Flower growers benefit from cannabis boom

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Erin Nathanielsen had heard about a number of fellow flower growers across Canada selling or switching their businesses over to marijuana production, hoping to cash in when the drug is fully legalized.

However, it wasn’t until a few months ago that she started noticing that the reduced number of competitors was having a positive impact on her family business that grows potted kalanchoes, kalanchoe cut flowers, geraniums and begonias.

“We are starting to find demand is going up,” alongside some prices, says Ms. Nathanielsen, who co-owns McIntosh Greenhouses in Surrey, B.C., with her husband, Eric.

To meet that new demand, the Nathanielsens have increased production by an average of about 20 per cent this season. Still, they’re being careful not to overextend themselves by expanding capacity or overhiring. “We’re just working harder,” Ms. Nathanielsen says.

Greenhouse property values have also gone up as marijuana growers shift into rapid expansion mode. “It has made us feel a bit safer,” she says of the family operation. “Business has been quite tough in the last five years … and has been good the last little while, so we’re hoping it stays that way.”

McIntosh Greenhouses is one of many floriculture operations across Canada seeing an increase in business – either from new customers or existing ones – as former competitors move into cannabis production, says Andrew Morse, executive director of Flowers Canada Growers Inc. and Flowers Canada (Ontario) Inc. But it’s far from a windfall, Mr. Morse says, due to rising costs and competition from other countries that affects how high prices can go.

“This is a trade-exposed industry. We have competitors on the other side of the border who don’t have the same increasing price pressures that we do,” Mr. Morse says. “As a result, there’s a limitation to how much you can push the price up or else you run the risk of losing business to a competitor.”

The boost in business is coming largely from existing customers looking for more products. One supplier told Ms. Nathanielsen at least five kalanchoe producers in Canada sold to investors looking to start marijuana operations.

Growers are also facing higher prices for greenhouse supplies due to the surge in demand from the marijuana industry, Mr. Morse says. “It’s to the point where certain products are cheaper to buy from a hardware store than they are from a wholesaler,” he says, such as hoses, for example.

The cost of labour is also increasing, due to the higher minimum wage in provinces such as Ontario and the shortage of tradespeople working on greenhouse expansion projects.

“If you’re already positioned for it, good for you, but if you’re not, you may have to wait,” Mr. Morse says.

Many growers are being cautious with their expansion plans, worried in part about a potential oversupply of cannabis that could send some growers back to flowers or other greenhouse crops. “The real issue here is that we don’t know what this will look like in the next few years,” Mr. Morse says. “It’s hard to tell where it will balance out because nobody really knows how successful the marijuana industry will be and what long-lasting impact that has.”

George Scott, co-owner of Scott’s Nursery Ltd., a third-generation business based in Lincoln, N.B., has noticed costs of supplies that come from other provinces, such as cardboard boxes, have increased. Mr. Scott hasn’t seen a noticeable boost in demand that he would contribute to growers going to cannabis, “but I do hope that’s part of a spinoff from it,” he says.

Other greenhouse operations aren’t seeing a meaningful boost in business – at least not yet, according to Joseph Sbrocchi, general manager of the Ontario Greenhouse Vegetable Growers association. But Mr. Sbrocchi notes capacity expansion across the sector has slowed significantly this year. His organization, which represents growers of greenhouse tomatoes, cucumbers and peppers in Ontario, is expecting greenhouse acreage to grow by about 1.5 per cent this year. That’s below an average of about 7 per cent a year over the past six years.

“We are still increasing, but by a much more modest percentage,” he says.