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Part 1: Startup pot operation full of stress and hard work
This is the first story in a seed-to-sale series focusing on one pot-growing operation in Seattle as owners take their historic product from seedling to retail store shelf.
June 7, 2014 – Inside a windowless Sodo warehouse teeming with 1,143 pot plants, one of the state’s pioneering marijuana producers waited anxiously to “snap the lights.”
To growers, that means putting the leafy stalks on a 12-hour cycle under the lights. The suddenly shorter “days” signal to the plants that fall is coming — in early June.
“That’s when we play Mother Nature,” said Steve Elliott, an owner of one of Washington’s first licensed pot growers, AuricAG. “It puts the plants into hyper-drive.”
To propagate the species, the all-female plants then start to flower, secreting resins, sticky with pot’s psychoactive chemicals, to attract pollen. But not a speck of pollen should be around if Elliott and team have done their job. Desperate, the plants get more sticky, more pungent and more valuable. Their fastest-growing strain should be ready for harvest five weeks after flowering begins.
As the cycle is repeated in coming weeks, AuricAG’s owners will confront crucial questions. Can they deliver to the state’s first recreational pot stores a crop that meets purity standards, makes a decent profit and brands them as mature entrepreneurs who view pot more like good wine than hippie lettuce?
Much is at stake, including personal finances and reputations. Even the perceived success of Washington state’s experiment with legal weed depends on the first wave of growers getting good products to the stores expected to open in July.
The name AuricAG hardly conjures marijuana, never mind counterculture. But it is a sly riff on the owners’ ambition. “Auric” is more than the first name of the James Bond villain Goldfinger. It means related to, or derived from gold.
And gold is what the owners of AuricAG hope to grow. It’s what they dream of reaping. And it’s the standard they aim to set for the new industry.
With their backgrounds, the owners believe they’re well-equipped for the mission. “This product is basically a widget. You manufacture it and distribute it. I understand that operation,” said Mark Greenshields, the company president.
Sales director Joby Sewell sees pot differently. “Instead of selling two-by-fours or hammers, this is living and breathing. There’s passion involved, and that’s why I’m in it,” Sewell said.
In any case, those on the team have faced a steady diet of stress. They had to find property where the landlord was willing to break federal law. They had to pass the state’s vetting process, including FBI background checks. They had to install security cameras — 29 in all — to cover every inch of their operation. “Treat this like a prison,” a state inspector told them.
They’ve also had to create 911 clones — and counting — from the 232 plants they brought in during a 15-day window in which state officials essentially looked the other way while the industry sprouted from medical-marijuana farms and illegal sources.
There’s little rest for prospectors in the first days of Washington’s green rush. And even with their more-than-a-half-century of combined business experience, the local guys who own AuricAG are in deeply unfamiliar terrain as a company that banks won’t even serve because of the federal prohibition of pot.
Will they really be forced to deal only in cash? How will they protect it? Is there a chance they could be one of the few pot merchants a local credit union has said it will service on a trial basis?
“It would bring a big sigh of relief,” Greenshields said Wednesday morning. That afternoon, a committee at Salal Credit Union would decide if AuricAG was worthy of becoming their first customer in the pot industry.
Willing credit unions
Two credit unions have stepped up to give legal pot merchants a trial run, Numerica in Spokane and Salal in Seattle.
Credit unions tend to operate within state and appear to be more comfortable developing programs that meet Washington’s pot law than multistate banks, said Scott Jarvis, director of the state’s Department of Financial Institutions.
AuricAG’s Greenshields was the first potential customer to make a presentation to Salal. Greenshields brought a thick binder with 23 sections, stocked with tax returns, financial disclosures, credit references.
The odds still didn’t seem all that favorable.
Salal is starting with no more than seven pot companies in what it calls a “beta test” for the industry. “We aren’t sure how labor intensive these companies are going to be,” said Bob Schweigert, senior vice president. “We have to do this right. If we stumble at all, it’s going to impact the ability of others.”
Formed by Group Health employees in 1948, Salal is the 23rd-largest credit union in the state, with $366 million in assets, Schweigert said.
He sees great potential for pot business. “It’s going to surpass the alcohol industry,” he said.
Salal decision-makers emailed Greenshields on Wednesday just after 4 p.m. Impressed by the experience of AuricAG’s owners, they said they wanted to make the company a customer.
From checking accounts to armored-car pickups, Salal was excited about its role, Schweigert said. “You don’t get very many opportunities in your life to be at the forefront of something like this.”
