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US: California's largest cannabis farm is run by a former cop Lester Black SF Gate Saturday 29 Apr 2023 Glass House Brands, a Long Beach company widely considered to run the largest cannabis farm in California, is growing pot inside 2 million square feet of Southern California greenhouses. At any given time, the company has 750,000 pot plants in the ground and has the capability to grow more than 300,000 pounds of pot a year. It expects to add another 1 million square feet this year, and it plans on growing more than 5 million square feet of cannabis by 2025. That’s larger than all licensed farms in Mendocino County combined, according to SFGATE analysis. This massive growth makes Glass House one of the few winners in California’s $5.3 billion cannabis market. The tumultuous market has put thousands of small farms out of business, and the economic pain is hitting everyone from third-generation family pot farms to billion-dollar companies. Despite these headwinds, Glass House keeps growing. Not everyone is happy about Glass House’s success. Its massive scale has allowed it to sell cheaper cannabis and has earned the company nicknames like the “Walmart of weed.” Social media is filled with angry cannabis industry members claiming its “corporate greed” is what’s wrong with California’s industry. The huge farm is also built on what some critics call a “broken promise.” California had originally planned on delaying farm licenses until 2023 to give small farms a head start, but a last-minute change in 2017 allowed farms to grow infinitely larger. Glass House is one of the many companies that have taken advantage of these rules. Graham Farrar co-founded Glass House in 2015 and has turned it into one of the largest marijuana farms in the world. As small farms struggle to survive, critics point to Glass House as evidence that the state created an industry that favors big players over historic small farms. The anger only intensifies because Glass House’s CEO, Kyle Kazan, is a former police officer who admits to having arrested people for pot possession decades ago. Despite the criticism, Glass House co-founder Graham Farrar isn’t about to apologize for his business. “I’m trying to make the most-consumed cannabis brands on the planet. I think weed makes the world a better place, and so I want to bring as much weed to as many people as possible,” Farrar said. “There’s no shame in that to me.” ‘An unprecedented level of production’ Farrar launched Glass House in 2015 with the help of Kazan, an LA cop-turned-businessman. Together, they bought a 150,000-square-foot greenhouse in Santa Barbara and started growing cannabis in California’s medical market. The team eventually expanded to a 350,000-square-foot facility and then, in 2020, put itself in the international spotlight by doing two things: First, it listed its company on a Canadian stock market and raised $140 million in investment capital, according to Farrar. Second, it took that infusion of cash and bought one of the largest greenhouse facilities in America: Ventura County’s 125-acre Houweling greenhouse, built to grow tomatoes and other vegetables. The state-of-the-art facility spans 5.5 million square feet, or the size of nearly 100 side-by-side football fields, and includes roof-washing robots, positive-pressure greenhouses and automated plant handling. Glass House is in the process of converting the facility into one for pot farming — it’s using 1.5 million square feet for pot production and the remaining 4 million square feet for growing tomatoes and cucumbers. It expects to expand cannabis production to an additional 1 million square feet of the facility by the end of the year. The company is still growing pot at its other facilities, which add 500,000 square feet of greenhouse space. That increased footprint makes it the largest cultivator of cannabis in California, according to Hirsh Jain, a cannabis consultant at Ananda Strategy and the vice chair of the California Cannabis Chamber of Commerce. Jain said the company’s plan to expand by another million square feet this year will make it one of the largest marijuana cultivators in the world. “Glass House will (conservatively) be able to produce over 500,000 pounds of cannabis a year, an unprecedented level of production in the history of the legal cannabis industry in the United States,” Jain said in an email. The majority of the company’s revenue comes from selling wholesale cannabis, according to stock market filings, but Glass House isn’t only a farming company. The company produces five different lines of cannabis flower and edibles, including its eponymous Glass House Farms brand, and owns nine retail stores across California, including the Farmacy chain, which has locations in Berkeley and Santa Cruz. ‘A broken promise’ California's marijuana legalization initiative didn't originally allow Glass House's massive multimillion-square-foot expansion. When voters legalized pot in 2016, the initiative included a provision that was intended to give the state’s legacy pot farmers a chance to compete in the legal market: The state would wait five years before it issued any farm licenses larger than 1 acre, or about 43,000 square feet. At 2,000,000 square feet, Glass House’s operations clearly violate this principle. But its operation is completely