By Eric Peterson | Oct 26, 2021
Cannabis growing, extraction, and processing systems
Agrify's technology was initially aimed at leafy greens, but it required a higher-value crop to make "economic sense," says Chang, who joined the company two years after it pivoted to cannabis in 2017.
"I've always loved to use data, science, and technology to disrupt a large, growing industry," says Chang. To wit, his career includes launching GigaMedia, the first broadband network in Asia, and LuckyPai, one of China's leading shopping channels.
Likewise, Agrify's Vertical Farming Unit (VFU) fits the bill of an industry disruptor. Chang says the product allows cannabis cultivators to move from a "square-feet basis" to a "cubic-feet basis," and that can boost the yield by a factor of six.
"A lot of people have tried to do vertical farming, but what makes us unique is that these chambers -- we call them grow pods -- each one is individually environmentally controlled," he continues.
This allows for operators to control about a dozen different variables, including temperature, humidity, light spectrum and intensity, irrigation, and oxygen level. "For each of those parameters, we can really dial it in," says Chang. "We can dial in the temperature within 0.5 degrees Celsius at all times."
This is critical for "Cannabis 2.0" cultivation, he adds, as it allows grows to optimize conditions for a growing number of strains. "The benefit of that, especially for cannabis, is you're talking about thousands of potential varieties of genetics," says Chang.
"What we realized is that each of the genetics actually requires its own optimal grow recipe. For example, if you want to grow something like Purple Punch, in order to bring our that nice purple color at the end, what we realize is that at a certain point during the grow cycle you want to intensify the red spectrum."
These strain-based settings are included in the VFU's software. "Basically, it's pre-programmed with these ideal grow recipes, so the customers can literally press one button and they will have the optimal grow plan," says Chang, noting that each unit also records 1.5 million data sets per year.
The end result? Stable cannabinoid levels, with variations of less than 1 percent (and less than 0.1 percent in terms of terpene profiles), he says, rather than 15 percent, not uncommon in the industry. "Right now in the industry, nobody else can deliver the level of consistency of the Vertical Farming Units."
Since the first VFU installations in 2018 -- around 50 units -- the product has gone through several iterations in terms of both hardware and software. As of late 2021, several hundred are in use at grow operations in multiple states, primarily on the East Coast.
Sales continues to grow: As of Q2 2021, Agrify had a backlog of orders that was in excess of $100 million.
To complement the VFUs, Agrify acquired Troy, Michigan-based Precision Extraction Solutions and Hillsboro, Oregon-based Cascade Sciences to create an end-to-end catalog of what Chang dubs "intelligent hardware" for growing (Agrify), processing (Cascade), and extracting (Precision). The deal closed in October 2021.
"These are the two leading brands in the industry. They have sold to pretty much every single large multi-state operator and have done 1,000-plus installations," says Chang of the strategy. "If you don't start out with good biomass, the extraction process is just going to amplify that inconsistency. The reason behind this acquisition is we want to basically bring a level of consistency not only on the cultivation side for the dried flowers, but extending it all the way down to Cannabis 2.0 products. We're going to help our customers have more consistent biomass so they avoid a trash-in-trash-out situation."
Agrify manufactures VFUs at a company-owned facility in Georgia and a contract manufacturer in Vermont, and Cascade and Precision currently manufacture in Oregon and Michigan, respectively. "One of the things we're proud about is everything is made here in the USA," says Chang, noting that the company's supply chain is global.
Chang forecasts the company will roughly double its sales in 2022. "The industry is just growing so fast, and now that we're even more vertically integrated, I think that it will help accelerate our market adoption," he says.
Challenges: "Supply chain," says Chang. "It's not only hitting us, it's hitting everyone, but fortunately we have a little bit better visibility of what's happening, so we can take proactive actions to minimize global supply chain issues." He says Agrify has minimized disruptions by building longer lead times into the schedule and diversifying its vendor base.
Integrating Precision and Cascade under Agrify's umbrella is another challenge. "Ultimately, it's all about execution," says Chang.
Opportunities: Markets that are largely part of the second wave of cannabis legalization. "We're very much focusing on this Eastern corridor," says Chang. "Obviously, cannabis pretty much started from the West -- California, Oregon, Washington, et cetera. I think a lot of the states have learned from their mistakes."
He also sees Agrify's catalog a perfect match for current market trends: "Cannabis 2.0 products are gaining popularity. We've seen more dispensaries devoting more shelf space to 2.0 products. Going from dried flowers to these concentrated products, extraction is really a centerpiece of all that. Today, you have tons of inconsistency on the initial output, the dried flowers, and we're solving that problem with our VFUs, to reduce that level of inconsistency."
Then there's a market that is set to boom even bigger as more states -- and the federal government -- eye legalization. "I think we're very much at the beginning of the hockey-stick growth in the industry," says Chang.
Needs: Talent. "We're going to continue to grow both organically and through acquisitions as well," says Chang, estimating that Agrify will likely increase its head count by 15 to 20 percent in 2022.