REDWOOD VALLEY — Dust covers the redwood bar inside the abandoned Big Dog Saloon on an 80-acre ranch north of Ukiah where a famous Mendocino County wine family long ago launched an empire.
Built in a meadow near Seward Creek with the help of friends trading sweat equity for food and wine, the Fetzer family’s saloon was once the stage for epic tastings and freewheeling parties as Mendocino County built its fledgling wine industry.
That was nearly four decades ago, when deputy sheriffs in Chevy Impalas and Crown Vics raced down dirt roads past the rush of the grape harvest, plumes of dust marking their routes into the rugged hills. They’d return hauling illegal marijuana plants confiscated from remote back-to-the-land homesteads.
In 1999 the Fetzer family moved its winemaking operation to Hopland, and the warehouses and saloon have sat vacant since.
But heady days are returning to the Redwood Valley estate.
A Venezuelan entrepreneur with Silicon Valley connections and deep-pocket investors bought the property earlier this year to build a farm-to-table marijuana empire — part production hub and part cannabis tourism destination. Michael Steinmetz said he wants his San Francisco-based company Flow Kana to become “the Whole Foods of cannabis.”
In his vision, the old warehouses where wine stains still mark concrete floors will be filled with vast rows of drying marijuana plants bought wholesale from boutique Emerald Triangle marijuana farmers. Tourists will stay in the old homestead renovated into a bed, breakfast and spa, wander gardens, hear lectures on sustainability and sidle up to the Big Dog Saloon bar to taste the nation’s best marijuana.
“We’re not chasing dollar signs in the Central Valley,” Steinmetz said. “We’re building a dream up here.”
Big ideas, big investments
The industrialization of marijuana production is well underway elsewhere in California while lawmakers are still drafting long-needed regulations for medical-use marijuana. They haven’t even begun the rule-making for recreational pot, approved by voters in November.
Acres of Salinas Valley greenhouses once used for flowers are being transformed to grow thousands of marijuana plants, including a 47-acre farm run by Steve DeAngelo, founder of Oakland’s massive Harborside cannabis dispensary, which made a reported $44 million in sales last year. Some struggling areas, such as Desert Hot Springs in Southern California, have seen entrepreneurs scoop up dilapidated warehouses and dusty parcels to build indoor pot production centers.
StarGreen Capital, a Beverly Hills-based investment firm, announced Friday it would invest $100 million over the next year in real estate and other business development for marijuana cultivators, manufacturers and retailers in the state. There are more than 800 marijuana startups listed on the website AngelList, where entrepreneurs can search for angel investors.
Flow Kana, too, has attracted big money with a cohort of investors from California, Florida, Massachusetts and an international investor from an undisclosed country. They facilitated the $3.5 million property purchase and remain involved in development of the site.
They have bought into Steinmetz’s belief that money can be made by leveraging the environmental ethos and products of Northern California mountain marijuana farmers. The lead investor was Poseidon Asset Management, a San Francisco hedge fund founded in 2013 by siblings Morgan and Emily Paxhia and focused solely on cannabis.
“If you’re to draw a simple graph of quality and quantity it’s a complete inverse relationship,” Morgan Paxhia said. “All these guys trying to do huge operations are going to have low-quality product.”
Like Steinmetz, the Paxhias were attracted to the culture of off-the-grid, organic farming practices. Strains tailored over generations for microclimates of rumpled coastal hills hugged by a damp marine layer or the hot-and-dry areas of high inland elevations of northern Mendocino County have flourished. These farms were built out of necessity for a plant better suited to more temperate climates, but growers have become “master breeders,” Steinmetz said.
Network of farmers
On the Mendocino Coast, Albion Ridge farmer Justin Calvino is developing a plan for cannabis appellations to call out the plants’ regional influences. Borrowing from viticultural designations, the Mendocino Appellation Project divides the 130-mile coastline into separate northern and southern appellations while identifying nine inland regions from Piercy to Hopland.
