Why Indoor Grown Cannabis Earns Premium Market Prices

Ask any group of hard-core cannabis connoisseurs whether they prefer outdoor, greenhouse or indoor bud, and you’re likely to hear a lot of differing opinions.

But one thing can’t be denied: if you want top-quality cannabis with a more reliable dosage, desired effects, fragrant aroma and pleasant taste, then indoor is the way to go. Whether its flower, oils or edibles, cannabis users are willing to pay a higher premium for higher quality product.

For the medical marijuana market, where product reliability and consistency is the most important, indoor grown cannabis offers the best product for both patients and clinical researchers.

For Canadian licensed producers, indoor grown cannabis represents the opportunity to play a role in the growing global market for medical-grade cannabis.  As nations around the world begin to understand the health benefits and wide-range of applications in the treatment of disease, global medical cannabis is expected to become a $55.8 billion market by 2025. Canada allows its licensed producers to export their product, and the list of countries allowing imports of Canadian grown cannabis products has risen in the past year, including major markets such as New Zealand, Australia and Germany.

Medical grade cannabis requires a consistent cannabinoid profile

As with any pharmaceutical, healthcare providers want to ensure their patients receive consistent and accurate dosing. Consistency is critical in the pharmaceutical industry, and is necessary for pharmaceutical-grade cannabis as well. “Otherwise we are not there. We are not in medicine,” said Dr. Raphael Mechoulam, the famed cannabis research pioneer who discovered THC.

The use of cannabis in modern medicine is just beginning to take root. Years of prohibition and stigma have left the medical community with little research in terms of proper dosing and treatment protocols.  For Canada’s cannabis industry to fully mature, cannabinoid profile consistency and reliability is key not only for medical marijuana consumers but for legitimately advancing our understanding of the drug’s health benefits through clinical trials.

The ability to consistently replicate the same cannabinoid profile from one harvest to the next can only be achieved through product standardization, which requires strict control of the environment in which the product is grown.  Consistency is also critical when creating and maintaining brands.

Indoor grow operations are key for product standardization

Under the former medical cannabis regulations, Health Canada did not license producers for  outdoor growing operations; however, as a surprise to most in the industry, under the new cannabis legislation the agency has left it up to the provincial governments to decide whether or not to allow outdoor production of medical grade cannabis.  Regardless, cannabis grown indoor is far more likely to fetch a premium over outdoor bud.

The controlled setting of an indoor grow op offers the ability to do just that: control all the variables that can impact the cannabinoid profile from one harvest to the next. Unlike an outdoor operation, the indoor environment is not dependent upon external conditions, such as farm location, hours of sunlight and climate changes.

“With an indoor grow operation you have better control of the growing climate allowing for higher yields and consistent product production all year round,” Michael Ash, a veteran of the pharmaceutical industry and Chief Commercial Officer of Canadian licensed producer FV Pharma Inc., told INN. “Using a scientific approach, indoor grow operations provide an ideal environment to effectively manipulate certain variables such as light and temperature to allow for the plant’s genetics to be expressed exactly the way you want for not only a consistent cannabinoid profile, but a distinct terpene profile as well.”

Terpenes are the essential oils in cannabis that have medicinal properties and the ability to help cannabis plants fight against pests and fungus. They are also responsible for aroma and taste, two factors that are especially important to a cannabis user’s overall experience of the product.

While modern advances in greenhouse technology have some in the industry suggesting they offer a cost-effective alternative, as well as the best of both worlds when it comes to the pro-sides of outdoor and indoor growing. However, Ash notes that “in a greenhouse environment, fluctuations in temperature and relative humidity are common, which increases the risk of pest and mold infestations. Greenhouses may also experience light quality fluctuations throughout the year that can cause inconsistencies in the cannabinoid and terpene profiles.”

Canadian licensed indoor growers

Ontario-based Aphria (TSX:APH; OTC:APHQF), one of Canada’s top licensed medical cannabis producers was up until recently 100-percent greenhouse. In January 2018, the company acquired Broken Coast Cannabis, a leading BC-based indoor grower, for $230 million in cash and stock. “Adding one of Canada’s most sought after premium brands represents a major triumph for Aphria and our shareholders and firmly establishes our position as a Canadian leader in premium indoor cannabis production,” said Aphria CEO Vic Neufeld. Aphria also has a supplier agreement with Shoppers Drug Mart for the dispensing of medicinal cannabis.

FV Pharma, wholly owned by FSD Pharma Inc, (CSE:HUGE) is a Canadian licensed medical cannabis producer that recently acquired the former Kraft Foods (NASDAQ:KHC) production plant in Cobourg, Ontario. The company is currently growing 25,000 square feet of cannabis flower at the plant and is converting another 220,000 square feet for cannabis cultivation and processing with its joint venture partner, Auxly Cannabis Group (TSXV:XLY). Auxly’s CEO Chuck Rifici is co-founder of Canopy Growth (TSX:WEED) and has signed on to assist FV Pharma in their burgeoning operation. Once retrofitted and in full operation, the former Kraft facility is expected to cover 3.8 million square feet and be the single largest legal hydroponic indoor cultivation and processing space in the world.

INDIVA (TSXV:NDVA), another Ontario-based licensed medical cannabis producer, began production at its pharma-grade 10,000-square-foot indoor facility in September 2017. The company is now expanding its current facility to 40,000 square feet, which will include 16 separated small flower rooms to allow for strict control of the growing environment. Indiva was recently included in the Horizons Emerging Marijuana Growers Index ETF (AQN:HMJR), which provides investors exposure to primarily North American small cap cannabis companies.

The Takeaway

From Canada’s emerging legal recreational market to the booming global medicinal market, consumer demand is focused on high quality cannabis products. Often, cannabis users are willing to pay a premium for indoor grown products, which are more likely to display consistent dosing and an excellent terpene profile to enhance the experience. Cultivators who focus on controlled growing climates are much more likely to maximize yields while maintaining quality and operation at peak efficiency year round—increasing profit margins for their business and maximizing return on investments for their shareholders.

This INNspired article is sponsored by FSD Pharma Inc (CSE:HUGE). This article was written according to INN editorial standards to educate investors.