A largescale marijuana cultivation site is shuttering, unable to survive Michigan’s record-low cannabis prices.
Fluresh LLC will close down its $46 million 105,000-square-foot grow facility in Adrian and will be laying off 46 employees at the end of this month.
The company, doing business as Tend.Harvest.Cultivate, couldn’t make the economics of the operation work as the average price for an ounce of marijuana flower plummeted 21% since the beginning of the year to just $73.99.
“It cost me more to grow in Adrian than I could sell on the market,” CEO Brandon Kanitz told Crain’s. “The site is not profitable.”
Kanitz said his company needed $300 per pound to turn a profit at its Adrian cultivation site, but faced stiff competition from outdoor grows who were selling product as cheaply as $80 per pound.
The 27-acre Adrian site used 55,000-square-feet of canopy to grow, which utilizes natural light and is viewed as slightly higher quality marijuana than outdoor grows, but slightly lower in quality than light-controlled indoor operations.
Kanitz also said the facility’s dehumidification system never worked properly, straining operations.
The end result was about a $500,000 monthly loss on operations.
“We went to Adrian for reasons,” Kanitz said. “My grandpa grew up in Lenawee County and played football at Adrian College. It’s a community that doesn’t seen a lot of development. This wasn’t an easy decision. It’s really disappointing to have to let go of my teammates.”
The terminated employees will receive pay and benefits through January, Kanitz said.
Fluresh is just another victim to the state’s low prices, which are a consequence of market oversupply.
There were 3.56 million active plants being grown in Michigan in October, down from 3.77 million in September; but still up 73% year-over-year. The decline in active plants last month is likely due to the influx of product from “Croptober,” where operators harvest their seasonal outdoor grows for the market.
Illicit market marijuana infiltrating the regulated market also plays a roll in decreasing prices.
Kanitz said much of the industry is in financial trouble as it weathers the market realities.
“(The market) is unhealthy,” he said. “We’re all sick. But closing Adrian is going to allow us to get better. If we didn’t do this, (Adrian) would take the whole company down. We did this to save the business.”
Fluresh will maintain its Grand Rapids cultivation facility and dispensary, which operates more efficiently than Adrian, Kanitz said. The Grand Rapids site, an indoor grow, produces 100 grams of marijuana at an average of 24% THC per square foot of grow space, compared to just 50 grams at 18% THC per square foot in Adrian, Kanitz said.
“We feel we can make money in GR at these prices,” he said. “But the only way this industry becomes healthy is if supply comes offline.”
Fluresh produced about 4% of the state’s total marijuana output with Adrian contributing about 20,000 pounds of product and Grand Rapids’ output of 30,000 pounds annually, Kanitz said.
Removing the Adrian site’s supply could move marijuana prices up in the coming months.
Kanitz hopes others in the industry follow suit and throw in the towel by removing unprofitable operations to become smaller companies.
Fluresh projects roughly $40 million in annual revenue without Adrian, but cash-flow positive, compared to $51 million with the site operational.
H/T: www.greenmarketreport.com
