphasis on efficiency. And each grow room is the same but “completely isolated” with minimal fresh air throughout the facility for the purpose of experimentation with variables like lights and nutrients.

“Every single thing is automated: the lights, the CO2, the humidity, the air filtration systems,” he adds. “We’ve now got artificial intelligence algorithms crunching data to be able to identify and quantify growing trends and show improved efficiencies.”

Fairwinds uses a full hydroponic growing system with rockwool as the medium. It uses zero pesticides and opted for hydro to prevent impurities and “uncontrolled risks” from leaking in through soil.

“A lot of companies don’t even know we grow our own cannabis,” James says. “I’m like, ‘Yeah, that’s one of our advantages. It’s why our stuff is so good.’”

James says before Fairwinds got its license, he spent several months studying the plant and its needs. He read scientific studies, hired consultants, spoke with growers and then leaned on his strengths in developing technology and solving problems to design and build the facility. The Hulls even had the power and water at their home turned off while they lived in a 12-foot trailer with their cats during the build-out.

Instead of selling flower, Fairwinds extracts its entire harvest to make products like the Catapult Coffee line, below, which the Hulls say “put us on the map.”

ATYPICAL

If Fairwinds seems like an atypical cannabis company, it’s probably because James and Wendy Hull are not your typical cannabis entrepreneurs. Prior to getting into the industry, both had long, successful careers with the federal government. Wendy was just seven years away from full retirement from the federal government after a 26-year career in which she became an executive with a department of about 35 employees. And while James’ family owns flower greenhouses in Massachusetts, he pursued a career as a mechanical engineer with the U.S. Navy, designing special forces boats and holding a high-level security clearance.

“I helped a lot of people on the Navy side,” he says, “but now we’re saving lives in a different way.”

James doesn’t even see Fairwinds as a pure cannabis company, but instead also as a technology company. He hopes to spin off his designs to sell them across the industry.

The company also puts a tremendous amount of work into its product formulations. One of the company’s first six employees was a chemist who studied herbal medicine for 15 years before joining Fairwinds.

For the cannabis, Fairwinds is dedicated to using the full plant to create its extractions to ensure it captures all the minor cannabinoids that aid in the entourage effect and create what the Hulls believe to be better, more effective products.

“We’re going to grow flower but we didn’t want to be one of the companies that was selling the flower and taking all the trim, extracting the trim and turning that into the edible products, which for us was going to be our medicine. So we made the decision at the very beginning to use the full flower,” says James.

But along with the cannabis, the company seeks out the highest-quality herbs and essential oils it can find to make up the rest of its blends.

“What we pay for ingredients is astronomical,” James says. “Our products are expensive to produce, but our commitment is to produce wellness products. This is not a get-rich-quick scheme. We don’t make our decision based on the revenue and the profits that product is going to produce.”

Both Wendy and James believe that products-before-profit approach sets Fairwinds apart from its competition.

“Our commitment to quality and customer service from day one really set our path,” James says.

 

EDUCATION

James and Wendy Hull both gave up successful careers in the federal government to start Fairwinds, which has grown to be a top 10 cannabis company in Washington.

Because Fairwinds products are not typical of the selection found at recreational stores, the company has had to focus on educating not just consumers, but budtenders and retailers across the state as to why its products are different.

“We really put a huge emphasis on vendor days, education sessions with the retail stores, making sure people understand the quality of our products,” says Wendy.

That special attention has paid dividends. According to Headset, the company saw a 27% increase in retail sales between February and March of 2018, jumping from about $800,000 to over $1 million, and Fairwinds never looked back.

According to Wendy, a change in packaging and an increase in sales staff, as well as a “huge focus” on educating retailers about the difference between Fairwinds and other high-CBD or medical-focused products led to the sustained increase.

The company has recently doubled down on its education efforts, purchasing video equipment and launching a series of education videos on its website aimed at budtenders as well as the public.

“You can produce the best products in the world, but if you don’t educate the consumer why they’re better and help a consumer choose the right product, you get no credit for it,” James says. “The complexity of what we do is truly amazing. We are producing pharmaceutical-level medicine in a lot of cases.”

Fairwinds has put a premium on budtender education which led to increased growth of products like Flow, the top revenue generating cannabis product in  Washington state in 2018.

EXPANSION

Now that Fairwinds has secured its place in the Washington market, James and Wendy are looking to expand into new states, both in the adult-use marketplaces and the larger CBD market created since the passage of the 2018 Farm Bill that legalized hemp and hemp-derived CBD products.

According to James, Fairwinds already has licenses in two other states and is in the process of building out its facilities. He also hopes to break into his home state of Massachusetts someday, though he says for now Fairwinds is taking it slow. As a fully self-financed company, James and Wendy believe in making sure their plans are in order and the moves are the right ones instead of simply jumping into a new market.

“If you start going to other states too early, and you haven’t perfected your business plan in the state (in which) you started, you just distribute problems,” James says.

“We’re definitely steady, but I wouldn’t say slow,” adds Wendy.

As for the CBD market, the couple have formed an entirely new company, Fairwinds CBD, and have become part-owners of a 700-acre hemp farm in Oregon, where they can have the same hands-on control they believe makes their adult-use brands so effective and successful. They have also partnered with other companies to do white labeling of CBD products.

“We didn’t want to lose that level of connection with the cultivation side,” James says.

As for the new formulations, the goal is to replicate the Fairwinds adult-use formulas as much as possible, though that is not without its challenges.

“When you take out the THC and THCA and some of the other cannabinoids and terpenes we have in some of our Fairwinds cannabis products, there have been some products that are a little bit challenging to produce, Deep Sleep for example,” says James.

But the company’s success in Washington has given the couple and the company the confidence it needs to strike out beyond that state’s borders and to take their chance not only in other states, but to try and replicate their success on a national level.

“We’re going to find that niche again,” says James.

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