Commerce, California (plus Arizona headquarters, Washington, Illinois, Michigan, and Massachusetts)

Vice President of California Operations, Joshua Krane, says the cannabis operator’s newest automated manufacturing facility will help them reach the scale necessary for nationwide legalization.

Founded by Kris Krane and Josh Rosen as a consulting company that helped cannabis startups secure the licenses necessary for their businesses, 4Front Ventures (CSE: FFNT) (OTCQX: FFNTF) eventually transitioned into cannabis operations of its own with the acquisition of a dozen or so retail, cultivation, processing, and manufacturing licenses.

“4Front’s real expertise back then was in retail and in navigating the regulatory frameworks on the path to licensure,” Krane says. “So, they began a search for operator partners, and in that process, they came across Cannex and Leo Gontmakher. Cannex had built up operations in Washington, and pound-for-pound they were one of the best operators out there. What began as a conversation around a joint venture quickly turned into a merger [in 2019].”

With Gontmakher now on the 4Front Ventures team, the company’s expertise shifted towards building large-scale cultivation, manufacturing, and processing operations. “We now have [large] manufacturing operations in California and Washington and also smaller, but ready to scale, manufacturing operations in Illinois and Massachusetts,” Krane says. In addition, the company operates two cultivation plants in Washington, one cultivation plant and two retail centers in Illinois, three cultivation plants and three retail centers in Massachusetts, and one retail center in Michigan.

In total, 4Front Ventures produces more than 32 tons of cannabis per year, manufacturing and distributing a portfolio of over 20 cannabis brands and more than 1,800 products. Nine of those brands — and 164 SKUs — are manufactured in the recently launched 170,000-square-foot facility in California, billed as one of the largest and most efficient automated cannabis manufacturing facilities in the world.

“The thesis of the California facility is, whenever possible, to utilize automation and machinery to scale our processes and elevate the quality of our labor pool by focusing on higher quality, less turnover machine operators and skilled technicians as opposed to the low-level labor that typically has been how you would scale a cannabis business,” Krane says.

He notes that when designing the facility, 4Front Ventures took the processes it had developed in its manufacturing operations in other states and scaled them up with larger machines, larger capacities, and more automation.

“If you were to tour with me,” Krane continues, “the first thing I would show you is that we’re centrally processing all of our packaging for all of our manufacturing departments in advance. Things get labeled flat by machines as opposed to by hand once erected. This allows our manufacturing departments to step through their manufacturing steps without having to stop for manual assembly or labeling.”

Krane says the facility’s pre-roll department can produce upwards of 18,000 to 20,000 joints per shift thanks to automation. 4Front uses “an automated joint roller that puts the joint all the way through. It twists it, it cuts the tail, it taps it down, it puts it into a tube, and then it caps the tube,” he explains. “And those tubes go into that machine with their labeling already in place. It’s truly machine operators that are turning out those joints as opposed to the old-school person sitting there and knocking a hand-rolled joint into place.”

The thesis continues in the vape fill department, where Krane says automated and semi-automated fillers can churn out 18,000 vape units per shift. Automated packaging machines package each vape in a clamshell rather than a typical box with inner tray and tube. “It’s less paper and less touches,” Krane adds. “And because the paper board goes into the machine labeled, two operators can do nearly 28,000 of those in a shift.”

In 4Front Venture’s California mints department, the company has two presses. “They run at very high capacity,” Krane says, “and we can put them into the tins on automated packaging lines to the tune of 4,000 or so per shift.” In the gel cap encapsulation suite, the team can bottle somewhere between 5,000 and 6,000 units per shift. And in the kitchen, a large-scale automated confectionary cooker can produce 220 kilograms — or 485 pounds — of candy per hour on a continuous loop. “We can just keep making it,” he continues, “to upwards of 20,000 10-packs in a shift.”

Krane notes that while the company’s Washington kitchen can produce 4,000 to 5,000 10-packs with 40 people per shift, the California kitchen manages that 20,000 with only 12 operators. “So, we are fewer boots on the ground, are higher output, and are far more efficient,” he says. “That allows us to get to the scale that we think we’ll need to be at for things like national legalization and interstate commerce.”

Challenges: Krane says that making a splash in the California cannabis market is currently 4Front’s biggest challenge. “We have a market to penetrate and a consumer to win over,” he continues, “which means we have a series of retail buyers to impress. I don’t think of it as a negative; it’s just a hill we face.”

Photos courtesy 4Front Ventures

Opportunities: “Given all of the production capabilities that we have in California, we have the ability to be the leader in several smaller consumer packaged goods categories that, over time, will grow and become very robust product lines like tinctures and soft gels,” Krane says. “These are areas where other cannabis operators have not focused as much of their energies, but there’s still a viable percentage of the market that wants products in those forms. We intend to try to be innovative and competitive in all of those categories.”

Krane notes that 4Front Ventures is also examining the California cannabis market for gaps and has had success introducing products from the company’s pre-existing brands to fill them as well as heavily engaging in R&D in pursuit of novel product development.

As an example, Krane says the California edibles market has been dominated by gelatin- and pectin-based gummies. “The vast majority of them are also sugar-sanded,” he continues. “We have a product line that is a gummy that is very much like that. I’’s one of our top sellers in every other state. But in California, it’s in a saturated subcategory of edible. Our chewy caramel product, however, has found a tremendous amount of traction in California. While we find buyers here have a reluctance to try something in the pectin gummy category because there are so many competitors, our caramel gets right through. Once they taste it, they love it. It becomes a very easy sale.”

Needs: “We’re constantly in search of better ways to automate and improve our processes,” Krane says. “And we’re constantly on the hunt for great talent. At our core, when you peel back the layers, what makes us so good is that there are really smart people running around this company and giving a crap about what we do, and that it’s right, and that it’s well thought out, efficient, and profitable.”