How did you make this model work in cannabis?
We like to consider ourselves as the cooperative of the 21st century, and we’re mirroring our model very similar to Sunkist. We hired the COO of Sunkist, who is now the COO of Flow Kana (John Striff).
Sunkist is known as the biggest citrus company in the world, yet they don’t grow a single orange. They have more than 3,000 citrus farmers who grow the oranges and sell first to packing houses, which grade and sort the oranges.
The best oranges go into crates bound for supermarkets, the lower-quality oranges go to the juicers, and from there, the juice gets extracted at scale.
We are the same. We don’t grow a single gram of cannabis; we partner with master craft farmers.
We have a series of aggregation hubs that are like Sunkist packing houses where we take in the product, quarantine it (and) lab test it.
Once the product clears testing, we trim it, grade it and sort it. The top flower gets sorted into jars and lower quality go to pre-rolls or extraction.
The value of our model is that we are scaling and putting capital and resources into everything that happens postharvest.
What about pre-harvest, during growing?
We are a for-profit that can get capital from outside investors yet operate with cooperative values.
We don’t own land or have a cultivation team. But we have a big farmer-relations team, so we are basically hand-holding farmers through the processes of buying soil, nutrients and other inputs at scale.
We do clone financing, so we buy all the seed and starts and clones and work with farmers to produce a diverse set of genetics that the market wants.
How do you set prices and pay your farmers?
We operate like a co-op where, once our costs are covered, the leftover profits get spread out to members.
We don’t buy from our farmers at the bulk commodity price.
We give kind of a down payment to help the farmer with cash flow and then take on product, and then we add value to it. We put it into a jar, a pre-roll, a vape pen.
We’ll find the best avenue to market for that product, and then we take our wholesale price minus our service fees and then we’ll pay the farmer.
This allows the farmer to win on the upside of what we create.
For example, we do a lot of white labeling. We do a white label for Willie Nelson and for Dr. Bronner’s.
Most of these get a premium in the marketplace, which trickles back to the farmer.
Is this co-op model being replicated?
We hope to inspire others. We think this model can be disruptive in cannabis and agriculture as a whole.