“The only principle that’s going to survive is the micro brand,” Calvino said.
Tourism “is imperative” for the craft farmer to outlast the wave of money that will forever change California’s most lucrative and secretive crop, said Brian Applegarth, founder of a Santa Rosa-based marijuana tour outfit called Emerald Country Tours. Applegarth takes groups to farms and dispensaries, alongside more typical destinations like wineries and redwood groves.
“If you ask anybody in the world where the finest cannabis comes from, ‘Mendocino’ and ‘Humboldt’ will be the first words out of their mouths,” said Applegarth.
On a recent afternoon, Steinmetz walked up a dirt road toward the Big Dog Saloon. It’s an iconic structure for the property, but just a small piece of the sprawling ranch that has about 85,000 square feet of warehouse and production space, all needing significant renovations from up-to-code sprinkler systems to bathrooms.
Modeled after coffee cooperatives in Columbia, Flow Kana will buy wet plants from farmers, then process and repackage it. Each product will brand the farmer under the Flow Kana banner.
“What’s beautiful here is what prohibition (against marijuana) left us, because nobody was allowed to scale up,” Steinmetz said. “It created an ecosystem where the product comes from thousands of small growers who are masters of their craft.”
Steinmetz speaks a mile a minute with a slight accent and wide-eyed enthusiasm. He earned bachelor’s degrees in engineering and economics from Carnegie Mellon University in 2005, and he worked a yearlong stint in investment banking before eventually launching companies in Venezuela and Columbia, including manufacturing of a Stevia-based sweetener.
Steinmetz moved to San Francisco about 2013 to seek work as a software developer in Silicon Valley. But something else caught his imagination: the inevitable legalization of marijuana in California, a market estimated at nearly $7 billion a year.
He started visiting dispensaries and noticed they were making money with broad margins.
“I thought, ‘Someone is getting a (bad) deal out of this — that’s the farmer,’ ” Steinmetz said.
That sent him on a journey through the backroads of Mendocino and Humboldt counties. Once farmers realized Steinmetz was not an undercover federal agent, he started making headway. He built Flow Kana into a delivery service bringing outdoor-grown Mendocino and Humboldt county marijuana to San Francisco Bay Area dispensaries.
He now has a network of nearly 50 farmers organized in three collectives: Emerald Growers, Humboldt High Five and Mendocino Generations.
Small farmer story
West of Ukiah, a long dirt road wends through oak groves and meadows flecked with wildflowers. Beyond a series of gates and hand-painted signs with folksy road names, a young couple grows marijuana on a remote 50-acre parcel.
There was a time when Jenn Gray grew potted marijuana plants hidden in oak trees or planted guerrilla grows only accessible on a four-wheeler.
Today Gray, 26, and her partner, Simon Evers, 29, grow Berry White, an energizing hybrid, in a greenhouse at their Elysian Fields parcel, where they laid perforated pipes in trenches dug underneath to build a battery-powered climate control system.
“We’re trying to scale up and adapt without losing our identity and stay true to our values,” Gray said. “It’s a full-time job living out here.”
It’s how Gray grew up on that land, in her family’s garden, bringing food directly from the field to the kitchen. It’s a life closely connected to the seasons, and now, the local community inextricably tied to marijuana.
“This is our heritage,” Gray said, standing among rows of potted cannabis plants outside the greenhouse on a misty May morning.
For about a year, they’ve been providing pot for Flow Kana’s delivery service and are the organizers of Mendocino Generations, a 39-farmer collective. Steinmetz flew Gray and Evers to Los Angeles for fancy meet-the-farmer private events where guests were “enamored by us, the farmers.” They also joined a cohort of Flow Kana farmers who traveled to Colombia to visit flower cooperatives.
Gray estimates they could eventually produce 1,000 pounds per year. Without selling to Flow Kana, it wouldn’t be enough to compete with a market expected to be flooded with marijuana.
