Growing the Giving Tree – Cannabis Business Times

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Lilach Mazor Power, founder and CEO, Giving Tree Dispensary

Photos by Brandon Tigrett

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Giving Tree strives to develop cannabis products in smaller niches with fewer competitors, like capsules, to help it stand out on dispensary shelves.

Photos by Brandon Tigrett

“It’s much easier to grab shelf space when no one else is competing there.”-Lilach Mazor Power, Founder & CEO, Giving Tree Dispensary

On Jan. 22, 2021, just 80 days after voters passed Proposition 207, Arizona’s adult-use market rocketed to the fastest rollout of any state yet to legalize—a feat made more impressive as it was accomplished during a global pandemic.

Many industry stakeholders expected a later launch, because Arizona state law established April 5 as the latest date that existing medical dispensaries could start selling to adults 21 and over if the Department of Health Services (DHS) didn’t promulgate the program rules by then. But as soon as adult-use license applications opened to Arizona’s existing 130 medical marijuana licensees on Jan. 19, the DHS responded swiftly—approving 73 dispensaries for adult-use sales by Jan. 22. 

“Once we applied, we received approval within three days. We didn’t know it was going to happen that quickly, so there was no time to prepare,” says Lilach Mazor Power, founder and CEO of Giving Tree Dispensary, a vertically integrated cannabis company in Phoenix. “My expectations were three to four times more [customers after legalization], but I thought it was going to take time to get there. The surprise was, it was almost overnight.” 

Although Arizona’s existing operators began preparing months—if not years—in advance of adult use, this record-setting speed-to-market created challenges across the state. At the time, cultivators were still adjusting to the mandatory medical marijuana testing regulations that took effect in November 2020. These challenges converged—pinching the state’s supply chain just as adult-use demand began budding.

To navigate this perfect storm of obstacles, Arizona’s cannabis cultivators had to leverage their depth of medical marijuana experience while adapting swiftly to market changes.

Not-So-Soft Launch

After operating in an industrial area of Phoenix since opening in 2013, Giving Tree Dispensary moved to a new retail location in January 2021. Power planned a soft launch for the store—not knowing the state would suddenly greenlight adult-use sales the same week. 

“Our soft opening was not soft at all,” she says. “Within 48 hours of operating at our new location, we started seeing adult-use customers. We saw 350 people per day, which is almost double what we normally saw at our other location. No, we weren’t as ready [as we wanted to be] and yes, there were some growing pains. But sometimes it’s good to be thrown into the water to learn how to swim.” 

To handle the additional traffic, Power more than doubled her retail staff from 10 to 23 employees—condensing the company’s typical month-long onboarding program into one day of shadowing before new hires hit the floor. Power and her managers even pitched in behind the counter to serve the influx of traffic, so customers never waited in line more than 30 minutes during the initial rush.

Scaling the staff was relatively seamless, but keeping shelves stocked—both in Giving Tree’s own retail store and in the other dispensaries that carry its products—was the real challenge. 

“Since we are a small grow, we know we’re not going to compete with some of these large-scale facilities in the volume game—but when it comes to quality, we can.” -Jesse Miller, cultivation manager, Giving Tree

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Photos by Brandon Tigrett

“As a supplier, we were not prepared,” Power says. “We had a lot of orders that we couldn’t fill in the beginning, and it took us until April to get it together.” 

Testing Bottleneck

When adult-use sales started, operators were still adapting to the mandatory testing regulations that took effect Nov. 1, 2020, requiring all medical marijuana products to be tested for potency, pesticides, residual solvents, heavy metals and microbial contaminants. Industry stakeholders like the Arizona Dispensaries Association (ADA) supported the legislation, but the ADA also had some concerns about the state’s testing capacity.

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Giving Tree cultivates its cannabis using a hydroponic system in combination with a rockwool, coco, and perlite growing medium.

Photos by Brandon Tigrett

“From the association’s perspective, we want to be regulated, because that’s what separates us from the illicit market,” says Samuel Richard, executive director of the ADA. “But the labs were not prepared for the volume. At the time that bill was voted on, there were only [19] labs in the state.” As of press time, there are only three labs that have cleared all the state certification hurdles for full-panel testing, though there are others that are approved to test some or most of what is required by law, according to Arizona’s DHS. 

