NewsExtraction Emerging As One Of the Most Lucrative Cannabis...

Extraction Emerging As One Of the Most Lucrative Cannabis Industry Verticals, Finds New Report

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THE emerging extraction industry is proving to be one of the most active areas of innovation and growth in the cannabis industry, finds a new in-depth report from Prohibition Partners.

The Cannabis Extraction Report, highlights how the market is being driven by second generation cannabis products in the adult-use markets, the shift away from flower in the medical markets and the booming global cannabidiol (CBD) industry.

The report highlights how extraction is becoming one of the hottest verticals in the industry demonstrating an on-going  shift from vertically-integrated companies to specialisation in the supply chain.

The Extraction Report takes an in-depth look at the North American and European markets highlighting the various extraction methodologies.

Staying Ahead Of Competition

And, it elaborates on how this shift toward extracted products heralds the arrival of the major pharma and FMCG companies whilst offering significant commercial opportunities – although they do come with high-barrier entry costs.

Barbara Pastori, Head of Consulting at Prohibition Partners, said: “Among the rapidly expanding cannabis markets; extraction is arguably the most active area of innovation and growth.

“The ability of a company to meet the growing and diversifying consumer demands for cannabis extracts in a precise, reliable and cost-efficient manner offers significant commercial opportunities – and is critical to businesses looking to remain competitive as the market grows.”

The report is sponsored by leading companies including; Always Pure Organics, PurePressure, Eurox Pharma, Vitalis Extraction Technology and SOMAÍ Pharmaceuticals.

It also features interviews with leading industry players including Michael Budd – Founder of BuddCann Extraction Consultants – North America, who highlights how the move toward extraction heralds the arrival of the major multinationals. 

It reports that sales for medical extract-based finished products in Europe are expected to reach €1.5bn by 2024.

Extracts To Account For 75% Of US Market

Elaborating on the shift to cannabis extracts and derivatives in his home market he says that from 2017 to 2019 extracts market rose from 35% to over 50%. 

And continued: “We’re seeing forecasts predicting that as much as 75% of the market will be extract-based products by 2024. So there’s good times ahead for processors. 

“The majority of clients we’re dealing with are either trying to get ahead of forthcoming demand from CPG and Pharma or are upping their game in response to rapidly evolving consumer knowledge.”

The report highlights the growing number of extraction methodologies which include: ethanol, hydrocarbon, supercritical CO₂, hydrodynamic extraction and the emergence of new technologies such as enzyme assisted extraction.

One of the major hurdles for businesses looking to explore opportunities in the sector are the high barriers to entry related to capital expenditure, regulations, distribution channels, product differentiation and a lack of expertise.

High Barriers To Entry

Start-up costs to secure property, build laboratory facilities, purchase extraction equipment, train personnel and regulatory compliance can lift costs for a standard 2,000sq ft hydrocarbon extraction operation to between US$400,000 to US$600,000. 

However the report highlights the rise third-party extractors and white labellers means many smaller companies are now able to access the cannabis-infused sector, without the overheads,

It says: “Traditionally the sector was dominated by vertically-integrated companies focusing on the manufacture of their own branded extracts. However, as outsourcing of raw materials and services has become more prevalent we are seeing smaller brands flooding the market.”   

Ms Pastori added: “The North American extraction markets are the most mature markets; however, Europe is witnessing growth as supply chains are becoming more robust and extract demand is on the rise. 

“Both markets still hold a set of significant challenges and barriers to entry in terms of; regulation, distribution channels, capital costs, access to capital and a lack of expertise. 

“Nevertheless, it is expected that, as the markets mature and regulatory frameworks are established, the barriers hindering growth will begin to diminish.”

“In the face of a rapidly evolving and highly competitive market; the ability and willingness of companies to leverage the latest technology and services in the cannabis extraction sector will mean the difference between their success, or failure, in the space.” 

Peter
Peter McCusker is an experienced news and business editor, who believes it’s time to fully embrace the multiple, proven, medical benefits of the cannabis plant.

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