Supply Chain, Automation, and Predictions for 2022 – David Kessler, CSO of Agrify

The rapidly evolving cannabis supply chain is quickly becoming more efficient. In order to give consumers consistent, high quality experiences in a cost-effective manner, cultivators, manufacturers, and retailers must deploy the right tools. Agrify provides end-to-end solutions for the booming cannabis industry, blending science, data, and technology to propel the market forward. 

Leafwire spoke to Agrify Chief Science Officer David Kessler about the company’s cutting-edge product offerings, the future of the industry, and his advice for up and coming entrepreneurs.

Leafwire:  Agrify provides premium cultivation solutions — what are the direct benefits to the supply chain?

David Kessler: When we look at the entire industry, what we noticed was that it really didn’t have enough repeatable processes. There’s some great producers, there’s some great businesses out there, but in terms of delivering a consistent product, whether that’s a flower product, a concentrate product, or an edible, the processes, the technology in place just didn’t exist. So what Agrify did was really take a different approach by designing cultivation solutions to deliver a level of consistency, a reproducible consumer or patient experience and expectation, and then combining that with facility optimizations, workflow optimizations, and the incorporation of artificial intelligence. What we’re really trying to do is deliver a sustainable method for cultivating high quality cannabis and delivering a consistent consumer and patient experience.

A lot of that comes from our demand-based planning algorithms. If cultivators are seeing an uptick in the demand from dispensaries, for example, of three of their key strains, they can use our software to quickly transfer over production and increase the capacity of those varietals based on the information that they’re receiving.

So it delivers a lot of actionable business insights, the ability to rapidly adjust and change based on the market demand, the market conditions. Ultimately, when we start talking about the supply chain, we just want to make sure that not just cultivation is accounted for with this level of technology service, we also want to ensure that that level of service technology is delivered to the entire supply chain and that’s everything from your genetics, which we’re not plant touching, but we do have plant touching partners through the cultivation equipment into the extraction formulation of products, and ultimately even with the brands deployed so that consumers and patients can have a consistent experience, and when they purchase a product from one of our cultivators, that they’ll have an expectation and a repeatable experience each and every time.

LW: Why is automation so important in cannabis?

DK: We’re a maturing industry, we’re still quite nascent, but what we are seeing is the scale up of production capacity. You’re seeing larger and larger businesses merge together. You’re seeing the formation of MSOs marching across the states taking larger shares across the country. As you start increasing the production, you would of course expect and require increases in automation, essentially the ability to lower costs and do processes more efficiently. So what Agrify does is we look at each individual task that’s a part of the production process and we look at where the addition of technology, the addition of science, the application of data can yield results.

We’re not trying to replace growers. This isn’t the kind of automation that’s robotic that, for example, would prevent or replace a grower from trimming a flower. What we’re talking about is the kind of tools that empower growers to remove some of the unnecessary. If you will, grunt work things, like fertilizing and irrigating the plants and taking notes. All of that is being automated and so it’s a tool to empower growers to really allow them to produce the finest quality cannabis repeatedly. That’s both on the process side and the environment side. So when we look at automation, what we’re really doing is kind of parsing the different processes of cultivation, extraction and so forth down, and seeing where we can use the technology, use the data to really improve the process.

We still believe that it has to be a hands-on, eyes-on, human-centered process, but we can alleviate some of the work and allow the human spent hours to be more efficient. So I think that’s the future of cultivation. I mean, we saw these big mega facilities in Canada at the Aurora Sky facility where they used robotics and automation to do things like plant movements and harvesting the plants. While I love that, I don’t think the industry was ready and their approach yielded very low quality cannabis. In fact, a lot of those facilities have been shuttered. Our approach is really designed to foster the highest quality, the most consistent cannabis produced at a lower price point to allow competitors, to allow our clients to successfully maintain their position and actually increase market share over time in this competitive space.