Giving Tree, which already was testing products voluntarily, had to scramble to find a lab with the proper certifications for all the mandatory tests. “We’d have to send samples from one batch to multiple labs in order to complete the full panel of testing requirements,” says Jesse Miller, Giving Tree’s cultivation manager. “Before it became mandatory, we would get the results back in a week or less. Then, all of a sudden, we were waiting a month. We’d have product ready to go, but we didn’t have the testing results so we couldn’t put it on the shelves.”

At times, Giving Tree waited up to 11 weeks for test results, which strained product supply. Squeezing through this bottleneck required a few quick changes. “We discontinued wholesaling [our dried flower],” Miller says. “We were just focusing on filling our own store.”

Giving Tree also limited how much product customers could buy. Although state law allows consumers up to one ounce of flower per purchase, Giving Tree set temporary limits of a half-ounce to stretch out its supply. “We still had to deal with angry people, and we had to explain, ‘We will sell you whatever we can, but we have to make sure we service everyone,’” Power says. To that end, Giving Tree designated separate checkout lines for qualified medical patients, and designated two hours to serve patients and senior shoppers only on Tuesday and Friday mornings.

To keep inventory stocked, Giving Tree shifted its approach to bringing other products into the retail store. “We ordered more of whatever brand we could find with testing results,” Power says. “This is not our normal practice, but we had to fill our shelves.”

Although certain cultivars ran out and some edibles were difficult to find during the market’s initial launch, Power says Arizona’s supply chain is finally “getting into a good rhythm.” As more labs work through the state’s two-tiered certification process, industry stakeholders expect product availability and testing turnaround times to keep improving. 

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Photos by Brandon Tigrett

Prepared to Grow

With just a matter of days to transition into adult use, the producers that spent years preparing—long before the laws passed—were best-positioned to navigate the change. 

Giving Tree, for example, built a flexible foundation for growth over nearly a decade of refining its medical marijuana operation. The facility consists of 11 separate grow rooms, totaling 6,000 square feet of canopy space inside a 15,000-square-foot building that also houses Giving Tree’s extraction labs. 

When Miller joined the team five years ago, “Everyone was using their own growing methods and recipes, so every room was different. There was no consistency,” he says. “We started collecting data and doing trials, rather than just using what each individual grower thought was the best method. Getting the team to work together significantly increased production.”

Based on the data collected from his trials of various growing methods and media, Miller developed standard operating procedures around 2017. A key component of these SOPs—and one of the biggest changes to Giving Tree’s growing process over time—is the nutrient feeding program that fertilizes plants grown hydroponically in a combination of rockwool, coco, and perlite.

“We started out using premixed nutrients, but then in order to save money, we decided to buy all the elements in bulk and formulate our own,” Miller says. “Once we implemented that, we saw an increase in plant health and a huge boost in plant size and flower production—and we ended up saving 30% in fertilizer costs.”

Since adult-use sales began, Giving Tree’s growing team has continued to evaluate its processes with an eye toward improving efficiency. For example, Miller plans to implement an automated fertigation system to streamline the nutrient program even further. Giving Tree also uses drip irrigation tanks. “Right now, we hand-mix our nutrients, so having the recipe programmed into the computer is going to save us time,” he says.

However, automation isn’t always the answer for growth. In fact, Giving Tree is moving away from trim machines to begin hand trimming its harvests. Power says the machines, while well-suited for larger grows, did not make sense in a boutique setting. They plan to hire six full-time people to prepare for the hand-trim shift, which will increase the number of harvests per year. “We’re going to improve the quality of our final product if we hand trim, [because] the machine just doesn’t remove all the leaves,” Miller adds. “That’s actually going to speed up the process, because we’ll be able to chop a room down in one day, as opposed to the machine—which uses less people but still takes about a week to harvest a whole room.”

Meanwhile, the company is also increasing its capacity to keep up with Arizona’s burgeoning market. An expansion slated for completion this summer will make Giving Tree’s extraction lab four times bigger, increase the size of its packaging and distribution center threefold, and add an extra 1,000 square feet of cultivation space. 