Their other concern is regulations. The shelter where they used to trim their crop is now storage because of impending state regulations requiring Americans with Disabilities Act-compliant features, commercial-grade roads and other upgrades not possible on a remote, off-the grid ranch such as theirs.
Gray and Evers said they share Steinmetz’s vision for a centralized processing hub where they can sell their plants, and retain their Elysian Fields brand under the umbrella of Flow Kana.
“They’re truly betting on the small farm; their model depends on our success,” Evers said.
The concept of sourcing from multiple growers is echoed throughout other industries, from coffee to flowers to grapes.
Mendocino County winemaker Paul Dolan, who was hired in 1977 as the Fetzer’s first full-time winemaker, and later served as company president, estimates today about 75 percent of grapes are grown by farmers who sell their crops wholesale to winemakers.
“Even in the wine business being a farmer has been challenging over the years because you’re on the bottom rung, and the one that seems to have most of the power and control is the buyer,” Dolan said.
The Fetzers “developed a culture, and relationship with the community and as we grew there was confidence in the farming community to sell grapes to us and we grew really fast,” Dolan said. “I think that probably can happen in cannabis.”
Mendocino County agriculture
Mendocino County’s top agriculture products are wine grapes and timber, valued in 2015 at $88 million and nearly $84 million, respectively. Interim Agricultural Commissioner Diane Curry said they have not estimated the value of marijuana produced in the county.
An acre of grapes is worth, on average, about $35,000 in Mendocino County, according to Frost Pauli, president of the Mendocino County Farm Bureau. In Colorado, an acre of marijuana can yield more than $1.1 million, using an average price per pound of about $1,950, according to New Frontier, a Washington, D.C., firm that produces data on the industry.
Farm Bureau members are concerned about the potential conversion of land from grapes to marijuana. Pauli said he knows of three farmers, all with small grape acreages, who lost leases when the landowner opted to lease to cannabis producers.
Still, marijuana farmers clearly belong among farm bureau members, said Pauli, whose family grew pears for four generations before switching to grapes. Pauli said he wouldn’t be surprised if cannabis was the county’s top crop.
“There is potential for tourism, there is potential for folks who are going to do good things,” Pauli said “There are a lot of unknowns, but there is also a potential for a lot of good.”
Flow Kana time frame
The Fetzer estate sale sent waves through Mendocino County’s agriculture and tourism circles, said Alison de Grassi, who has lived in Redwood Valley for about 23 years and is communications director with the county’s tourism marketing arm. She’s hopeful the neighborhood’s concerns about traffic and nuisance will be addressed and the business will bring in more jobs and tax revenue, two things the county needs “more than anything.”
While the Mendocino County Tourism Commission doesn’t yet officially endorse cannabis tourism, it has a committee planning how to do so.
“It’s been part of the culture of Mendocino County for the past 50 years,” de Grassi said.
No significant construction has begun at the property yet but Steinmetz and his team believe they will be able to get the basic processing functions up and running by fall harvest. There’s plenty of industrial space, including a truck-weighing station, capacity for cold storage and “everything you need to process an agricultural crop,” said Sean Quinn, property director.
Paxhia said within a year, the site also will be outfitted with manufacturing and testing facilities. Next, they will renovate buildings with an eye toward visitors who come for events or to stay at the property. They also have more ambitious ideas, like hosting a state treasury office to collect taxes on-site or starting a bank.
Quinn, a political writer who co-founded FiveThirtyEight.com with statistician Nate Silver, was brought into the Flow Kana project by his partner, Amanda Reiman. She directed policy strategy in California for nearly five years with the Drug Policy Alliance, a national nonprofit focused on reforming drug laws, which she left to join Flow Kana full time and move to the property.
Reiman wants the Flow Kana ranch to educate people.
“We want to help people consume cannabis in a healthy and holistic way,” Reiman said. “We want this to be a showplace for other states, other countries.”
You can reach Staff Writer Julie Johnson at 707-521-5220 or firstname.lastname@example.org. On Twitter @jjpressdem.