Does the legal cannabis sector have a talent shortage?

Canadian cannabis sales did NOT track a 63% January over December increase in finished inventory. We continue to suspect quality problems, and wonder if it has to do with a failure to spend on and develop talent.
Data from Health Canada, Chart by Fundamental Hype

International Cannagraphic Magazine‘s marijuana growing forum is a very popular and active message board for hobby growers and grey market pros alike. It’s fairly active and maintains a low-fi community aesthetic that’s endangered in the Facebook era.

A rookie poster showed up on the forum on February 25th, purporting to be a consultant working for a 300,000 cubic foot (15,000 square foot) greenhouse in Southern Ontario. This consultant claimed to be helping the proprietors of this outfit control a powdery mildew problem. The post describes a regulatory limit on fungicides, implying that the greenhouse he’s consulting for is a licensed producer, unlicensed producers not being subject to any such regulations.

I work at a 300,000 square foot greenhouse in southern Ontario Canada. It is poly. 150 feet long by 100 feet wide and 30 feet tall.

I am an internal consultant on the greenhouse and am not apart of the grow team. I have been indoor growing for about 6 years now and had great success. I was hoping to get some feedback/advice.

We have been struggling to control Powdery Mildew and am looking for some advice. In terms of air exchange, it is limited. The greenhouse sits around 23 degrees Celsius and humidity is pretty high. All of this is bad for PM lol

Does anyone have any suggestions to help control and reduce the around of PM we are experiencing? We are limited on fungicidal control methods due to regulations.

-Rookie poster asking about controlling powdery mildew in a large-scale greenhouse, Feb 25, 2019.

The forum community was quick to point out that it isn’t the mildew that needs controlling, but rather the environment in which it was thriving. Some of the hobby growers offered advice that the poster claimed not to be able to use, but most of them just dunked on him until he finally deleted his account.

ICMag.com forum posters Dank Frank, Lapides,  and Lastdon contributed to the pile-on that buried an apparent consultant to an LP who was clearly out of his depth.

The thread remains (thanks to El Capitan for sharing the link on twitter, Eamon Cyr with the archive assist), and a read of it begs the question: What LP is running a 15,000 square foot greenhouse with polyethelne walls, no climate control units, and an outside consultant who doesn’t know the difference between cubic feet and square feet? We have our guesses, but narrowing it down based on addresses and sizes would surely cast suspicion on LPs who don’t deserve to get tainted based on an unconfirmed report on a forum.

There’s no reason not to take this post at face value. Here we’ve got a licensed producer who is unwilling to spend the money to create the conditions needed to succeed. They’re hiring B-grade consultants in the hope that they can fix it without having to spend money. We’ve all had landlords like that, and one might expect the volume and quality of product coming out of this greenhouse to echo the quality of those run-down slumlord apartments.

Licensed producers operating under this paradigm generally would be consistent with the shortage of quality bud that is presently hamstringing the Canadian Retail Rollout with a mountain of “extract grade” flower.

Can’t buy talent? Sure you can! You’re just too cheap.

A good look at the available talent pool would go a long way towards helping investors handicap the sub-cultivator class. Without previous production, there’s nothing to measure against. Greenhouses are difficult things to dial in. The talented people who design, build and operate them are in high demand right now, and their services are going to first be made available to the companies who can afford them.

The number one ingredient in a box of cornflakes by cost isn’t corn, it’s labor.

-unknown

This very relevant and often repeated quote is commonly misinterpreted as a warning against allowing labor costs to get out of hand and eat up profit. And that might be a risk for Kellogg’s, who ships millions of boxes of cornflakes every year. Decades of doing it has given them a good idea of how many they can ship, so their path to margin is eliminating cost, and the number one ingredient in a box of cornflakes by cost…

But it’s that cost that gets the conflakes on the shelf in the first place. Very few of these cannabis companies are shipping high-quality product, and the ones who are aren’t yet doing so in a volume that can supply the market. Pre-commercialization isn’t the time to be trimming labor costs. That doesn’t mean they ought to spend like a drunken sailor, everyone wants to be cost-effective – especially the shareholders! – but saving money by running a skeleton crew, or hiring sub-standard talent who have to learn on the job isn’t saving money at all. It’s spending that money less slowly to accomplish an inferior result. It’s fair to wonder what a growth-stage company is saving that money for, then digging out the AIF for a close look at the exec compensation structure, options plan, etc.

CDN LP seeks Master Grower. Ability to tell the difference between 2D and 3D space an asset

There is no way to positively measure the availability of cannabis industry labor, or even its demand. But the industry that has sprung up around cannabis staffing and recruiting are working on making one.

We talked to Allison McMahon, CEO of Cannabis at Work, who told us that her cannabis-focused recruiting business is seeing a significant amount of hiring. She had a lot to tell us about how job creation in the sector is most definitely real, they’re hiring for hundreds of positions at all levels, etc., but we were mostly interested in the availability of and market for master growers.

Picture of an indoor garden in Portland Maine borrowed from this Leafly article on humidity control in grow rooms, which might be good reading for the “consultant” in our lede.

She told us that there were few candidates available, experienced master growers being hard to come by. LPs are ready to make very attractive offers to candidates with experience in the industry, and McMahon made it sound like the grey market was their second choice for a talent pool. Those hires sometimes have trouble working in the more regimented environment of the LPs. She also mentioned that they hire cultivators of other crops, which sounds kind of like hanging out at the track to recruit a wide receiver.

McMahon also told us that there are more jobs coming on line in cannabis all the time and greater varieties of jobs are showing up as the industry matures (for instance, more sales jobs in the era of legalization). She played it tight when we asked about compensation, but said that many candidates are coming in from other industries because the pay tends to be more competitive. CAW is in the middle of an industry-wide compensation survey that should produce a better idea, and we hope they share it with us when it’s done.

