Vertically integrated Colorado company utilizes a commercial-scale greenhouse to supply wholesale market in addition to its own stores
The following story originally ran in the Spring 2017 issue of SunGrower & Greenhouse.
Successful companies in every industry understand the motto, “Evolve or die.”
While many cannabis businesses have been slow to grasp this concept, stubbornly clinging to outdated methods and philosophies, Strawberry Fields has embraced the need to stay at the forefront of change.
Brothers Mike and Rich Kwesell started the company in 2009 with three plants in a closet. Nearly eight years later, Strawberry Fields now has three storefronts in Colorado, multiple grow facilities totaling 140,000 square feet of cultivation space and more than 100 employees.
With the business experiencing tremendous growth since its inception, the Kwesells believe focusing on their core strengths has allowed Strawberry Fields to thrive during the tumultuous early years of legalization that buried many competitors in Colorado.
“We’ve invested every little drop of blood, every little drop of sweat and every tear and penny to stay relevant and keep growing our business,” Mike says.
“We don’t look at it through marijuana eyes,” Rich says. “It’s not a get-rich-quick scheme, especially after you pay your taxes. Anytime someone comes into this business thinking they’re going to be a millionaire inside of a year, it’s a recipe for disaster.”
Expansion and Evolution
Legal cannabis has been in a constant state of transition since California took the major step of legalizing medical marijuana in 1996. Since then, Colorado has emerged as the front-runner of national change, becoming the first state to legalize medical marijuana in its constitution in 2000 and creating a blueprint for a regulated, state-licensed industry in 2010 — another first in the nation — before full-scale commercial legalization in 2012 solidified the Centennial State as the de facto marijuana capital of the U.S.
When Colorado stripped away its vertical integration requirements, it gave rise to a previously nonexistent wholesale market. Retailers no longer had to rely on their own grow operations to stock their shelves, and growers could focus on what they do best.
It also spurred an explosion of sun-grown cannabis production in Southern Colorado, where Pueblo County became one of the few municipalities to allow both outdoor and greenhouse cultivation.
It was about that time that Strawberry Fields made the jump into greenhouse cultivation, using a separate entity, Heartland Industries, as its wholesale brand.
Heartland Industries “sells to the wholesale market, and among those clients happens to be the Strawberry Fields stores,” Mike says. “That’s why Heartland is its own separate brand, because we wanted to service the wholesale recreational market in Colorado.”
The brothers still use their 30,000-square-foot indoor grow to produce a selection of medicinal products, but the constant struggle to balance operating expenses while maximizing production space came at too high of a price for it to be a long-term solution.
“We felt it was going to be a race to be the lowest-cost producer and wanted to set ourselves up for that down the road,” Rich says.
“That’s when we started to look into building greenhouses,” Mike says. “That’s the world we embraced and we’re glad we did it.”
The Kwesells knew they didn’t want to be a testing ground for the latest innovations in cultivation, so they based their strategy on farming models in traditional agriculture.
“When you look at every other crop in the world, there’s nothing else growing inside of warehouses with manufactured light,” Rich says.
The brothers likened indoor growing to the computer industry and technology’s knack for being outdated almost the minute a product hits the market.
“No matter how big we went with an indoor grow, it was going to become obsolete,” Mike says. “Plus, the world doesn’t run that way. The world doesn’t feed itself that way. It feeds itself with outdoor grows and big horticulture.”
In 2013, after much research, Mike and Rich purchased a 250-acre lot in Southern Colorado and constructed a two-acre commercial greenhouse, outfitting it with Gavita grow lights and using an organic soil mix with a peat moss base.
The shift to greenhouse production required some new skills, but the basics didn’t change much.
“At the end of the day, a person is growing marijuana — that’s what it all comes down to,” Mike says. “So, if you’re growing in a greenhouse or indoors or outside, you’re still doing the same activity. But if you take an indoor grower to a greenhouse … there is going to be a humongous suite of nuances, different tricks of the trade that they are going to have to learn.”
And the two brothers have never been shy about reaching out to experts both from within and outside the cannabis industry. With eight years of experience as licensees and business owners, that’s one of their strengths, Mike says.
“I guess one of our secrets to success is to look to people who are experts in whatever you’re having trouble with,” he says. “No matter what you’re having trouble with, there’s some guy who has made his life study out of it, and he knows all the tricks and he can teach those tricks to you.”
An outdoor cultivation model was never really considered for Strawberry Fields. The Kwesells prefer the environmental controls and year-round capabilities provided by greenhouses.
One bad dust storm could put an outdoor operation out of business, Rich says.
The land surrounding the Heartland Industries greenhouse is comprised of a loamy soil. Traditional farmers know loam as a type of soil that is rich in nutrients and retains water well. However, the top layer of the Southern Colorado soil is a fine brown sand that could easily decimate crops if the conditions get bad.
“With an outdoor grow you’ve got pollutants, you’ve got insects, you’ve got everything blowing through the air,” Mike says. “Even if you don’t get wrecked by a hailstorm or an early snow or something else — even if you do manage to yield a crop — it’s still hard to justify the defects with the product.
“If you can’t control your environment then you can’t guarantee a product.”
“We prefer having the top-quality bud and we’re doing that in a greenhouse; we wouldn’t have been able to produce that in our natural elements,” Rich adds.
Colorado and Beyond
The Kwesells have elected to take a methodical, well-thought-out approach to expansion, allowing Strawberry Fields to keep pace with changing rules and regulations.
“I think one of the biggest traps that even the most experienced business people fall into in the marijuana industry is they get sidetracked every time they see a shiny new object,” Mike says. “With all these crazy opportunities going on nationally and now internationally, instead of these teams focusing on their core competencies, instead of operating and running a marijuana business, a lot of people chase after capital. But they are these long, complicated deals with a goal in mind that is so complicated and far out there that you often see them implode under their own weight.”
Strawberry Fields has two retail stores in Pueblo and a medical dispensary in Colorado Springs. It’s also in the process of licensing the brand out of state, with Maryland’s medical program as the company’s first target.
“We don’t look at expanding into new markets as the end-all goal,” Rich says. “That’s not it at all. It has to be the right territory.”
As new states roll out legalization programs, the Kwesell brothers — now industry veterans who came from the days of closet grows and have persevered through numerous variations on the marijuana business model — welcome fellow industry participants to come train at their facility.
“By learning our protocols and our procedures, they can take it back to their states and roll out much safer and more profitable programs,” Mike says. “It’s all production-driven, so it’s data, data, data. You just never stop tuning, refining and working at it.”
It’s obvious that the two brothers have talked substantially about their expansion philosophy. While they’re not in a rush to branch into every available market, “we are businessmen,” Mike says.
“We are open to new opportunities and we are really good at what we do.”