When we think of automation, I don’t want people to think that it is big box cannabis. The fact of the matter is our technology is modular and scalable. What we’ve done is we’ve taken cultivation and we’ve miniaturized the cultivating environments down to very small 300 cubic air feet chambers. What that allows is the production of craft quality cannabis at scale. So I just don’t want people to think that the move towards automation is this move towards low cost, low quality cannabis. I think that automation and craft quality are not mutually exclusive. In fact, the adoption of technology like ours allows producers to produce craft at scale and that’s going to be the key differentiator moving forward because people can always produce lower quality for a little bit less. It’s been documented time and time again.

LW:  What brought you specifically into the industry?

DK:  Well, I am Aristotelian by nature. My grandmother had me on nature walks as soon as I could walk and my mother used me as free labor in the gardens as soon as I was able. So I was always very in touch with nature and plants. I just didn’t think it was a viable career path. So I went to school and while I consumed cannabis as a college age youth, my focus was on law. I was going to be a lawyer. Eventually my love of cannabis, my love of plants, really guided me away from the study of law and towards horticulture. So I studied horticulture. I started a tropical plant nursery specializing in orchids. Again, I didn’t think cannabis was a viable career path at that point, and I was working for a woman from Harvard who had one of the largest rare plant nurseries in the Northeast.

She really encouraged me to just dive headlong into horticulture if this was my passion, and it was, and so I set up the orchid nursery. I moved to Atlanta, Georgia and became a judge with the American Orchid Society, which took about seven years. From there, my day job was to do commercial agriculture, closed environmental agriculture, and farm design. So I had a wonderful experience working with Georgia Tech, KSU, designing STEM curriculum for the Georgia Public School Systems. I wrote grants and was funded by Google and Chase banks and I got into consulting for Hollywood films, such as Black Panther, the Legit series, Hunger Games. All of that was just fascinating and it allowed me a lot of very unique experiences, related in surrounding horticulture to widen my expertise.

At the same time, I was designing a vertical food for the farm for an Atlanta business person and this actually became the early technology that is now Agrify. After a few years of working with them, they said, “Would you ever move to Colorado to do R&D testing on cannabis?” I said, “Absolutely.” So it was probably about six years ago, packed up the family and moved to Colorado, started optimizing the technology for cannabis and really evolved it to the state it is in today with Agrify and I’ve never looked back. It’s been something I love to do. I love to teach. I love to design. I love cannabis. I love horticulture. So every day is just a delight. While each day is a little bit different, I continue to grow professionally, I continue to kind of use my passion for horticulture and for cannabis to better the plant and to better Agrify’s ability to cultivate. So it’s really just a confluence of my own personal interests, unique opportunities, and a unique skill set.

LW:  Are there any major changes ahead for the industry in 2022?

DK:  I would say we’re seeing an increased rate of mergers and acquisitions. MSOs are now having access to debt based capital instead of just equity based and that’s increasing their ability to take market share. I also think that instead of the days where businesses were being purchased in their entirety, now you’re starting to see segments of businesses being acquired. So not a vertically integrated player, but maybe just someone that has specialized in just extraction in two states or just cultivation in three areas. So I think you’ll continue to see that as the larger companies try and strengthen their offerings in specific areas. I think that you’ll continue to see brand penetration into new markets.

I think where MSOs and larger businesses have to take the slower steps necessary caused by regulation, brand adoption is quite easy. I mean, if you have consumer recognition and you have a following, let’s say, out of California on the West Coast, when that brand penetrates, say, Cookies into a new market, you have immediate consumer recognition, immediate consumer demand. So I think that you will start to see more brand penetration continuing. Ultimately, though, I think that this brings up a real issue for the industry as a whole and something that Agrify looks to solve, which is consistency. When I was on a tech panel, it was the primary panel at the Michigan Cannabis Aid conference, we were asked by the audience, “Why is it, with all of our PO data, do we see so much repeat consumerism and very little three-peat consumerism?”