Greenshields was relieved at the news. “That takes a major pain off of our radar,” he said, checking another task off his list.
Sewell responded via text message with one word: “Awesome!”
Call of opportunity
Sewell and Elliott have played soccer together for decades and still play every week. They used to joke that they should get into pot dealing, with Elliott growing and Sewell selling. “Because I was getting burned out selling wine,” Sewell said. “There’s only so many times you can hear people say, ‘Ooh, I smell eucalyptus.’ ”
They discussed opening a medical-marijuana dispensary a few years ago with Greenshields. But they deemed it too risky. Sewell stayed in wine, where he has worked in sales and distribution. Elliott remained a commercial painter who grew a little medical marijuana on the side. Greenshields was a habitual entrepreneur whose latest gig was setting up video-rental departments in rural grocery and convenience stores.
When Washington voters approved Initiative 502 in November 2012, legalizing possession and sale of marijuana, Greenshields called the band together to revisit pot commerce.
“At first, we all were like, ‘This is crazy.’ But he kept driving forward,” Sewell said.
In the state system, they could apply for licenses as growers (called “producers”), processors (who tend to make pot-infused edibles or liquids), or retailers.
Under the law, only retailers can sell to consumers, and only licensed producers and processors can supply retailers.
As of June 3, the Liquor Control Board had approved licenses for 49 producers and 41 processors statewide.
Greenshields steered the group toward production because of Elliott. “I knew Steve could grow the product. A grower doesn’t do you any good in retail. It would just be a waste of talent,” he said.
On the first day the state took applications for pot licenses, the AuricAG team submitted theirs.
The team includes Greenshields, 48; Elliott, 45; Sewell, 44; and Mark Arnold, 50, a friend of Elliott’s and former Boeing inspector, who works as assistant grower.
In daily tasks, the approach is more collective. All tend to wear soccer jerseys, shorts and sweatpants to work. “Titles get left at the door when we walk in,” Sewell said.
But they’ve slid into roles since the official birth of their company on April 16, when they became the 16th grower licensed in the state. “We had about 30 to 60 seconds of real joy and high-fiving,” Greenshields said about the day they passed their state inspection. “Then I looked at everybody and said, ‘Now the real work begins.’ ”
Theirs was but one of the 2,800 applications for state growing licenses. They applied for a license that allows them to farm up to 7,000 square feet, a mid-sized operation in the state system. They hope to produce at least 1,000 pounds of pot a year to start, a small fraction of the 80 metric tons the state eventually expects to be legally produced.
Their families approved. “My dad was 100 percent supportive. He sees the potential of the industry,” Greenshields said. “My mother was very worried. I brought my parents down to say, ‘Look, you can see we’re fairly secure.’ ”
Sewell said his parents and wife also thought it was a good opportunity. “I haven’t talked to my children yet,” he added. “They’re young (12 and 8). I haven’t figured out how I’m going to direct that conversation.”
The team will have invested $150,000 of their own money by the time they sell their first products. The owners tapped retirement accounts and sold cars and houses to raise the money, Greenshields said. But they didn’t have to rely on outside investors.
“The money is an issue,” Sewell added. “But the big pressure I’m putting on myself is that you don’t get these opportunities often, if ever. To fail would be emotionally devastating because I don’t want to go back to working for someone.”
Work and stress
The first two months of AuricAG have been short on glamour and fun.
Those on the team water and feed plants every day, which means mixing nutrients and pH balancers. They create more clones by taking clippings from existing plants. That requires tapping an identification code for each new plant into the state’s traceability software, intended to track the flow of every gram of legal pot.
Much of their time has gone into building walls and creating segregated growing rooms to reduce risk from parasites and pollen. Installing an air-conditioning system, running from the floor to the top of their 17-foot walls,
was a major task. It led to long hours and stress.
The AuricAG team members did most of the work themselves to save money.
But Elliott couldn’t “snap the lights” until the air-conditioning was working. And with each passing day until then, it appeared more challenging to meet their goal of having a crop ready for stores in early July.
Elliott was eager to focus more on his plants. “The hard part is doing the build-out and plant management at the same time,” he said. “It’s a logistical nightmare.”
On Saturday, 48 days after they moved plants into the warehouse on Easter Sunday, they put the plants on a 12-hour cycle and tricked them into flowering.
