When the first recreational cannabis markets opened, it seemed like there was infinite potential for growth and expansion. Now, the numbers are telling a slightly different story.
Many of those first recreational markets have matured to the point where cannabis production is outpacing demand, and prices have plummeted. In states like California and Colorado, cannabis prices have hit all-time lows. While there are still young markets where cannabis prices remain high, they all seem to follow the same pattern eventually, as seen with recent trends in Massachusetts.
So, what is a cannabis processor to do? Are there still ways to profit from cannabis? Is there a ticking clock in the industry?
The cannabis industry isn’t bound to collapse. Just the honeymoon is over. The green gold rush has given way to business as usual. Now, companies need to gear up for the long haul and prepare for the reality that cannabis is still a profitable industry but one that businesses must be savvy to navigate.
While it will probably not change the cannabis market and cause prices to rebound in any meaningful way, it is possible to make the most of the product you produce.
It’s an unfortunate reality for many cannabis processors that there’s a fair amount of waste in the extraction process; whether that’s the loss of raw materials or time wasted wrangling temperamental extraction equipment, there are multiple places for profits to evaporate. In a market with wider margins, it would be common practice to roll those inefficiencies into the price of the product. However, with margins tightening, processors must eliminate those losses to turn a healthy profit.
It should sound like common sense, but increased efficiency directly equates to increased profits. Of course, increased efficiency can allow a cannabis processor to produce more product quicker, which can obviously bring costs down, but efficiency also cuts waste.
When your extraction system processes raw biomass efficiently and effectively, that will increase the overall yield from every batch. With efficient processing, additional costs like solvents and other operating expenses will also be reduced.
Speaking of operating costs, the right extraction system can also bring those down significantly. Automated closed-loop extraction systems, like those produced by ENTEXS, can cut the costs of solvents, training, PPE, staffing, and general maintenance.
Closed-loop extraction systems allow the process to be tightly controlled, increasing the overall yield and cutting waste. Plus, these systems also minimize solvent loss and even allow for solvent recovery and reuse. Closed-loop systems enable the process to be automated. Not only does automation grant fine-tuned control, it virtually eliminates the possibility of human error and reduces the amount of personnel required to operate the system.
There will always be people willing to pay more for a quality product. That’s just as true for cannabis as it is for anything else. So, while the average price of cannabis may be declining, processors capable of producing a higher quality product can command higher prices, even if to a slightly smaller customer base.
The right extraction system is key here as well. Increased control over the vital system variables can enable processors to lock in the precise conditions needed to get both the highest yields and the best quality end product.
Closed-loop, automated systems also eliminate much of the possibility for contamination and error during the extraction process. This leads to increased purity and greater preservation in collecting valuable cannabinoids and terpenes from the source plant material.
With maturity in the market comes a segment of consumers looking for high-end products, especially those that are seen as more pure, more potent, and closer to the natural source. Cannabis processors who can meet these demands will position themselves for success in the evolving marketplace.