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Frank Ragsdale trims flower. Giving Tree is switching to hand trims for its flower products, citing higher quality in hand-manicured products.

Photos by Brandon Tigrett

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Golden Lemon grown by Giving Tree

Photos by Brandon Tigrett

Brand Differentiation

Although the size of Arizona’s cannabis market is capped by a limited number of vertically integrated licenses, competition is heating up. Because the state allows license holders to sublease their operations to other companies that want to cultivate or manufacture cannabis, the license prices and product options will likely spike as more operators turn their attention to Arizona.

Beyond the 130 existing medical marijuana license-holders who can apply for a dual license to serve adult-use customers, Arizona also held a lottery in April to offer 13 additional adult-use licenses in rural counties. The state’s health department will release another 26 adult-use retail licenses later this year as part of a social equity program, bringing the total number of dispensary licenses in the state to 169. (About 125 stores operate currently.)

To stay competitive in this burgeoning market as large multistate operators look to move in, producers like Giving Tree are relying on product innovation to differentiate their brands.

“We’re seeing more brands trying to compete for shelf space,” Power says. “So, we’re focusing on creating cool brands with really amazing products.

Instead of trying to compete with the dried flower or vape cartridges that dominate the market, Giving Tree is focusing on smaller product niches, like full-spectrum capsules. “Even though capsules [only make up] 5% of the market, we don’t have much competition in that market,” says Power, who supplies her Kindred brand of capsules to 62 dispensaries, which is about half of Arizona’s current retail market. 

Giving Tree also is innovating with its Katatonic brand of concentrates extracted with CO2. Katarina Park, the company’s director of laboratory and product development operations, uses a proprietary method to isolate THCA crystals, achieving 100% purity. “We cannot keep the product on the shelf. Currently we are only in five stores, and everything sells within days,” Power says. “Our diamonds are popular because they’re … clear. ”

This summer, Giving Tree is launching its newest brand, Revelry, featuring capsules that are specifically targeted to menopausal women. “It’s much easier to grab shelf space when no one else is competing there,” says Power, who hopes to explore partnerships with producers in other states that want to manufacture this brand.

“My expectations were three to four times more [customers after legalization], but I thought it was going to take time to get there. The surprise was, it was almost overnight.” -Lilach Mazor Power, Founder & CEO, The Giving Tree

Opportunities Ahead

Last year, Arizona’s medical marijuana dispensaries sold about 106 tons of product. Richard says he expects that volume to increase by at least 50% to 75% this year—predicting a continued “upward trajectory” as the market evolves. 

Sales already have doubled for many operators, based on quarterly earnings calls from publicly traded operators and conversations Richard has had with other dispensaries, including Giving Tree. “I believe we have an opportunity to double [those sales again] in 12 or 18 months as we mature,” he says.

To stay ahead of this projected growth, Giving Tree is exploring new ways to expand its operation. For example, Miller is weighing options to increase production within their existing cultivation space—like experimenting with vertical growing methods that use LED lights, and testing new genetics known to produce higher yields or faster harvests. 

“We’re always trying to improve what we’re doing [by implementing] new technology and different products, and just looking at ways to be more efficient in the space we have,” Miller says. “Since we are a small grow, we know we’re not going to compete with some of these large-scale facilities in the volume game—but when it comes to quality, we can.”

Power also plans to increase Giving Tree’s production capacity, either by expanding the facility again and adding more automation, or by “teaming up with growers from other states that are interested in the Arizona market,” she says. 

After navigating a trifecta of obstacles in Arizona—marked by a record-setting rollout that came on the heels of a major testing mandate, all during a global pandemic—Giving Tree and other agile operators in the state are poised for growth. 

“If we aren’t already, we will be the marquee program across the country,” Richard says. “It’s a learning process from every angle of the ecosystem—from consumer to producer to regulator—but we’re all rowing in the same direction now.”

Brooke Bilyj owns and operates Bantamedia, a national award-winning content, SEO and PR firm based in Cleveland. She is a frequent contributor to GIE Media’s horticulture publications.