Cannabis company envisions processing center at former winery
The grapevines that line rolling hillsides and sweeping valleys in Northern California’s wine country have become iconic – a symbol of the region’s rustic charm that helped California earn its reputation as a world-class wine and food destination.
But winegrapes have new competition: weed.
California’s legalization of recreational marijuana has led to the beginning of a major transformation of wine country. It’s been just seven months, but already investors are snapping up property where wine was once produced. Vineyard operators are developing expertise in cannabis cultivation. New, specialty marijuana businesses are sprouting up in Sonoma and Mendocino counties. And farmers who have long made a good living by growing and harvesting winegrapes are expressing interest in diversifying with marijuana.
“As a sustainable farmer, you have to be willing to change with the market, and with crops that are profitable,” said Steve Dutton, president of the Sonoma County Farm Bureau whose family farms 1,200 acres of pinot noir and chardonnay grapes west of Russian River Valley, as well as a few hundred acres of organic apples.
Farmers, outside investors and cannabis entrepreneurs see the landscape of California’s North Coast changing before their eyes. Their opportunities are particularly ripe in the fertile soils of rural Sonoma, Mendocino, Humboldt and Trinity counties.
“I think that cannabis and wine have amazing potential for a symbiotic relationship, and the reason this region is used for that production is the soil and the air and the unbelievable ecological qualities that we have up here in Northern California that are unique to the world,” said Amanda Reiman, community manager for Flow Kana, which recently bought the historic Fetzer winery property where the family got its start.
Poseidon Asset Management, a San Francisco-based hedge fund specializing in cannabis, was the lead investor for the $3.5 million purchase.
As a sustainable farmer, you have to be willing to change with the market, and with crops that are profitable.”
Steve Dutton, Sonoma County winegrape grower
The estate in the foothills of southern Mendocino County is being converted into a new cannabis processing and distribution campus, where its founders are also planning to host tourists for marijuana consumption and education – similar to tasting rooms at wineries.
Marijuana tourism could one day rival the region’s multibillion-dollar wine tourism industry, and grapes could be replaced with marijuana plants, said state Sen. Mike McGuire, a Democrat from Healdsburg, whose sprawling North Coast district includes a large portion of Sonoma County and the famed weed capital of the U.S. known as the Emerald Triangle.
“Winegrapes and cannabis have coexisted for decades, but we are now starting to see the reach of cannabis into wine country because it is a newly authorized agricultural crop here in the Golden State,” McGuire said. “Some winegrape farmers have begun to look at cannabis as a financial opportunity… Longtime vineyard managers have already started traveling to Colorado from Sonoma County to refine their cannabis farming practices.”
Grapegrowers are eyeing marijuana cultivation, in part, as a way to stay in farming.
“If it helped keep my farm business, sure. I have no idea what I’ll be doing in the future, I have no idea what my kids will be doing,” Dutton said. “My family has grown every crop that you can grow here in Sonoma County. At one time hops were profitable. My family farmed walnuts for many years and they became not profitable. We used to grow a lot of prunes here but then they went away. Then we started farming apples but we struggled for many years. Thank God we had grapes.
“They became profitable and have kept being profitable, but in the future, who knows?” he said. “I don’t think you’re going to see all these vineyards going away, but that’s not to say you won’t see an acre of grapes removed here and there for an acre of marijuana.”
Value of grapes in wine country: $55,000 to $365,000 per acre. Value of California cannabis: $1.1 million per acre.
An acre of grapes in Sonoma County is worth $75,000 on the low end to $185,000 on the high end. In neighboring Napa County, an acre is valued at $55,000 to $365,000, according to a new wine industry analysis by John Bergman, a longtime real estate broker specializing in vineyard estate sales in Sonoma and Napa counties.
An acre of NorCal bud, however, is worth $1.1 million, according to industry estimates.
“There’s a new agricultural product coming to town. I think we’ll see some of these grapevines be ripped out for cannabis,” Bergman said. “If you can plant 1 acre of cannabis and make … a million or more per year, that’s a hell of a lot better than vineyards.”
Bergman and others, however, are skeptical that marijuana will replace grapes as the area’s signature crop.
“For the most part, farmers I deal with see marijuana as more trouble than it’s worth,” said Mike Martini, proprietor of Taft Street Winery in the heart of the Russian River Valley and a former Santa Rosa mayor. “Cannabis is an interesting experiment. In today’s dollars, it looks promising, but as we’ve seen in every agricultural product, once it gets a good buzz everybody starts to plant it and prices fall. We saw that with grapes.”
State lawmakers are writing rules and regulations for marijuana growing, processing and sales. Cities and counties, meanwhile, are adopting ordinances tailoring local tax and licensing rules. Once finalized, new laws will give growers the legal framework to begin operating in the open.
Lawmakers also are working with growers and industry experts to create labeling guidelines helping to establish Northern California – the Emerald Triangle in particular – as the premier marijuana growing destination in the world.
“Think of it like, you can only produce Champagne in the Champagne region of France,” Reiman said.
Some fear a looming explosion of outside investment will force smaller, boutique growers out of business.
“I think we’re in the midst of an industrial boom, and it’s got everyone’s imagination,” said Tawnie Logan, executive director of the Sonoma County Growers Alliance, which represents about 5,000 of the state’s estimated 60,000 growers. “We’re seeing rapid growth – a lot of people coming in and trying to get rich quick.”
The Seattle-based private equity firm Privateer Holdings, which invests worldwide in the emerging legal marijuana market, last year chose the largest city in Sonoma County as the headquarters for its California expansion. It plans to use its facilities in Santa Rosa to process its Marley Natural products.
A new angel investment firm specializing weed called Canna Angels is targeting entrepreneurs and Sonoma and Napa counties – and around the country – who want to expand into the business.
I think we’re in the midst of an industrial boom, and it’s got everyone’s imagination.”
Tawnie Logan, executive director, Sonoma County Growers Alliance
The lead investor who helped Flow Kana purchase the former Fetzer estate says he sees Northern California emerging as the leading producer worldwide for top-quality bud.
“The farms up there are producing fantastic quality, and we want to preserve that. We want them to have a competitive role in California cannabis,” said Morgan Paxhia, a founding partner and chief investor for Poseidon Asset Management, founded in 2013 to invest exclusively in marijuana. “Right now, there’s a massive land grab happening in Northern California, for the cannabis industry in particular.
“We’re looking for good opportunities, but the problem is there’s so much money – tens of hundreds of millions – being invested into properties there right now,” he said.
McGuire, the state senator who got his start in politics in Healdsburg, once known not for its upscale restaurants and wineries but for its prunes and orchards, says weed could one day replace grapes as the region’s prime crop.
“When my family first started farming over a half-century ago in Alexander Valley, it was the buckle of the prune belt. Prior to that, hops were the king crop,” he said. “Today, some farmers see cannabis as the natural transition from grapes to what I believe is going to become the largest agricultural crop in California in the years to come – marijuana.”
Editor’s note: This story was changed at 11:50 a.m. May 11, 2017 to clarify that the Fetzer wine family started making wine at the property in Mendocino County now owned by Flow Kana. Fetzer Vineyards was established as a brand later.