How Automation Is Helping Cannabis Companies Survive the Slump

May 13, 2023 ·

While robots and artificially intelligent digital bots start to land exotic jobs in manufacturing, agriculture, and other types of industrial production, smart cannabis companies are investing more money into mundane machines used to create pre-rolls, stamp out labels, or trim flower. In order to compete in an increasingly competitive marketplace, automation is one of the most effective ways for companies to cut costs and boost bottom lines.

“What we’re seeing across the United States is the price of cannabis has fallen and, as prices compress, the way to make money in this business—whether you’re a cultivator, processor, or retailer—is to have a reduced cost of goods sold or a reduced cost basis,” said Andrew J. Kaye, chief commercial officer at Sweet Leaf Madison Capital, which lends money to cannabis companies for real estate, equipment leasing, and cash expenditures. When Kaye talks about automation, he focuses on areas where companies can streamline production easily and make labor-intensive processes more efficient. “You need to get more cash out of every dollar spent, so I think automation is an area where we’re going to see a lot of focus—even in distribution—because it’s a necessity to survive.”

Here are just a few of the ways automation has impacted the industry.

Cultivation

Integrated, automated environmental controls can include everything from water management to air flow, fertilizers, pesticides and fungicides, and more. The larger the grow, the more essential these systems become to protect against crop failures. Some systems incorporate information and data about individual plants and plant beds, giving growers insight into methods that will lead to higher yields and more valuable biomass.

Security

Automated security systems help companies monitor controlled access to various parts of the production process. Likewise, they help companies administer policies and procedures that are dictated by state regulations. Showing the details and standard operating procedures within a fully integrated security system is one of the most important parts of winning a license in most states, not to mention remaining compliant once the license is issued.

Packaging

Because of strict regulations governing labeling and product date stamps, companies are deploying automated systems that combine packaging and labeling into a single system. For cultivators who produce their own pre-rolls and customized packages, these systems are essential tools.

“A lot of these tools are incremental, but I think packaging is probably the one area where there’s been a lot of attention because, for example, one packaging machine that costs $250,000 can probably replace four employees,” said Kaye. In that scenario, he explained, a client might put 25 percent down on a machine and pay about $12,000 a month to service the loan. In return, they could save as much as $25,000 a month in employee costs and recoup their investment in less than a year.

Kaye also mentioned one Colorado retailer uses a vending machine to scan the customer’s information, print out a compliant label, and affix it to the package when a purchase is made.

Edibles

Whether it’s baking cookies or stamping out gummies and mints, automated machines can handle many parts of the edibles manufacturing process. Additionally, as health and biotech companies develop more medicinal forms of cannabis, they also will develop increasingly automated production processes similar to those employed in the pharmaceutical industry.

While large multistate operators may seem to be leading the way in adopting automated production systems, Kaye noted most of Sweetleaf’s clients are small and medium-sized businesses. He suggested many of these companies are more willing and inclined to adopt new technologies that will help them reduce costs.

“The competition in cultivation and all parts of the value chain has resulted in an acute awareness that cutting your production costs and increasing efficiency will allow you to survive and thrive,” he said. “The midsize [companies] are doing between $50 and $100 million a year in sales, and I think in some ways they are more nimble and more cost-sensitive.”

So while it might be tempting for cannabis companies to look for clever ways to utilize ChatGPT or Microsoft’s AI arsenal in their operations, their best bet for now may be to ask those bots a simple question: “How can I use automation to streamline my processes?” (Full Story)

In categories:Cultivation Edibles Marketing
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