Cannabis Co-Operatives: Can Working Together Preserve Small Players?
Hezekiah Allen believes in small family farms, though he’s biased — he grew up on one. Born in an off-the-grid community of rural Humboldt County, Allen was raised surrounded by a culture of craft cannabis farming that’s now being threatened in the scramble for dominance of California’s newly legal marketplace.
“I don’t take social arrangements and social structures for granted,” he explains. “I think they’re ours to imagine.”
That’s why, in recent years, he’s devoted his efforts to shaping a more equitable regulatory framework for small cannabis farmers as executive director for the California Growers Association (CGA). In September 2018, Allen transitioned to the private sector as chairman of Emerald Grown, a mutual benefit corporation made up of cannabis cooperative organizations — or co-ops — aimed at helping those same “legacy” growers adapt and compete.
By the end of last year, Emerald Grown had already assumed 30 co-ops. Allen hopes that by 2023, cannabusinesses organized under the co-op model in general will comprise 30 percent of California’s flower market.
“The regulatory stuff is done, now we need to build a market,” he says with infectious, slightly squeaky enthusiasm. “Co-ops are the tool to do that.”
He isn’t the only one that thinks so. Amidst the ever-quickening pace of private capital and industrialization in the global cannabis market, a growing group of producers, processors, regulators and consumers have been turning to the co-op model as a way of preserving the more agrarian production methods of pre-legalization days, letting small farmers achieve economies of scale through unity rather than competition.
And with good reason, it seems. Co-ops — particularly agricultural co-ops — have been around for almost as long as farming itself, and provide members a steadier path to success by coordinating resources and foregoing the profit maximization objectives of investor-owned corporations (IOCs). The results speak for themselves — in addition to being more equitable for all participants, cooperatively-owned businesses are also more resilient than privately-owned ones, with twice the ratio of co-ops (80 percent) surviving their first five years in business as IOCs (41 percent).
In British Columbia, which shares the Golden State’s problem of a large preexisting illegal marketplace, Grow Tech Labs is a canna-centric coworking venture and startup incubator with a similar endgame, promoting growers and entrepreneurs of local craft cannabis through resource sharing and education. Founded in February, they’ve already taken under their wing the BC Small Cannabis Producers and Processors co-op, while others like the Cascadia Agricultural Co-op Association and Kootenay Outdoor Producer Co-op are collectivizing even more of the province’s existing farms.
“We’re doing a bunch of meetings in towns where there’s small medical growers and trying to help them become licensed producers,” explains Alex Troll, head of marketing for Grow Tech Labs. “There’s two issues with that, the financial side and the documentation.”
Co-ops are great at letting producers meet common needs by sharing equipment and ideas that would otherwise be private or intellectual property, but when it comes to cannabis farms, the most common needs nowadays are for expertise in navigating the legal system and the capital to compete in industrial supply chains.
Monitoring compliance or managing a brand on social media can be a tall order for farmers already working a full day, but co-ops give them leverage as a larger group to negotiate sales and discounts on business services or technology platforms, as well as a wealth of communal wisdom to draw upon. This way, not every farmer has to reinvent the wheel to get licensed and gain efficiency.
Emerald Grown is currently developing a flexible “plug and play” software system and consulting team to help California’s small farms more easily achieve compliance and get to market. Meanwhile, they’ve also received a grant from California’s Resource Conservation Districts (RCDs) to create a self-assessment method by which growers can evaluate their farms’ ecological impacts and better understand the state’s rules for compliance.
“Cannabis should be the most sustainable cash crop grown in California,” says Allen. “We’re firmly committed to that goal.”
In the short term, Emerald Grown is more focused on keeping afloat members still reeling from the exorbitant costs of going legal in the first place. That’s why they’re looking to consolidate more value-adds like trimming, packaging and labeling on the farms themselves, so producers will see more sales money coming back to them rather than being distributed to various processors along the supply chain.
Both Emerald Grown and Grow Tech Labs will also be taking up the mantle of marketing for their member co-ops, bundling product from multiple farms into artisanal craft brands showcasing the refined strains both California and BC are famous for. These small-batch brands might not yet compete in price with the largest cannabis operations, but Allen and other co-op advocates are betting that variety and quality will win over consumers in the long run.
“When you look at it through economic terms, it doesn’t take as much money to get 30 illegal growers to work together as it does to build 30 new grows.” – Hezekiah Allen, California Growers Association executive director
Otherwise, the fear is that cannabis could risk becoming just like any other industrialized cash crop, with policymaking power and consumer access concentrated in the hands of a select few litigious corporations. The top-down processes of drafting legislation combined with the costliness of compliance have already worked in the monopolists’ favor, so organizing into co-ops may be the little guys’ best chance of being heard and remaining independent within the legal marketplace. What’s more, it may also make the most sense in terms of the industry’s overall efficiency.
“When you look at it through economic terms, it doesn’t take as much money to get 30 illegal growers to work together as it does to build 30 new grows,” Allen explains. “Ecologically, it doesn’t take as much environmental impact, either.”
Displacing those local farms at the benefit of outside investors with mountains of consolidated capital, on the other hand, risks not only imperiling the cannabis growers most connected to their product and the land it’s grown on but also adding economic stress and job loss to those rural counties least equipped to handle it.
That isn’t to say co-ops present some utopian alternative to IOCs — just that they add value by coexisting. According to both Allen and Troll, balancing the competing interests of many farms requires an almost superhuman amount of patience, compromise and communication to achieve progress, though it may prove more lasting when progress does arrive.
For someone like Allen, who calls himself “a pretty mission-driven guy,” that progress is about more than shaping the cannabis industry — it’s about transforming global agriculture as a whole in a more sustainable and equitable direction.
“I think more of our economy, in general, should be structured as co-ops,” he says. “It’s not tearing it down, it’s changing it. Right now, it’s got that single bottom line, profit, profit, profit. We need to put people and place on par with profit, then let’s spend a couple generations in that space.”