Canada: Vegetable Growers Convert To Cannabis To Help Boost Margins

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Photo Credit: Dario Ayala

Ahead of Canada’s legalization of recreational cannabis, a slew of partnerships are cropping up between greenhouse farms and medical cannabis companies.

Emerald Health Therapeutics is partnering with Village Farms in Delta, B.C.; Aphria has teamed up with southern Ontario’s Double Diamond Farms; and Canopy Growth Corp. is taking over a 700,000-square-foot organic greenhouse in Mirabel, Que., owned by the largest North American producer of pink tomatoes. Other joint ventures are on the way, too.

Canopy – perhaps one of the most aggressive cannabis companies in Canada – is partnering with or acquiring greenhouses outright across the country. “We want to establish production in every province because it seems like there’s going to be some preference for local producers,” says Adam Greenblatt, Canopy’s Quebec brand manager.

Growers are hopeful that cannabis will give them some reprieve from decades of dwindling margins.

“When we started, the margins were fantastic,” says Michael DeGiglio, chief executive officer of Village Farms. He started the vegetable greenhouse company in the United States in 1987 and expanded to Canada in 2006 after acquiring Hot House Growers in Delta, just south of Vancouver.

According to Mr. DeGiglio, cheaper Mexican produce, available since the North American free-trade agreement (NAFTA) went into effect in 1994, has meant Canadian farmers have had to lower their prices to be competitive and export as much as possible to turn a profit. Even today, many vegetable and grain farmers are operating on thin margins.

Boosting his profit through cannabis will help compensate for Village Farms’ lower-margin vegetable business and ensure its viability and longevity. “This can only help us with the produce side,” he says.

Sylvain Miron, the general manager of tomato producer Les Serres Stéphane Bertrand in Mirabel, says he also felt a move into cannabis – through a joint venture with Canopy – would help protect his company’s future.

“After a few discussions, we saw it was an opportunity to be safer for a longer-term period,” he says.

“The market for tomatoes – there’s a lot of competition from Mexico, from Ontario. … We’re already a good producer, and we don’t have a very big margin.”

Cannabis companies are keen to work with established agricultural producers because it’s usually cheaper and faster to acquire and convert existing greenhouses than to build new ones. Mr. Greenblatt calls Canopy’s $15-million investment to upgrade Les Serres Vert Cannabis’ Mirabel greenhouse, the joint venture with Les Serres Stéphane Bertrand, “a very good investment for us.”

Most of these joint ventures also come with the added bonus of allowing cannabis companies – especially those eyeing expansion into the recreational and export markets – to absorb experienced growers and farm staff. As it turns out, cannabis and tomatoes share many of the same growing principles.

These are the reasons why Aphria just entered into a joint venture called GrowCo with Leamington, Ont., vegetable greenhouse growers Double Diamond Farms. “There’s a lot of greenhouses in the area here, and we needed some bench strength,” says Cole Cacciavillani, a co-founder of cannabis producer Aphria.

In the 51-49 partnership deal with Double Diamond, Aphria is acquiring a brand-new 1.3 million-square-foot greenhouse, which it expects to yield 120,000 kilograms of cannabis annually. This is on top of Aphria’s existing facilities and its one-million square-foot expansion at its own Leamington campus – which, incidentally, was also converted for cannabis production after Mr. Cacciavillani sold his family’s greenhouse business to Aphria.

Back in Delta, Mr. DeGiglio says he partnered with Emerald Health Therapeutics specifically because it was focused on the high-end medical market. That joint venture, called Pure Sunfarms, is currently converting a 1.1-million-square-foot greenhouse at a cost of about $50-million, with an option to acquire two additional facilities with a combined square footage of 3.7 million. Emerald is also building another large facility in Metro Vancouver.

The Delta conversion has been met with some concerns from local government. Mayor Lois Jackson has said that low-taxed agricultural land is meant for food and other agricultural practices and worries a shift to cannabis could make the region dependent on food imports.

However, farmers such as Mr. DeGiglio point out that Canada produces far more food than its citizens could possibly consume.

He says only about 20 per cent of Village Farms’ produce goes to B.C. consumers. “Those three greenhouses [in Delta] produce enough tomatoes for every man, woman and child in B.C.,” he notes.

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