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Tahoe Hydro
Dec, 2018 by Cannabiz Wholesaler
Tahoe Hydro is an award-winning cannabis cultivation company that is owned and operated by two families that have been growing cannabis for generations. They have won every single competition into which they’ve entered their cannabis, including winning the 2016 and 2017 Jack Herer Cups for indica, sativa, and hybrid flower.
The company has grown thousands of different strains and gone through years of pheno-hunting and crossbreeding to use only the highest- quality genetics possible. Its business model is based on producing ultra-premium cannabis at nearly half the cost of their competitors, even though their flower is some of the most expensive on the market.
In addition to its strain expertise, Tahoe Hydro is expert in running a cannabis business, averaging profit margins of 45% to 65%. The firm has close to 120,000 square feet of warehouse space for cultivation, and is producing more pounds per square foot, and by wattage, than nearly every other company. Most cultivators are trying to hit two or three pounds per light, while Tahoe is aiming for five.
CANNABIZ WHOLESALER HAD SOME QUESTIONS FOR RAY SCHIAVONE, CO-FOUNDER AND CEO:
CANNABIZ: GIVE US YOUR VIEW OF HOW THE INDUSTRY IS DEVELOPING AT THIS JUNCTURE.
RS: There are a couple major factors shaping the cannabis industry. In Canada, investors have poured a tremendous amount of capital into capacity and footprint in anticipation of its recreational cannabis market. In the U.S., more investment capital has gone to retail chains than to actual proven cannabis producers.
CANNABIZ: WHERE IS THE BUSINESS HEADING NOW?
RS: As production and supply increase, lower-to-mid-range flower, oil and distillate will begin to commoditize. High-quality flower will hold the highest margins due to availability and demand. It is the only aspect of this industry that takes a lifetime to master. We have had business partners that operated millions of square feet of greenhouse flowers and herbs… They had massive failures. At some point, the larger publicly-traded companies will start acquiring high-quality producers for their IP and genetics, which will in turn produce higher profit margins.
CANNABIZ: WHAT IS THE CANNABIS BUSINESS GETTING FROM LEGISLATORS IN WASHINGTON, DC?
RS: DC’s inability to legalize cannabis has opened the door for Canada to take the main stage. Canada now has an estimated $30-billion market cap versus an estimated $5-billion market cap in the U.S. The current administration is starting to realize how many billions of dollars it is losing to its northern neighbor. With President Trump saying he would most likely support marijuana legalization, more investors have begun looking to the U.S. due to its estimated $100-billion cannabis market.
CANNABIZ: WHAT LIES AHEAD FOR THE INDUSTRY?
RS: As cannabis markets mature, we are seeing more consumers interested in higher-quality terpene profiles. Some brands have emerged solely off of high terpene-based strains. Higher terpene profiles not only increase the flavor and experiences in flower, but they can also become even more sought after in concentrates. Very similar to fashion or technology, when there is a new type of flower with an interesting terpene profile, an increasing amount of consumers line up to try it out, just like a new iPhone.
CANNABIZ: WHAT IS TAHOE HYDRO’S STRATEGY GOING FORWARD?
RS: At Tahoe Hydro our strategy is simple. We continue to focus on producing the highest quality flower, while obtaining higher margins than our competitors. Most cultivators are working hard to be profitable, while we are consistently hitting 45%-to-65% profit margins. In a saturated market, the highest quality and the least expensive products sell first. Everything in the middle sits on the shelf. If we have the highest quality product and if it costs us less to make it, it puts us in a strong position.
CANNABIZ: TELL US HOW YOU ARE COMPETING AGAINST OTHER COMPANIES.
RS: We have been very fortunate and humbled by our experience in Nevada. Most of our competitors are either business people with limited cannabis experience or cannabis people with limited business experience. Mark (Bruno, co-founder and Chief Operating Officer) and I have owned numerous other businesses outside of cannabis, and we are both second-generation cannabis growers. It is extremely difficult to evaluate a problem -- at the end of the day this is farming -- and determine if you have the right people in place… I have seen competitors fire their grower then go and hire somebody worse. If Mark says, “We need this $100,000 piece of equipment,” or if I say “We need to stop growing this strain” we just do it. I am really grateful for the relationship we have.
Tahoe Hydro has been the undefeated Jack Herer Cup cannabis champion in the state of Nevada for two years in a row. We have won first place in every category of flower we have ever entered to date. The quality of our genetics keeps improving every year. By my having personally grown over 1,000 different cannabis strains, and Mark Bruno being one of the best cultivators in the industry, that combination, and this team, is what gives us our edge.”
TahoeHydro.com