Does a 5.5M Sq. Ft. greenhouse make sense?

By Alex Halperin
Oct 14, 2022
Glass House President and co-founder Graham Farrar, (Courtesy Glass House)

Glass House owes its status as one of California’s most controversial cannabis companies largely to a number: 5.5M. That’s the square footage of its new Ventura County greenhouse. It’s 126 acres, almost 100 football fields, the largest licensed grow in the country. The outsized facility has made Glass House the face of the mega-grows that have pushed prices down and hobbled many California farmers. And Glass House aims to push its production costs still lower.

The criticism isn’t entirely fair. At the moment, the big greenhouse is in the vicinity of 20% capacity. “There’s a ton of 20-acre grows in Lake County,” co-founder and president Graham Farrar said. No one’s blaming them for price collapses.

  • Glass House, which also grows next door in Santa Barbara County, estimates that it “powers” 6-7% of California flower. It’s a substantial share, but not one, I’d guess, that can dictate the market.
  • Johnny Casali, who owns Huckleberry Hill Farms in southern Humboldt, said they Glass House and other megafarms “just took advantage of the laws” that allow them to exist.

Speaking with Farrar, I wanted to better understand the business case for going so big with so much about legalization still up in the air. Farrar recently described the greenhouse to Forbes as a “call option” on federal legalization. (Stock analyst Aaron Edelheit explained why he’s bullish on Glass House.)

Like a lot of pot stocks, Glass House got a nice bump following President Biden’s announcement on rethinking cannabis’ legal status, But is Glass House — which also has a portfolio of California product and retail brands — well-positioned to benefit from interstate trade?

  • Among other things it will be competing directly against the big MSOs which have far more experience moving into new markets.
  • With interstate trade, there will be opportunity to grow where the growing costs least, states like Oklahoma with fewer environmental and labor regulations than California, but perfectly capable of hosting the high-tech, year-round greenhouses pioneered by Glass House and other big growers on California’s central coast.
  • The same product could be produced in, say, Colombia, for even less.

On paper, the economics may not be in his favor, but Farrar is betting on brand. “High-quality, sun-grown cannabis from California is what the country is going to want,” he said. He describes the ethos as “Casamigos of cannabis for the Whole Foods consumer.” Casamigos is a $40/bottle tequila brand started by George Clooney.

“Not every state is meant to grow cannabis just like not every state is made to grow oranges,” he said, and California is going to be a producer.

  • California’s top regulator Nicole Elliott strongly agrees.

The question is, ‘How much more will consumers be willing to pay for California weed?’

Graham’s answer is “Do you have a favorite non-Mexican tequila?” No, but I do enjoy some non-French wine.

There is going to be a national market for Emerald Triangle craft cannabis and some other California brands.  But does the California brand act more like tequila or wine? And if the latter, does it extend to a company like Glass House? (Like small farmers, Farrar strongly supports the proposed SHIP Act, which would legalize direct to consumer sales nationwide.)

Farrar thinks it does. As evidence, he says its the California brands, including some of Glass House’s own, popping up at grey market shops in New York City. In this weird video, Farrar’s co-founder Kyle Kazan visits one of those shops and marvels at how they got there.

California brands have a head start, but the race has scarcely begun. As weed ads reach more mainstream channels there is going to be a deluge of competition. The winners are TBD, of course, but Glass House has a marketing problem: Kazan used to be a cop. 

Farrar says Kazan deserves credit for his change of heart. It’s a fair point, one that deserves further discussion, but there are clearly some influencers who hold the grudge and will continue to hold it. Just like it’s greenhouse, Kazan’s former career makes Glass House an easy target, and that could work against it. (Here’s a recent WeedWeek interview with Kazan.)

  • One marketing point that could work in its favor is that greenhouse’s like Glass House’s use far less energy and emit far less greenhouse gasses than indoor grows.

Glass House’s path to becoming a $40 bottle of tequila doesn’t strike me as assured. But Farrar has a pretty good track record. He was on the founding team at lifestyle defining audio company Sonos. He knows the Casamigos/Whole Foods demo better than most of us.