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Survival of the Trimmest.

"Natural Medicine Extractors"

Survival of the Trimmest.

You may have heard that extraction companies are making a fortune (and they are). At the same time, Growers are reporting that the extraction companies pay very little for lower-quality flowers and trim whereafter they extract it into high-value oils for vape pens and edibles – making said fortune in the process. Apparently there is a big “value-bump” caused by “up-grading” sub-par raw material into high-value product – in this case, oil. And the upcoming harvest is going to create even more downward price pressure on sub-premium material allowing the extractors to make even more money on the backs of the growers. With such big profit potential, why aren’t growers doing the extractions themselves? I asked around and this is what I heard:

1. many growers just want to grow. Their interest is only in the top-quality flower segment of the market and they have little interest in the “chaff” (i.e. trim/popcorn);

2. many are content to produce great product even if it means operating on a shoestring – money is not their prime motivator;

3. the feeling that “chaff” will degenerate into even lower quality, possibly unsaleable, if not disposed of quickly so it must be sold no matter the price;

4. many believe that the “flower” segment of the market will remain the sweet spot and that demand will continue to grow;

5. many think of extraction as “voodoo” – too complicated to understand and operate;

6. they have ready buyers for top-quality flower but they don’t have a clear sales path for oil; and

7. they think extractors are too expensive.

So, about these points:

1. Growers wanna grow – no question that there will always be a segment for very top quality bud. The problem is that demand for bud is being displaced by demand for oil-based products like vape pens. Look at this chart – note how the vape pens (yellow) are growing while Bud sales are falling (light blue) – and look at the accelerating trend.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Why the displacement? Convenience and Discretion. Vape pens don’t smell, are easily “dosed” and can be refilled/recharged. This chart stops at 2016 – the market share in 2018 is thought to be higher than Bud. Growers, disregard this trend at your peril.

2. operating on a shoestring – if the grower is already operating on a shoestring, what happens when the margin gets cut even more? Take a look at Oregon where a supply glut is wreaking financial havoc on growers. And here comes another harvest.

3. sell the chaff before it degrades – yes, chaff requires storage space, humidity control to avoid mold and is not saleable through the Bud channels. However, the oil can be extracted and stored indefinitely without fear of degradation or mold and it can be used as feedstock not only for vape pens but also for tinctures, topicals, suppositories, sprays and edibles.

4. Flowers will always be the top product – again, look at the above chart – ’nuff said.

5. Extraction is voodoo – it can be, but it doesn’t have to be. Some extraction methods are very simple – it depends on which demand you are trying to supply.

6. I don’t know where to sell oil – even if you don’t know now, it is not difficult to find – a small amount of effort can yield big results – and the oil can wait without degradation or significant storage cost.

7. Extractors are too expensive – they can be but they don’t have to be. Small-scale CO2-based extractors can now be bought for less than $10k and can pay for themselves in very short time frames.

In conclusion, due to the seemingly ever-increasing supply, growers are being pressured to “value-add” their crop in order to survive. Extractors should be thought of as “up-graders”, i.e. tools that are used to generate very high-quality oil from lesser-quality chaff. The extraction value-bump can make the difference between failure and prosperity.

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