legal. The intended head start was wiped away in 2017 when the California Department of Food and Agriculture tweaked the rules to allow farms to combine an unlimited number of 10,000-square-foot licenses. This “license stacking,” as it has come to be referred to, allowed pot companies to expand infinitely, and Glass House, like hundreds of other California companies, took advantage of it. Glass House sells wholesale cannabis and has its own in-house marijuana brands. Genine Coleman, the executive director of the cannabis advocacy group Origins Counsel, called license stacking “a broken promise” to the state’s historic pot farmers that is partially to blame for legacy cannabis operators going out of business. “There was a clear structure that was negotiated to deal with this very issue,” Coleman said. “That got tipped on its head day one, and it has created severe market impacts. And that’s just a fact. It’s not Glass House’s fault. But it is a public policy concern.” Many farmers blame massive farms like Glass House for flooding the market with cheap pot and driving the price down. More than a thousand farms across the state have gone out of business as wholesale prices plummet. Farmers report seeing a 95% drop in the price they can get for a pound of pot as wholesale prices fall from as high as $2,000 per pound to as little as $100. Glass House Brands grows cannabis in one of the largest greenhouse facilities in America. Growing pot on this massive scale allows Glass House to produce massive amounts of pot at incredibly low prices — its website claims it can grow a pound of pot for under $135 in costs. That’s nearly half the average cost for greenhouse cannabis production, according to a 2021 survey. That’s made Glass House a pariah in some parts of the state, but Farrar said the criticism is misplaced anger. “We never lobbied for license stacking. We had nothing to do with that happening. We just played to the rules that existed,” Farrar said. “Taxes, regulations and the return to normal after COVID made a lot of pain for a lot of people. They needed a place to hang it, and the easiest place to hang it was the guys who just bought 5.5 million square feet and my partner who 25 years ago was a cop.” Kazan, the former police officer, spent years advocating for the end of drug prohibition after he left the police force. And Farrar also said that Glass House supports changing the state rules to allow small farms to sell directly to consumers and to allow farmers markets, two measures that advocates say would help small businesses survive in California. Why the grass might be greener elsewhere There’s good reason to be skeptical of Glass House’s ability to keep expanding. The company is not currently profitable — it posted a $35 million loss in 2022 on over $90 million in revenue, according to stock market disclosures. And its growth has almost entirely been funded by cash from investors and debt — Glass House secured a $100 million line of credit in late 2021. These are the same types of speculative investments that paid for equally massive pot farms in Canada only to have the market crater, leaving industrial facilities empty. Farrar said that Glass House has avoided the problems that plagued Canada’s public companies by slowly expanding over years, instead of months, and the company expects to be cash-flow positive in the second quarter of 2023. “I feel very confident with that forecast,” Farrar said in an email. “We will be the first public California cannabis company to do so.” Glass House could also fail if marijuana is legalized nationally or internationally. Glass House's largest pot farm is located roughly 50 miles west of Los Angeles. California’s pot farms are only competing with each other because federal prohibition has stopped interstate commerce. Glass House appears to be able to win when it’s competing against tiny family farms in Humboldt County, but what happens if national legalization or even international legalization happens and it’s competing against farms in places with far lower property, water and labor costs, like South Dakota or Colombia? According to Farrar, Glass House will be able to win in a future national or international market because of California’s prestige as a cannabis-growing region and Ventura County’s weather. Marijuana is grown from its sticky flowers that need lots of light and will mold with too much humidity. He said the area’s consistent sun and temperatures make it particularly well suited for growing cannabis for the same reason California grows most of the country’s strawberries. “The closest analogy is like a strawberry, where you have a soft, dense fruit [that] likes to rot and has seeds on the outside. Around 95% of strawberries come from California. It’s not because it’s cheap. It’s not because the water is easy [to acquire]. It’s because it’s the climate that grows them the best,” Farrar said. Lester Black is SFGATE's contributing cannabis editor. He was born in Torrance, raised in Seattle, and has written for FiveThirtyEight.com, High Country News, The Guardian, The Albuquerque Journal, The Tennessean, and many other publications. He was previously the cannabis columnist for The Stranger. https://www.sfgate.com/cannabis/article/largest-california-cannabis-farm-glass-house-17924258.php
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