The COVID-19 pandemic has brought much of the world to a screeching halt as municipalities, states and entire countries respond to the crisis.
While the U.S. cannabis industry has been deemed essential in many states, cultivators looking to launch or expand their operations may be left wondering how to navigate pending construction projects in the wake of the pandemic.
According to Ryan Douglas, the owner of Ryan Douglas Cultivation LLC, a company that provides cannabis cultivation services, it is critical that cultivators press on as much as possible with their startup or expansion plans during the pandemic in order to meet patient and consumer demand, as well as prepare for a speedy return to normalcy after the crisis.
Here, he shares how construction projects may be affected by COVID-19, as well as steps that cultivators can take to minimize its impact on their plans.
Cannabis Business Times: Broadly speaking, how might cannabis cultivation facility construction projects be affected by the COVID-19 crisis?
Ryan Douglas: What I would assume is that you’ll certainly have delays. If someone was building an indoor facility or a greenhouse facility, since the entire economy is affected, I’d assume growers are experiencing delays in the manufacturing of the equipment and the shipping of the equipment, and then of course the construction of the facility. I don’t think there’s any way around that.
CBT: How are you advising your clients to deal with pending construction projects during this time?
RD: What I would tell clients is to continue with the construction plan. Their hands are tied in terms of the equipment they can receive and the progress they can make on construction, but the reason that these companies initiated new construction projects or expansion projects in the first place is because they saw a demand to do so. I don’t think that with the COVID scare that cannabis is going to go away. I think it’s only on pause.
One benefit for our industry is it’s not like the airline industry or the hotel industry, which have taken a severe beating and, in my opinion, are going to take a long time to ramp back up to where they were just six months ago. What we’ve seen on the news with cannabis is that a lot of states have deemed it an essential service, which indicates how important it is to society. If the dispensaries are allowed to operate and the consumers are allowed to get out of the house and go to the dispensary it’s going to go immediately back to where we were.
If companies started a construction project and now they’re a bit timid or scared, I don’t think it makes sense to stop because the companies that continue building through this downturn are going to be rewarded with sales once this is over, and their competitors are just going to be finishing construction, at best.
I was thinking that perhaps some states might take a more favorable look at legalization in the future because everyone is taking quite a beating economically, and the tax revenue from cannabis might be more attractive now in states that were borderline or against it before.
CBT: How might it impact cannabis companies if they have to put their projects on hold, and what steps can they take to minimize the impact on their businesses?
RD: It’s tricky to stop or slow down the production of cannabis. The reason that a cultivation staff exists is because those people are necessary to successfully produce the crop, so if you put a production plan on pause or try to reduce the amount of people taking care of that crop, inevitably you’re going to have crop problems.
If a company needs to put construction on hold or stop construction altogether because of a down month or two, I wonder if it was an appropriate decision to expand in the first place. If construction continuing depends on last week’s income, it seems like a company that’s running a really fine line. There’s not much buffer there. If you’re running on that kind of a budget, you put a lot of things at risk—certainly the business, the patients you serve and the employees that depend on your business for their livelihood. Maybe it’s tough love or it sounds harsh, but if a scare like we’ve had over the last month or two causes a halt, maybe that company wasn’t in a good position to expand or build in the first place.
CBT: For companies that are moving forward with buildout and construction projects during this time, what steps can they take to ensure the project goes smoothly?
RD: I think more than ever, it would be good to avoid overcomplicating things during expansion or startup. I think now more than ever, you’re going to have immediate demand once things calm down, and you’ve got places like Illinois, where they can’t meet the demand for adult-use, so they need companies to protect their medical patient base and they also need to expand rapidly to meet the new adult-use demand. Prior to the COVID-19 scare, I know they were planning to issue even more licenses in Illinois, so the industry is thriving and there’s a lot of demand there. You’ve got companies that are in the fortunate position to be able to take advantage of that market. What they need to do is expand rapidly and have product for sale.
My recommendation post-COVID would be the same as before the COVID scare, which is really to try to simplify the process of launching or expanding the business. What some groups tend to do is overcomplicate things by, for example, hiring an inexperienced head grower or trying to launch production with way too many genetics, or they launch production using every single new technology out there. When you combine a lot of those factors together, it’s overwhelming and sometimes the cultivation program crashes before it even has a chance to begin.
Once this calms down, meeting demand will be as crucial as ever, and doing it in a timely manner will be critical. I think if companies can focus on growing in a simplified manner, they can duplicate what already worked well prior instead of introducing 100 new unknowns to the situation, which could derail progress and prevent them from coming to market rapidly.
CBT: Are there any other broad lessons that cultivators can take away from the COVID-19 crisis that could maybe carry over into their businesses when things return to normal?
RD: The most important would be to ensure that there’s enough capital to weather any kind of downturn or disruption. Months ago, we had a disruption due to the vape pen scare, and now we’ve had a disruption due to a pandemic, but I think the most successful companies are the ones that are rock solid, the ones that have the capital to be able to withstand downturns or big problems. That’s my best advice, which is, again, the same advice I would give to a company before all of this happened anyway.
Editor’s Note: This interview has been edited for style, length and clarity.
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