September 25, 2019 Andrew Ward
2019 Data Shows Adding Solventless Processing Can Increase Profitability
Editors Note: we are in no way affiliated with MJBiz Daily. This is not a sponsored piece in any fashion, and they made no requests of us. We are just huge fans of their data and think that anyone who is serious in the cannabis industry will be better off understanding what they put out. There are plenty of other great sources of cannabis data as well, such as New Frontier, Headset, and more.
Like much of the cannabis industry, we here at PacificGlassCo are huge fans of Marijuana Business Daily. The publication is one of the best outlets for business news, and has some of the top conferences and events each year.
MJBiz an immense resource for news and connecting with the industry. It also create wonderful reports for the industry. It’s yearly factbook is one of the best looks into the cannabis market. Its recently released 7th annual factbook proved to be yet another winner that is chock full of insights. We fully recommend you grab a copy for yourself.
One of the biggest takeaways in the 2019 Factbook details how cannabis processing laboratories report dramatic differences in profitability depending on the number of product SKUs they produce, especially above 7 individual SKUs or more. We dive into more detail into this below, but now modern cannabis data backs up an assertion we’ve made repeatedly which is adding solventless processing to your extraction SKU mix can be one of the best moves a processor can make for their bottom line.
This year’s edition delved deep into the world of cannabis concentrates and other consumables. 2018 saw concentrates gain across the board in Colorado and Washington state.
One of the standout aspects of the cannabis market continues to be its wide base of consumers. Products can range from everyday items to premium products that rival fine wines to some connoisseurs. As such, the 2019 Factbook identified specialty goods, like beverages and edibles, where major brands compete over features other than price. On the other hand the essentially interchangeable commodities market where dab manufacturers, for example, compete on price. Meanwhile, the Factbook puts vape pens in the middle of it all.
Data once again drives the narrative that concentrates are on the rise.
Key Trends to Watch For
Dabble concentrates made a modest jump from 13% in 2017 to 13.3% of the two state’s market share in 2018. Edibles jumped from 8.5% to 10% during the same period of time. Though, vape pens lead the charge, going from 9.1% of the market share in 2017 to 14.7% last year.
At the same time, pre-rolls fell .4% to 7% in 2018. Meanwhile flower continued its market loss trend, falling just below half of the market share with 49.5% of the market. The fall from 2017’s 57.9% market share was much steeper than the decline from 2016’s 62.2%.
One of the more possibly surprising statistics concerned age demographics. Concentrates held the largest market share in consumers aged 76 and up. Each other demographic was unable to cross into a majority share of its market.
What MJBiz dubbed the “Silent Generation” was able to take up 57% of the market. The weird range of beverages, capsules, topicals, tinctures and sublinguals led the way with 21% of the market share. Edibles (16%) and vape pens (17%) weren’t far behind, with dabble concentrates rounding out the remaining portion of the share.
Rosin and other solventless extraction-derived items can do wonders for a company’s menu. This is especially true for brands offering several types of SKUs to choose from. The 2019 Factbook found a significant jump in companies reporting profitability when crossing into the seven and higher amount of SKUs. 60% of companies offering seven to 10 SKUs reported profiting, with 30% breaking even.
The potential for profit falls in a similar range when offering more than 15 products. 64% of business report profiting at this level. That said, only 18% of companies reported breaking even.
The sweet spot appears to currently be at 11 to 15 SKUs. A staggering 83% of companies reported profiting at this stage. However, the remaining 17% were unprofitable, leaving zero wiggle room for break even.
On the other end of the spectrum, smaller SKU offerings seem to make it rather difficult to turn a profit. Only 6% of businesses offering one to three SKUs were profiting while those offering four to six only saw a profit 20% of the time in 2018.
For some, producing such a number of SKUs may seem like a tall task. However, that shouldn’t be the case when using an approach like solventless processing. Products like hash rosin are some of the most versatile items a manufacturer can produce.
Hash rosin is a potent and pure product free of solvents and rich in the plant’s profile. usually going for $40 to $80 per gram, hash rosin is a high-end concentrate that builds brands and loyal buyers.
Hash rosin can serve as an optimal foundation of a brand’s menu. In addition to hash rosin, the following additional SKUs can round out a brand by while sticking to solventless processing:
Solventless Dabbable Concentrates
In addition to hash rosin, the following SKUs target the range of buyers in the market. They include the popular sift rosin. With a price point falling in the middle of the pack at $30 to $60 per gram, sift rosin is considered “a step up” from rosin derived from flower. The just mentioned flower rosin goes for $20 to $40 per gram and is considered quality when extracted from fresh, high-quality cannabis.
Then, for connoisseurs is full-melt 6-star rosin. This is the premiere stuff that many claim to make while only a few truly can do it properly. As such, expect to pay anywhere between $45 and $100 per gram for it. Keep in mind that not all strains are suitable to create full melt. Anecdotal evidence said only 25-35% were suitable for processing 6 star hash rosin.
Higher price point items also include rosin cartridges, which tend to begin selling at $50 per half gram. The highly potent oil takes a more skilled hand to create but does represent one of the fastest growing sub-markets today.
Solventless Topicals and Solventless Edibles
The category pretty much details what to expect from these SKUs. With edibles, consumers get a product derived from oil which can come from a number of concentrates from rosin to shake. Typically, solventless edibles retail for 10% to 25% more over the solventless variety. Those are the figures for solventless topicals as well. Deriving from the same sources as edibles, topicals provide opposite onset effects for consumers, In doing so, in theory, covering a significant portion of the market with two SKUs.
Each SKU offers the opportunity for a brand to really customize itself and standout as a brand worth taking note of. Consider the facts laid out decide which is feasible and best for your business. Our team at Pure Cannalabs is happy to help get you on the right track with as much or as little help as you need.
Be sure to your copy of Marijuana Business Daily’s 2019 Factbook to learn more about solventless and the cannabis industry overall.