So the lecturers and I conferred and we all agreed it’s because we’re in legal cannabis, everyone’s excited to shop, there’s lots of options. If they try something that they like, be it a patient or a consumer, then when they go back, they want to experience that again and they will absolutely try that product a second time. But if you can’t deliver that same expectation of the experience or the medical benefit, then you’re not going to have a third chance. So it’s the need for CPG-like product consistency, right? Every Pepsi tastes like every other Pepsi, regardless of whether it’s bottled in Texas or in Vermont, and that’s the consumer mindset. That’s where we are as cannabis consumers. Until we can deliver that level of consistency, that expectation, it’s going to be hard for these brands to build larger footprints because it is different every time.

Agrify’s technology, which really takes cultivation down to a very granular level, allows fine-tunable control over the micro climate for cultivation. Because cannabis produces over 550 different chemical metabolites and the environment has a tremendous influence on which chemicals are produced and in what quantity and proportion ratio to one another, the need for consistency is even greater than with traditional food and beverage products. So I think that what you’re going to see is that as the consumers become more educated as they have more of these options in front of them, you’ll see this move towards CPG, the consumer product good form factor, this demand for consistency increasing. I think that’s a trend that’s going to continue for several years and where the adoption of technology like Agrify’s vertical farming units can minimize that variability, most of the cultivation today still suffers from that problem quite markedly.

LW:  Why is that product consistency piece so crucial?

DK:  If I told you that you should take between one and 50 Tylenol for your headache, we would never be able to prescribe it as a medicine. We would never consider it a medicine if it was variable like that. So I think that we all know that this push and change towards a more consistent production methodology is coming. I just don’t think everyone has figured out how.

What Agrify has done is by shrinking the cultivation environment, and then focusing on a very uniform reproduction across the entire 300 cubic feet of aerospace, what we’re allowing is the minimization of plasticity, the minimization of chemical variability based on that environment, and because we’re automating the environmental control, because we’re automating the data collection, each chamber records at least 1.5 million data points per year at minimum. That is all data used to recreate very specific internal environments for each individual strain, which can be different strain to strain to elicit different outcomes, different chemical profiles and so forth.

So what we’ve really done is create a reproducible micro climate that allows growers to minimize the variability to deliver a higher level of both quality and consistency, and if they found a recipe that worked, they can go back through the software and just simply say, repeat because whatever they did last time was the best it’s ever been. That’s going to allow cultivators using Agrify’s technology to deliver the consistency that the market is really starting to demand and ultimately is going to require.

LW:  What are some benefits of utilizing AI in cannabis that may surprise people?

DK:  Agrify is really about the incorporation of artificial intelligence. So we’re incorporating cameras with the ability to look at images in real time, detect pests and pathogens from visual camera feeds, which again, foster the ability of cultivators to do their job without requiring as much hands-on, eyes-on, but it still is just an alert that cultivators need to go and take a look. Then we’re also using technology to do a lot of other wonderful things. I see that as cultivation narrows, we talk about the future. I think that what we’re going to see is cultivation improvements based on a couple of key factors. One, improvements in genetics. We’re behind a hundred years on every other major agronomic crop because of the illegal nature of cannabis.

I think you’re going to see tremendous improvements based on biofeedback. So right now, for example, the growing media has always been well, you water it, you add fertilizer, you don’t get droughted. But what we’re realizing now is the ability to steer a crop to really foster and elicit a specific outcome from a plant. You have a lot of tools at your disposal, but what you need to do is have biofeedback from the plant in order to capitalize on that. So by understanding the moisture in your growing media, the EC or the level of fertilizer, you can use those levers in addition to CO2, light intensity, light spectrum and so forth and many others to really drive the best expression from the plant, the highest yield, the highest quality. As you control all of those factors as Agrify documents each individual change, we are enabling you to improve the recipes for cultivation and then hit repeat.

