Cannabis Watch: Verano cannabis cultivation takes root in massive ex-retail space as legal industry gears up

Cannabis Watch: Verano cannabis cultivation takes root in massive ex-retail space as legal industry gears up


Behind the beige walls of this former 120,000-square-foot Walmart store in Branchburg, N.J., blooms an emerald green indoor cannabis farm for multi-state operator Verano Holdings Corp.

After winning a permit in 2018 from the New Jersey to supply cannabis for the Garden State’s medical program, Verano’s
VRNOF,
+3.33%

 
VRNO,
+2.69%

cultivation facility now grows and processes jars of dried flower, pre-rolled cannabis cigarettes, gummies and vaping oil for the company’s Zen Leaf dispensaries in the state.

Verano currently operates three adult use dispensaries in New Jersey in Neptune Township, Elizabeth and Lawrence Township.

Exterior of Verano grow facility housed in a former Walmart


Steve Gelsi/MarketWatch

Verano’s 200-employee cannabis cultivation facility operates as one of many in the overall cannabis industry that’s expected to total $26.5 billion in 2022 as “robust consumer engagement with the category has driven strong unit growth,” according to Cowen analyst Vivien Azer.

This year both legal and illegal cannabis production in all forms in the U.S. is expected to approach 49 million pounds, according to data from Whitney Economics as reported by MJBizDaily. The study projects legal cannabis sales will grow to $81.6 billion by 2030, up from about $29 billion this year.

For producers, however, prices of cannabis have been coming down amid a glut in supply.

The volume-weighted average spot price of cannabis in the U.S. for the week-ended Dec. 16 fell 26.9% to $950 per pound, according to Cannabis Benchmarks data cited by Cowen’s Azer.

Also Read: Amid steep inflation, one thing is getting cheaper: cannabis

Also Read: Voters approve cannabis use for adults in one red state, one blue state

All of this makes larger scale and efficiency more important than ever for companies such as Verano. The company provided a press tour on Dec. 15 led by Verano Chief Investment Officer Aaron Miles.

When approaching the building from the parking lot, a fragrant smell is detectable. It doesn’t smell skunky like burning cannabis at a rock concert at all. The aroma is more like fresh cut grass or a type of flower, which is what consumable cannabis is made from.

From just outside the retail store doors, the resemblance to a Walmart vanishes, as the front entrance gives way to a big wall and a security door where the grocery carts would have been kept.

Instead of a Walmart employee greeting shoppers, a security guard stands guard over the area and shows guests through another wall and a second inside door.

Just past that is the heart of the operation for the human component of the facility, with offices, employee break rooms and bathrooms.

Walls inside the building break up the former retail space into separate growing and processing rooms.

Dozens of employees mills around, dressed in protective clothing that you’d find in a hospital or other clean setting, with hair coverings and mouth coverings and rubber gloves.

After introductions all around, the first stop is the mother room where Verano grows the mother plants used to produce the roughly 60 strains of cannabis clones raised in the building.

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Mother plant in Verano’s grow facility


Steve Gelsi/MarketWatch

Instead of sprouting each plant from seeds, cultivators use cuttings from the mother plant to grow baby plants in separate grow rooms.

In the grow rooms, the baby plants grow into bigger plants with potent, THC-laden buds on the flowers in lines of three vertical rows with LED lights and automatic feeding systems.

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Cultivation room where plants grow in three vertical rows


Steve Gelsi/MarketWatch

“Everything is state of the art,” said Oscar Cabeza, director of cultivation and head of growing cannabis for Verano NJ.

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Holding tanks for Verano’s state-of-the-art cannabis plant feeding system


Steve Gelsi

Cabeza’s raises female plants that flower to reproduce but do not come in contact with pollen from male plants.

The resin that the flower makes contains THC and it’s actually toxic to bugs that would attack the plant in the wild

The valuable resin comes from stress in the plant and its effort to protect itself, while harnessing energy for reproduction that never actually takes place because male plants are kept away to preserve the potency of the female, Cabeza said.

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Verano’s Oscar Cabeza with mother plants


Steve Gelsi/MarketWatch

“It’s really a hopeless romantic story,” Cabeza said said.

Nowadays, most customers prefer more flowery strains while others prefer more sour flavors like diesel.

Next up is the curing room where cannabis dries upside down to keep all the potency in the flowers, not unlike the step for tobacco. That process takes up to two weeks.

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Curing room for mature cannabis plants


Steve Gelsi/MarketWatch

The cured cannabis is then sent for further drying and aging in boxes that are opened up periodically to expose it to air.

The trick here is to get the cannabis dry enough to consume and also keep mold at bay.

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Cannabis is dried in boxes that get opened periodically to let air in sporadically


Steve Gelsi

The cannabis then gets processed further in a number of ways. Some of it goes for dried flower to be cut, trimmed and sorted into various sizes of buds.

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Cannabis gets sorted into dried flower buds of various sizes


Steve Gelsi/MarketWatch

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Cannabis being trimmed


Steve Gelsi/MarketWatch

Some of it goes through a distilling process as well to create oil for vaping and to make edibles.

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Cannabis distillation into oil for vaping and edibles


Steve Gelsi/MarketWatch

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Cannabis distillation into oil


Steve Gelsi/MarketWatch

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Edibles kitchen at Verano cannabis cultivation and processing facility


Steve Gelsi/MarketWatch

Some of the dried flower goes to the automatic cannabis cigarette rolling machine to be sold as pre-rolled joints.

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Pre-rolled joint-making machine at Verano


Steve Gelsi/MarketWatch

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Packs of pre-rolled joints getting prepared for sale at Verano’s retail locations


Steve Gelsi/MarketWatch

Finally, all the products go into a large shipping room housed within steel cage walls for security. Verano refers to this last room as the vault.

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Verano’s Oscar Cabeza in secure room with steel cages where Verano stores its finished products


Steve Gelsi/MarketWatch

Overall, the cultivation portion of the business has been building up in each state as adult use sales come on line.

New Jersey started adult use sales this year, while New York State is about to launch, along with Connecticut and Rhode Island.

Massachusetts was an early entrant on the East Coast, while operations in Colorado and California have been going since the 1990s when medical cannabis became legal and after roughly 2015 when legal adult use sales started ramping up.

This past November, Missouri and Maryland voters approved referendum to allow adult use cannabis sales in their states.

Including those two states, cannabis will be legal for adult use in 21 states.

Some of the growing spaces are in newly-built structures, but many are repurposed from retail spaces or even prisons in some cases.

Each state must cultivate cannabis from seed to sale because federal prohibition on cannabis prevents interstate commerce.

Despite strong growth expected ahead on a state-by-state basis, shares of cannabis companies have moved sharply lower in 2022 amid dim prospects for federal legalization and steep losses in the broad equities market.

For its part, Verano has seen its stock fall 76.2% in 2022, compared to a loss of 72.8% by the AdvisorShares Pure US Cannabis ETF
MSOS,
+5.01%

and a 33% drop by the Nasdaq
COMP,
-0.07%
.

Also Read: Maryland, Missouri vote to legalize recreational cannabis, while 2 states reject measures



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