If you’re interested in finding or filling a job in Cannabis, Cannabis at Work will be hosting a career fair at Lift & Co.’s  Toronto Cannabis Expo this June. Can’t wait? Visit them online.

UPDATE: Cannabis at Work let us know that they will also be hosting a career fair in Toronto on May the Fourth. More info here.

How big is a 1M square foot team?

Last week, Aphria Inc. (TSX:APHA)(NYSE:APHA) announced the full licensing of their much-touted Aphria One facility in Leamington. APHA was flat on news of the 1.3 million square foot facility going live, and that had some of the Aph faithful wondering why, exactly, this enormous news didn’t move the stock.

Asking why a stock does anything is like asking why a cat does anything, (no real reason, because she felt like it, etc.) but the market-based reasons are down to the news coming on a slow market day when everyone left the screen early, and the licensing being a foregone conclusion, already baked into the market narrative.

The fundamental reason is that the place is a barn! 

Aphria can’t just head down to the parking lot at Home Depot, fill the back of the truck with day laborers, shove em into Aphria One and come out with a few tons of weed in 3 months. Even a talented staff is likely to need time dialing in a facility of that size. The difference between the new facility getting a running start and improving with each planting and harvest, and it stumbling out of the blocks, taking forever to figure out, will come down to the quality and consistency of the staff running it. Whether or not Aphria can put their hands on that staff or not is an unknown that has to be accounted for.

Elon Musk will not save us

This classic mistake of only seeing the cost in labor, and not the benefit, is playing itself out in the slow-motion train wreck at Tesla (NASDAQ:TSLA). The cash-strapped company lowered the price on the flagship Model 3 sedan to the originally promised US$35,000 on February 28th, right before laying off the bulk of their sales staff to pay for it. The unprecedented move, from a company that eschewed the dealership model for a more modern arrangement of their own design, comes with a promise to focus on service centers, which would certainly address a weakness.

Service centers on dealer row, where a glass-walled shop could be observed by aspiring and weekend tech heads, would be a great place for a small showroom with one car in it – a friendly top-knotted fellow named “Khalb” taking shoppers’ pictures for instagram, telling them about attractive lease rates on the new standard-range 3s… It wouldn’t have to be called a dealership… but it would move cars. And fix them, protecting a valuable brand… But such a thing can’t be accomplished without staff.

#1 Tesla supporter & enabler Ross Gerber, demonstrating the depth of his misunderstanding. original tweet & thread

Innovation will eventually enable companies to cheat people at all positions. It’s a platform for bad HR.

This is a curious economy. As an abundant, able, educated workforce casts about in a “gig economy,” looking for a “side hustle” that might enable them to pay off their student loan debt before they die, companies with an abundance of capital (both in-hand and available), and a capital market that forgives losses so long as there is growth, can’t quite figure out how to bring in the multitude of talented peole who can help them achieve that growth. They’d rather try their damnedest to “innovate” them away with some revolutionary AI that’s really going to be something! in 10 years.

It might have been some time in the Regan & Thatcher era that the populous bought in to the idea that they could BE the capital class, which is technically true. The access is there. Anyone with enough smartphone to be an Uber driver can be a Robinhood trader just the same. But that only really works out for the ones with enough capital to cover their mistakes and occasionally the ones who develop some influence. Those of us who have to work at things other than finance to create income to have savings in the fist place forgot some place along the way that all of those margin-killing labor costs are paying for the very things we do to make these businesses worth investing in.

Worker cage with robotic arm patented by Amazon. Image from gigazine.

Amazon.com (NASDAQ:AMZN)‘s take-no-prisoners approach to putting every department store in the country out of business took no small amount of labor, and the company’s success comes from an ability to squeeze every bit of value out of every single employed person. The company leverages the weight of people they plan on hiring by securing valuable tax breaks and concessions from municipalities where they plan on setting up – jurisdiction shopping like a pro sports team ready to swear allegiance to whichever city is ready to build them a new stadium.
With a location secured, the world’s most impressive logistics network is kept running by people who are pushed to the literal psychological brink, before being spit out and replaced. According to a recent report from The Daily Beast, Amazon facilities have been the source of an inordinate amount of 911 calls about people harming themselves or attempting to harm themselves, but the company doesn’t appear to be concerned by the spike.

In a statement to The Daily Beast, Amazon said it values the health of its employees and suggested that the number of calls is an “overgeneralization” that “doesn’t take into account the total of our associate population, hours worked, or our growing network.”

To hear Amazon tell it, The Daily Beast just doesn’t get it: they’re trying to expand their network, and that’s going to take more work hours per employee. Hiring more of them would cost more, so they aren’t going to do it. There’s bound to be fallout. They go on about counseling being available, etc., but don’t appear to be concerned about 189 suicide-related 911 calls being made from 46 sites over a 5 year period. To Amazon, that’s a cost of doing business.

Gig-economy king Uber consistently loses money ($865 million last quarter, $1.05 billion the quarter before), grinding it out with a part time labor force and paying little to no payroll tax as they go. It’s a play to increase market share, like Amazon did. Once they’ve innovated every taxi service in the world out of business, and the drivers are all “entrepreneurs” carrying the cost of their own vehicles, competing with each other for rides and paying a vig to Uber, do you expect they’ll see a pay bump?

Feature image courtesy of Darien Library, via flickr.

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About Braden Maccke 60 Articles
Founder and Editor in Chief at Fundamental Hype, a blog about venture stage finance and the media that supports it.

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