So I think what I just want to say about the inclusion of automation and technology is really that as we move forward, you’re going to see more of this biofeedback, whether it’s biofeedback from the media on the moisture and EC, biofeedback from the leafs, looking at vapor pressure deficit and photosynthesis rate of transpiration rates, and having these pieces of data is going to allow us to move cannabis forward more rapidly. Because it is so far behind other agronomic crops, I think that you’ll see a more rapid evolution and improvement, and it’s going to be to those that incorporate technology, look at data, review the new scientific literature to really lead that path forward. That’s where Agrify is leading the way through the adoption of technology and the application of data to improve production of both cannabis cultivation, extraction and process, all the way through the supply chain.

LW:  What advice would you give to a budding entrepreneur in cannabis?

DK: The first is stolen from real estate agents: location, location, location. You have to understand how licenses and regulations matter in this industry. The difference between starting a business in Oklahoma and in New York is profound. Oklahoma, it’s very simple. It’s not a limited license state. It’s low cost of entry and the assumption will be that the cream of the crop will rise and attrition will occur because not everyone can succeed. They’ve licensed almost as many cultivators as the state of California with 10% of the population. So while Oklahoma is a great location for low cost entry, it’s also going to be high competition. Whereas you have more restrictive states like New York that are coming on with more regulations, higher capital demands to enter the market and a more competitive space overall, and it’s just going to be a very different experience for an entrepreneur starting that business.

Number two: know your business model. You have to find a niche. You have to decide what it is you’re going to do and what it is you’re going to specialize in. I’ve talked to lots of people that say, “Well, I grow cannabis and I’m just going to make lots of money.” It’s not that easy. I wish it were, but it’s not. I mean, the “green rush,” as they call it, is not something easily won and at the end of the day, what you need to do is have a solid business plan built on fundamentals. So that means understanding who your consumer is, understanding what the costs are that are going to drive your business and understanding what your niche is. What it is, what needs you are specifically going to fill and what’s going to make you different from every other Tom, Dick and Harry out there trying to do the same.

Then the final piece, this one is my favorite, it’s to delight your customer. That’s your job. Your job as an entrepreneur is to deliver a good or a service and the consumer to be delighted, to be elated. Whether that’s done through the quality of your product, the novelty of your product, the efficacy of your product, figure out a differentiator, delight your customer and make sure you set yourself up in the right location with a solid business plan and you’ll do wonderful.

LW:  What else should the Leafwire community know about Agrify?

DK: I think that fundamentally we need to be seen as more than a hardware company. A lot of people when they come and they see us at a trade show, they see our hardware on display and it’s pretty big and bold. I mean, a vertical farming unit is a cultivation chamber that’s roughly four feet by eight feet by nine feet tall, and they stack like Lego bricks. So it’s quite impressive and imposing when you see this laid out in front of you. The entire idea is that every chamber can be completely independently controlled from all the other chambers. So because of the novelty, because of the wow factor, a lot of people will walk away from an initial meeting with us and think, “Wow, that’s a really interesting hardware company,” but we’re so much more than that.

We’re really an ecosystem of solutions. It’s an integrated solution of hardware and software that was designed to work with one another. So the days of needing an integrator because you bought an HVAC system and then you bought the best of the best humidifier and the best of the best lighting and then you bought a building management controller and got a fertilizer system, all of that combined together, you still have disparate pieces of equipment that need to be integrated to work with one another in order to deliver a high quality product. Because we have taken more of the apple ecosystem approach, everything works with everything else. It’s all designed to work seamlessly to deliver that uniform environment, which ultimately leads to higher consistency, fosters brand building and the CPG form factor, and ultimately delivers consumers and patients the kind of experience that they’re seeking.

So what I want people to know about Agrify is that we’re really looking at this holistically, from cultivation to a branded product that people consume, and we want to deliver the best technology, the most data and the highest level of repeatability to our clients to foster the highest quality, lowest cost and most consistent cannabis on the market.

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