In the Cannabis World Seeing is Believing

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It’s difficult for the human mind to conceptualize large numbers. For example, it’s easier to understand the concept of $10 than $1 billion. For that reason, it was difficult for me to really grasp the size and scope of the cannabis grow facility co-owned by Emerald Health Therapeutics (EMHTF) and Pure Sunfarms.  It’s one of the largest indoor cannabis growing facilities in the world.

A section of Delta 3 under construction

Last week, I traveled to Vancouver, Canada to tour Emerald’s massive facility, and to say I was blown away would be a gross understatement.  It’s hard to put into words just how jaw-dropping it was to see the company’s city-size greenhouses. One million one hundred thousand square feet is so big, it can’t be captured by a camera without an aerial picture. I took some shots with my smartphone, but they don’t come close to doing it justice.

A massive concrete vault constructed to hold harvested product

Currently, Emerald is using about 225,000 square feet of the total facility. We toured the Delta 3 greenhouse, and just to give you some perspective on just how massive that is, the picture below encompasses just one section of one of Delta 3, which represents a tiny fraction of the overall facility. Ostensibly, Emerald may need every square foot of available space because the company is on a short list of licensed cannabis suppliers for the Canadian government.

According to the company, when the facility is completed, they’ll be using 20,000 lights to
grow an undisclosed amount of cannabis, but presumably it will be a significant production.
One of the other advantages of an indoor grow is that the crops will have 5 cycles per year, compared with just 2 cycles per year for outdoor cannabis grows. The additional cycles provide several advantages above and beyond the additional harvesting capacity.

Growing cannabis at scale indoors is still an imperfect science. Nobody in the world has the exact recipe for creating optimal growing conditions in a million square feet of greenhouse. But with each cycle, engineers can adjust variables until an ideal grow environment is achieved. The technologically-advanced Delta 3 greenhouse design is based on decades of large-scale, low-cost agricultural production experience and extensive cannabis expertise,

Another section of Delta 3 under construction

resulting in a state-of-the-art facility with 17 grow rooms (seven of which are now licensed) optimized for year-round harvesting (more than 85 harvests annually) and an automated process line encompassing harvesting, trimming, drying and packaging. Emerald believes that eventually there will be only one way to grow cannabis, and it’s their ambition to be the first to figure it out.

On our trip we also had the opportunity to speak with management at great length. It’s clear that Emerald has assembled a team of highly skilled operators, not just in cannabis, but in pharma, structural engineering, and agriculture. Consequently, the company isn’t focused solely on growing and harvesting cannabis. Emerald is also developing proprietary cannabis-based formulations, delivery methods, and applications that can be patented.  Some of the compounds shouldn’t be subject to the same level of regulatory scrutiny as a new drug, which would have to endure a lengthy and expensive clinical trial process. The company believes these products they will have a much quicker and less expensive path to market.

While the depth of the management team certainly leaves open the possibility that the company could engage in drug development at some point, that doesn’t appear to be part of the near-term plan. For now, Emerald seems focused on exploiting market opportunities that management believes will result in the quickest path to revenue growth and profitability.

Ultimately, both Greg and I came away from the trip with a far greater appreciation for the jaw-dropping size of the Emerald’s greenhouse facilities, and the potential scale of its operation. This is especially true given the company has an option to develop another 3.7 million square feet of greenhouse with Pure Sunfarms. While some of Emerald’s larger competitors tend to grab the headlines, we wonder how long this company can remain under-the-radar. This morning the company announced that it received its third amendment to the cultivation license for its Delta 3 greenhouse, which will allow Pure Sunfarms to expand its cannabis production area by nearly 200,000 feet. This will bring the total production capacity of the Emerald/Pure Sunfarms joint venture greenhouse up to approximately 4200,00 square feet.

If Emerald can reach their stated goal of building out all 1.1 million square feet of greenhouse before the end of 2018, the company should become a significant player in the Canadian cannabis market.

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