In the weeks to come, Elliott will find out if he is successful growing, harvesting and curing far more plants than he had ever managed before.
AuricAG also will know if it can strike deals with retailers in the Seattle area willing to put its products on their shelves.
Part 2: For pot yield of growers’ dreams, fickle plants need constant care
They call it “weed” because marijuana supposedly grows like one. But it’s not simple getting this multimillion-dollar product to market. There are many quirks and challenges of growing at an industrial scale.
June 28, 2014–
A marijuana grow room in Sodo blazes from a dozen 1,000-watt bulbs. The light is so intense that Mark Arnold, assistant grower for pioneering pot producer AuricAG, wears blue-tinted lenses to cut the glare.
Surveying the tall plants — made happy, Arnold believes, by his own positive attitude — he beamed: “Who says money doesn’t grow on trees?”
If all goes according to plan, AuricAG could fetch $2 million a year for its products.
But it’s not easy cultivating high-quality pot on an industrial scale. “It’s remarkably hard to do consistently,” Arnold said.
It’s even harder when you’re a do-it-yourself operation, like AuricAG. Converting a Seattle warehouse, last used for car repairs, into an indoor pot farm is far from the plug-and-play automated facilities whose probes and nutrient systems nurse pot plants like electric nannies.
Throw in AuricAG’s ongoing build-out and fraught female plants — tricked into hypergrowth by artificial light — and you’ve got challenges. “This is when I go home and pray every night things are going to work out,” said master grower Steve Elliott, after AuricAG’s electrical system recently misfired and its air conditioning misbehaved.
The company, among the first 76 licensed growers in the state so far, had hoped to have its product in the initial wave of stores expected to open July 8. Now the team of middle-aged local guys is resigned to late July.
Elliott wanted to slow down and get everything working as desired. “People don’t understand what a volatile crop it is,” he said. “One wrong move, and you lose your room. It’s hard to explain to business people. They say you’re just losing money.”
Mark Greenshields, president of AuricAG, thought Elliott was overly concerned. “What it’s really about is plant perfectionists,” Greenshields said, referring to temperatures in growing rooms “just a little outside the perfect zone” of 75 degrees.
There’s not much choice but to defer to Elliott. He is like a lead singer in a band, Greenshields said. His talent demands that he calls certain shots when it comes to the plants he calls his “girls.”
“You have to roll with things like this,” said sales director Joby Sewell.
And, AuricAG’s delay isn’t devastating.
Retailers are scrambling for contracts with producers who can put pot on store shelves. They’ll need product in August as well as July. “Just about every retailer wants to lock us down,” Greenshields said.
State officials are expecting supply — which can only come from licensed producers — to be scarce at first, driving prices upward. Some growers are seeking up to $5,000 a pound, Greenshields said, almost triple the price of pot on the illicit market.
First step: starter plants
Greenshields and Sewell envision their product selling for roughly $3,000 per pound. They believe their pot will be as good as anybody’s. But they want to be in the business long-term and establish a well-regarded brand. They don’t want to be seen as gouging the first customers just because they can.
After retailer markup and before sales tax, Sewell hopes consumers can buy an eighth of an ounce of AuricAG weed for $60. Top-shelf eighths sell in medical marijuana dispensaries for roughly $40. But dispensaries don’t pay the stiff state excise taxes that the recreational system will — 25 percent when producer-processors sell to retailers, and another 25 percent when retailers sell to consumers.
AuricAG’s 500-square-foot grow rooms should each produce at least 12 pounds per harvest, Elliott said, citing the growers’ general rule of one pound per light. The yield could be much more.
In its assembly-line system, in which new clones are supposed to constantly replenish supply, the AuricAG team hopes to pump out 500 to 1,000 pounds of pot in its first year.
That could bring roughly $2 million in receipts before taxes and expenses. As for getting rich, Sewell said, “I don’t see it in the short term.” But AuricAG does hope to increase the size of its operation one day, and it is already exploring new lines of business, such as packaging for other growers.
The company has more than 1,000 plants in various stages, from clones just 2 inches tall, to 2-foot-tall juveniles, to behemoths stretching above Arnold’s head. Every plant taller than 8 inches must be assigned a bar code and a 16-digit identifier for the state’s tracking system.
The first challenge, though, was rounding up the starter plants. Elliott, who had grown medical marijuana on a small scale, used some of his plants and reached out to friends and fellow growers. They offered him cuttings from their reliable mother plants.
