HVAC Companies Find Growing Opportunities in Marijuana Market
Love it or hate it, marijuana is a blooming industry in both the U.S. and Canada. The Canadian Senate is on track to vote on a bill to authorize legal use of recreational marijuana by June 7. Following assumed passage of the bill, Canada would be the second country to have nationwide legalization of marijuana, after Uruguay, according to The Associated Press.
Additionally, the total economic output from legal marijuana in the U.S. will grow 150 percent from $16 billion in 2017 to $40 billion by 2021, per a report from Arcview Market Research, in partnership with BDS Analytics. With numbers like those, the marijuana market is ripe with opportunity for HVAC contractors.
Cascadia Air Conditioning Inc. in Ladysmith, British Columbia, Canada, has been in the medical marijuana market since 2001, when Canada’s Marijuana for Medical Purposes Regulations (MMAR) program was put into place.
“We have done several hundred MMAR design builds and five currently running ACMPR's [Access to Cannabis for Medical Purposes Regulation, which replaced MMPR], and have several more breaking ground right now,” said Rob Shannon, co-owner, Cascadia Air Conditioning. “Most notably is Broken Coast Cannabis on Vancouver Island. Currently, we are in the design stage of their Phase 4 environmental design build.”
Cascadia does much more than just HVAC. The company assists clients from the beginning of their ACMPR applications with floor plans, employee flow, bio-security, HVAC design, forecasts, and more.
“There is a huge demand,” Shannon said. “They’re looking for technical designs and experienced technicians who can understand the parameter involved.”
Lake Forest, California-based Dynamic Air Services has completed 11 marijuana projects since its first completion in 2014.
“We do a lot of work for a modular room company, and they got us into this market since they were receiving requests,” explained Bill Kean, director of field operations, Dynamic Air Services.
Meanwhile, E3 Service Group in Arvada, Colorado, has completed well over 100 jobs in the past six years. The company currently has maintenance contracts with 38 commercial grow facilities; is under construction with seven grow facilities, two dispensaries, and six extraction labs; and is under design on nine other marijuana projects in four different states.
“It wasn’t anything that I set out to do — it kind of found me,” said Bryson Guyer, president, E3 Service Group. “Out here in Colorado, I think every heating and air company has done marijuana at some time or another. For us, we always specialized in commercial kitchens before this. We’ve built a ton of Marco’s Pizzas, Texas Roadhouses, and Red Robin restaurants. And there was a lot of translation between building a restaurant and building a grow facility. We just started listening to the customers and their complaints and figured out ways to fix their issues. It’s slowly become our area of expertise.”
Trevor John, vice president of operations, Smarco Building Solutions Inc., Mississauga, Ontario, Canada, said his company has had over eight projects with two different marijuana operators/providers in the past three years. In fact, one of the company’s contracts includes maintenance on one customer’s four locations.
“We’re a building solutions company, and one of our claims to fame is: If we can’t do anything in your building, no one else can,” said John. “With that in mind, we were approached to do some IAQ and control from one customer who passed our name onto the second one. That’s how our business started growing in this field.”
While the growing marijuana market is filled with opportunity for HVAC contractors to cultivate, it is also a market that has long been filled with social stigma. For years, the marijuana industry, and those who partake, have been labeled as criminal or lazy. HVAC contractors who have entered the market have had to face plenty of challenges, including risking their reputation.
According to Shannon, his biggest challenge when entering the market was the perceived stigma of it in the beginning.
“We just had to change the public perception of the industry,” he said. “We overcame it with time, research, and talking to wholesalers and manufacturers and explaining the industry. It has been beneficial for us because we’ve tapped into a niche market and are now leaders in our field.”
Kean said it was awkward dealing with the secrecy surrounded by the type of work in the beginning.
“The heightened security measures took a little getting used to,” Kean noted. “Keep in mind, even today, there are questions regarding the legality of this industry. It’s a big difference from dealing with your typical standard commercial or residential HVAC project. The cash-only nature was also something we had to change operationally, as we weren’t set up to have our technicians handle these large amounts of cash. At the end of the day, we are just doing what we do — we are creating a specific environment. We are conditioning air, and we don’t really look too much further into it than that.”
Other challenges for Kean included design aspects and educating the customer on the complexity of the project. Kean and his employees spent a great deal of time learning about and testing different products as well as talking to manufacturers, technical teams, and engineers to learn what is needed.
“We’ve made ourselves better, so these environments are less challenging,” he added. “Becoming more proficient and buying power has helped with costs. Adding another revenue stream and customer base is always a good thing. The other benefit is the work isn’t as seasonal as our normal projects since it’s a constant industry, regardless of season.”
According to Guyer, the biggest challenges were in making the equipment work.
“We weren’t getting the support we usually get from suppliers and manufacturers because they didn’t want to give us the technical support once they figured out we were doing grow facilities or anything to do with marijuana,” he said. “So we had a really big uphill battle in the beginning because we couldn’t get the support we needed, and we were making these machines do something nobody else had ever made them do — like having a 5-ton air conditioner run when it was 10°F outside — it’s not anything anybody has tried to do.”
Other than the initial pushback from suppliers and manufacturers, Guyer said there hasn’t been much stigma attached to the industry. But that may be due to the fact that his business is located in Colorado, where it has been accepted locally.
“We’re doing a project in Little Rock, Arkansas, right now, and there are some huge stigmas in the southern states,” he said. “Even up in Kalamazoo County, Michigan, we’re working on a project there and are running into a lot of stigma. There’s a lot of guys who are very curious to what we’re doing, and they want to be part of it, but nobody wants to put their name on anything yet.
“There’s a huge opportunity in this for every HVAC company, but if you’re not specializing in it, if you’re not spending the time to learn what to do and what not to do, I can see how it would almost ruin somebody’s business,” Guyer continued. “You can make a bad name for yourself really quick if you didn’t know what you were doing. We’ve learned so much in the last five years. We were just in a grow facility yesterday that I built five years ago, and it is a dinosaur compared to the way we’re doing things now.”
For Smarco, the hardest challenge lay in finding employees, according to John.
“The first company we worked with wanted to make sure the people we were sending in were bonded,” he said. “Here, it’s a high security market, believe it or not — especially in their labs and grow facilities. We also had to sign confidentiality agreements, which in our industry is kind of unheard of. It’s not like we’re working with NASA, but I can tell you that it feels sort of like that. So we needed to specially hand pick our employees to send into the facilities. That was one of the challenges. We have to have someone on call every day, 365 days a year, to maintain the contract because if equipment goes down, that can cost a company a lot of money.”
John added that the financial reward for these projects and maintenance contracts is amazing. The marijuana industry is unique in that customers are not going to the phonebook or Google to find contractors — it’s all word of mouth.
“These guys have very high-tech equipment in there, and they will pay good money to maintain it,” he added. “One of our contracts is $50,000 a year just to maintain the facilities. And the nice thing about this business is once they get a contractor who can take care of them, they’re not shopping around for a new contractor.”
Publication date: 4/23/2018