The Evolution of an Industry: Cannabis Companies You Should Know, Pt. 2

cannabusiness, money and marijuana
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Organic food. It’s not so hard to find these days. From Whole Foods to Wal-Mart, it’s actually quite abundant.

Most of my food actually comes from local organic farmers that I’ve known for years and, of course, trust.

I can also somewhat rely on USDA organic certification. While there are still some questionable mechanisms used by the USDA to test and enforce this certification, the existence of this program certainly helps lessen my chances of scarfing down toxic cocktails of neonicotinoids and glyphosate.

So yes, finding organic food is not difficult. Finding quality organic cannabis, however, is.

Pot, Pesticides, and Profit

I have to admit, I always find it a bit disturbing when I see so many folks singing the praises of healthy, organic food but then go off and smoke weed that’s loaded with all kinds of chemicals. They won’t eat a conventionally grown cantaloupe, but they’ll smoke weed that could possibly contain pesticide residues at levels 1,600 times the legal digestible amount.

According to chemist Jeffrey Raber from the University of Southern California, as much as 70 percent of the pesticides found in cannabis are inhaled when smoked.

The Eureka Times-Standard reported on Raber’s findings, stating:

“I think that what’s so alarming to us is that such a huge amount of pesticide material could be transferred,” Raber said. “And, you have to consider that when you inhale (something), it’s much like injecting it directly into your blood stream…” 

Raber said it’s important to remember that smoking a marijuana bud that’s been sprayed with chemicals is far different than eating a non-organic tomato. First and foremost, he said, there are no controls over what’s sprayed on marijuana crops. And, while most people would rinse off a tomato before eating it, they can’t wash a bud before putting it in their pipe. The body also has filters in place for things that are ingested, he said, but not for what’s inhaled.

“You don’t have the first pass metabolism of the liver,” he said. “You don’t have the lack of absorptivity going through the stomach or the gut lining. It’s a very different equation when you’re inhaling.”

In these early days of legalization, pesticide use and abuse in the legal cannabis industry is very real. Over the past couple of years especially, we’ve seen a number of pesticide scandals in Colorado, California, Oregon and Washington. And these will likely continue for years to come as the industry races to keep pace with consumer requests and regulatory standards.

That being said, there’s clearly a demand for organic cannabis.

Robust Demand

OrganiGram Holdings is a Canadian cannabis company that’s done quite well over the past few years. Despite a recent recall, the company continues to be a major player in Canada. It’s also a company that built much of its reputation on providing organic cannabis to patients.

But what about the U.S. market?

Demand for organic cannabis in the U.S. is quite robust. In fact, of the few dispensary owners I know that sell organic cannabis, none can keep it in stock. Demand is simply outpacing supply. And that, dear reader, is an opportunity for a number of companies that are now focusing solely on growing quality organic cannabis.

Take Hifi Farms, for instance.

Hifi Farms is an Oregon-based organic cannabis cultivation company that started in 2015 after establishing a proof of concept with a small cultivation operation. Two years later, it’s operating a 50-acre farm and really has become a sort of model for how to properly build an organic craft cannabis cultivation company.

Doing Well by Doing Good

I’m a big believer in the concept of doing well by doing good.

In fact, I’ve built an entire career on this concept by investing only in companies that offer some kind of benefit to society.

Before I invest in any company I always ask one question: Is the world better off because of what this company is doing?  In the case of Hifi farms, the answer to that question is a resounding yes.

Here are a few reasons why:

1. Hifi Farms grows cannabis. By providing cannabis to those who need it, Hifi Farms, just like any other cannabis grower, is helping to facilitate the end of the drug war. Such a thing is worthy of praise and, of course, my socially-responsible investment dollars.

2. Hifi Farms has chosen not to treat the earth like a toilet. Instead of degrading arable land and draining local water sources to grow its cannabis, Hifi uses only organic soil and fertilizers and organic pest oils for pest and mold prevention. Management has also focused on minimizing water use and fossil fuel inputs and is looking to be completely carbon neutral within five years.

3. Hifi Farms is incredibly active in terms of community relations. I love this. Part of building a socially-responsible business is reaching out to the community. It’s about having a relationship with local businesses, thought leaders and non-profits. It’s about honoring the place where you do business and ensuring that the community is better off for having your company there.

4. Hifi Farms respects human capital. A business is only as good as its employees. So to ensure its employees are happy, Hifi Farms offers employee stock options, livable wages and four weeks paid vacation. Management has even implemented a diversity hiring plan.

Of course, it takes more than ethical business practices and good karma to build a successful business. And that’s another reason Hifi Farms is a model of excellence.

Hifi Farms management is top-notch all the way. In fact, CEO Sara Batterby is considered to be one of the most important CEOs in the cannabis industry. A seasoned venture capitalist and co-founder of an early stage Silicon Valley venture fund, Batterby brings a level of business acumen and finance expertise to an industry that needs it.

She’s actually been so successful at building the Hifi Farms brand that Meriwether Group, a very successful consultancy and investment banking firm, became part owner of the company last summer. Analysts at Meriwether went on record saying that Hifi could become a $100 million business. I agree.

The Big Fish in a Small Pond

Now, I fully admit that I’m a huge fan of the organic cannabis market. Although it still only represents a very small segment of the overall market, it’s also a very lucrative one due to market demand and price premiums that will ultimately favor growers the most.

We saw this in the organic food space, and we’re going to see it now in the legal cannabis space, particularly in Oregon where there’s a very large population of organic consumers. Baby boomers and millennials in the Beaver State find common ground in things like sustainability, organic agriculture and social responsibility.

Truth is, if there’s a place to set up an organic growing operation in the U.S., Oregon is the place to do it. Not only is there demand for “all things sustainable” in Oregon, but the Oregon market for legal cannabis is massive.

In 2015, Oregon consumers bought more than $250 million worth of cannabis. By 2020, that number is expected to reach $464 million, according to data analytics firm New Frontier.

Even with organics only claiming a small percentage of this market, it’s still a huge opportunity given the limited availability of organic cannabis in the state. Basically, you have a small handful of organic growers supplying an ever-growing demand for quality, craft organic cannabis.

And in this space, Hifi Farms is the clear leader.

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