In all, Elliott gathered 232 of these. Then the team started snipping off small branches, about 2 inches in length, creating more clones, as they’re called. Those are nourished until they produce stringy roots.
Then they’re transplanted into red keg cups filled with crushed coconut husk, which Elliott thinks is better than soil for growing. They graduate to three-gallon buckets in a couple weeks. All along, they’re fed a diet of water and nutrients, including calcium and magnesium.
All of their products must be tested by state-accredited labs to certify their chemical content and lack of contamination.
Inside the rooms, you can see distinct differences in the plants.
Some are cannabis sativa, a tall, spindly species that hails from tropical zones and is known for its energizing effect.
Others are shorter and thicker. They’re derived from cannabis indica, which has its origins in Afghanistan and Central Asia. Indica is prized for its more sedating properties.
Because of rampant crossbreeding, most of the strains are actually hybrids that lean one way or another, dominant in either sativa or indica genes. Marrying the two produced a plant generally “short, fast and strong,” according to Michael Pollan, author of “The Botany of Desire.”
A happy gardener
AuricAG has more than 30 strains in all, including Berry White, Cotton Candy, Obama Kush and Snoop Stream. The tallest plants are Skunk #1, whose lineage can be traced to Mexico, Colombia and Afghanistan. Another strain called Hog’s Breath tastes, Arnold said, like you fell face-first into dirt and apricots.
The Blueberry strain dominates several rows. Look at their hearty happiness, Elliott said like a proud papa, marveling at the similar structure and color in plant after plant.
But disaster lurks around every corner, Arnold said, from botrytis, or gray fungus, to bugs, like the mayfly. Defenses include neem oil sprayed on plants and a crunchy silica substance spread around the base of the plants, which looks like shards of glass under a microscope and lacerates tiny insects that crawl on it. Even the wheels on AuricAG’s watering buckets get bleached, to prevent contamination.
The best overall defense, Elliott said, is good air flow that maintains the right temperature and humidity. If rooms are too hot, plants will dry out and droop. If they’re too cool, dampness will invite pesky critters.
The growers believe their positive energy also helps the plants. If so, Arnold may be the equivalent of a human vitamin. A former Boeing inspector with a big scar on his back from spinal surgery, Arnold is a believer in the medicinal properties of marijuana.
His first growing experience came after he got his medical card and a friend challenged him to try keeping one plant alive for a year. “I was able to get off painkillers,” he said. “It allowed me to dream.” Now he’s living his dream, he said, tending plants at AuricAG.
“You always have to think about the gardener,” Elliott said. “If the gardener is happy, the plants feel it.”
The most exciting moment in growing, Arnold said, comes at the first sight of little flower buds, called “popcorn.” These clumps of tiny white pistils are the beginning of flower clusters that eventually reach the size of a zucchini, sticky with resin full of pot’s active chemicals. The appearance of popcorn stirred pride and joy in Elliott and Arnold.
Getting the air-conditioning system working on automatic controls was another big relief. That allowed sensors and actuators to adjust each room to ideal conditions, even while Elliott lay in bed. Until that juncture, Sewell was trooping down to the warehouse around midnight — because he lives closest — to check on the plants. Some of the biggest ones would gulp a gallon of water during his visits.
“I can actually sleep at night,” Elliott said. “We turned the corner.”
He’s eager to get software that will allow him to monitor the grow rooms from his phone and alert him via email if something goes astray. With it, he can even fine tune warehouse conditions from home.
But more challenges wait.
Some of his plants are too tall, growing several inches a day. That called for raising lights in one room, where plants were topping 6 feet. In turn, that meant less illumination spilling onto the lower branches of the biggest plants.
Elliott’s next task is to construct two more growing rooms, with 17-foot-tall tarp walls to reduce the risk of mold and other contaminants. He’d rather manage plants. But Elliott sees his sweat equity as the price of autonomy. AuricAG could seek help from outside investors. “But then somebody else has say,” he said.
A retailer visiting from Bellingham said he was impressed by AuricAG’s progress. “I like what I see, in terms of the setup. It leads me to believe you will have a high-quality product,” Justin West, owner of Cascade Herb, told Sewell and Elliott.
But West said he wouldn’t sign a contract to buy pot from AuricAG until he could see and sample some of the product.
As Greenshields and Sewell meet with more and more potential retail partners, Elliott is reminded of his burden in the coming weeks. “For a grower,” he said, “there isn’t a good day until harvest.”