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How to Make Money in the Competitive Cannabis Market?

Dollar banknotes rolled around cannabis flowers.

Author

Dr. George Stantchev
Dr. George Stantchev

PHD, MBA, MSEE, Entrepreneur and CEO of most innovative extraction technology company.

A Better way of Applying Science in Medicine

What is Changing?

Understanding the Customer

The world is changing daily. The world economy is affected by market, pandemics, customs, ethnicity, religion, politics, etc. Whatever worked years ago will not be applicable now. The customer gets more educated and in many cases influenced by convenience. 

There are normal cycles in the economy that drive the customer behavior. Below is an overview of the changes in the economy when the cost of raw material changes and the adjustment of the consumers. 

In inflated market there are few sequences that affect the market:

  • Companies have unsold goods. To improve their cash flow they try discounting goods to get rid of their excess stock.
  • Lower wage growth. As unemployment rises and there is more competition for job vacancies. Unemployment should reduce wage inflation.
  • Lower commodity prices. A global recession should usually reduce demand for commodities and reduce the price of commodities.
  • Lower expectations. Low confidence in an economy usually reduces inflation expectation.
  • Falling asset prices. In a recession, the price of assets tends to fall due to lower demand. This leads to lower wealth and therefore, less spending.

Understanding Market Psychology

Purchases depend on consumers having disposable income, feeling confident about their future, trusting in business and the economy, and embracing lifestyles and values that encourage consumption.

According a Harvard research in a recession market cannabis companies should prepare for a possible long-term shift in consumer values and attitudes and start building value and trust

  • Assess opportunities – Track how customers are reassessing priorities, allocating budgets, switching among brands and product categories, and redefining value. Determine products that have poor survival ability and embrace the right products.
  • Allocate for the long term – Realignment with market conditions requires frequent re forecasting of demand for each item in a product line as customers’ buying habits shift.
  • Build value – Create a package of benefits into an offering so the customer feels that is buying more for the money.
  • Improve affordability – Depending on customers the businesses fold more services into the bundle, creating value.
  • Build trust – reinforce an emotional connection with the customer and demonstrate empathy are vital.
  • Position for recovery – There is a good possibility that consumer attitudes and behavior shaped during this recession will linger substantially beyond its end.

Where is the value?

Cannabis has been used to treat pain since as far back as 2900 B.C. Plants have natural values in the baring oils, they get very powerful and strong medicine when concentrated with extraction. The most powerful is the flower oil when extracted properly with nature being in mind. Тhe Flower Oils contain a mixture of natural compounds that are extremely beneficial for the body functions:

  • 104 different cannabinoids, also called oleoresins;
  • 3,000 terpenes also known as essential oils;
  • Flavonoids are natural substances with variable phenolic structures;
  • nitrogenous compounds;
  • common plant molecules.

The Major Cannabinoids

There are few major cannabinoids that make 90% of the effect when cannabis has been used: CBD, CBG and THC. CBD may help reduce some cancer-related symptoms and side effects related to cellular level cancer treatment. THC is a cannabinoid that activates neurons responsible for pleasure, memory, and thinking and has direct medical benefits in addressing a number of mental illnesses. CBG is the precursor of both and works to fight inflammation, pain, nausea and works to slow the proliferation of cancer cells in stem cell recovery.

The benefits of the major cannabinoids have been already well studied. According the national institute of health (NIH) there are the following 20 conditions that can be directly influenced by the major cannabinoids: amyotrophic lateral sclerosis, dementia, anorexia and weight loss, irritable bowel syndrome, dystonia, nausea vomiting, addiction, sleep disorders, tourette syndrome, traumatic brain injury, multiple sclerosis, spinal cord injury, depression, stress disorder, epilepsy, chronic pain, parkinson’s disease, summary, glaucoma, anxiety.

The Minor Cannabinoids

Other common cannabinoids with smaller concentrations in the plant include CBN, which may treat pain and insomnia, and THCv, which may have neuroprotective properties. CBC shares many of the same benefits as CBD for reducing pain and inflammation, protecting the neurons from damage, and alleviating hyperactive symptoms like chronic stress or anxiety. CBDV significantly reduces the frequency and severity of seizures. It also reduces or even eliminates nausea associated with several conditions, and helps to reduce inflammation throughout the body. CBDV is also beneficial in the treatment of pain and mood disorders.

Many other cannabinoids can be found in varying percentages within specific strains and we expect that continuing research will yield new treatment applications for cannabinoid components whose potential remains to be fully understood. Paying attention to the cannabinoid content of the strains you sample will help you identify what works best and may help guide future purchasing decisions.

The Terpenes

There are 300,000 terpenes in nature that form the plant essence and taste, 3,000 of them are found in the cannabis plant and modulate the cannabinoid performance. Tht is how we have strain variances as Indica, Sativa and Hybrid strains. There has been extended research on how the terpenes influence the medical effect of the cannabinoids. According to recent studies, a number of most popular terpenes activate the cannabinoid receptors up to 50% before the cannabinoid connects to them. This means that keeping the extracted oil in natural strain ratios increases the bioavailability of that oil in times of magnitude. 

Below is more to the strain specific effects from the terpenes:

  • Indica strains tend to provide a physical effect, which can be felt throughout the body. These strains are commonly used for reducing pain, relieving muscle tension, increasing relaxation, and helping patients rest. Indica strains are often recommended for nighttime use, because many patients find them helpful for promoting sleep.
  • Sativa strains tend to produce a more cerebral effect, which impacts mood and emotion. These strains are popular for increasing energy levels, improving focus, and combating depression. Sativa strains are often recommended for daytime use because many patients find them helpful for providing symptom relief without interfering with daily activities.
  • Hybrid strains are varieties that contain similar levels of indica and sativa. These “best of both worlds” strains offer a balance between the benefits of both types.

The Medical Effect

There are 11 basic body functional systems in the human body:

The Endocannabinoid System (ECS) helps to fine-tune most of the vital physics. It promotes homeostasis and affects the processes that regulate sleep, appetite, pain, inflammation, memory, nausea and even depression. The ECS helps to regulate homeostasis in all major systems of the body, which guarantees that all systems work together.

  1. Vascular system, CB1
  2. Respiratory system, CB1
  3. Excretory system, CB2
  4. Reproductive system, CB1
  5. Nervous system, CB1
  6. Muscular system, CB1
  7. Endocrine system, CB2
  8. Lymphatic system, CB1, CB2
  9. Gastrointestinal system, CB2
  10. Immune system, CB2
  11. Skeletal system, CB2

It is often mistakenly thought that endocannabinoid receptors are found exclusively in the brain. This is not entirely true, as they can be found in some glands as well as in immune cells. The functions of the receptors are mainly to maintain the balance in the body and to monitor the proper course of homeostasis.

The receptors that act as locks in the endocannabinoid system are CB1 and CB2.

CB1 receptors are found in abundance mainly in the central nervous system (CNS) – the cerebral cortex, basal ganglia, hypothalamus, cerebellum and less in the periphery.

CB2-receptors predominate in the tissues of the immune system – spleen, tonsils, thymus, immune cells.

Human body with organs diagram

The terpenes are now considered as the lesser-known modulator that amplifies the overall performance of the cannabinoids. The most common terpenes in cannabis are Myrcene, Pinene, Caryophyllene, Limonene, Terpinolene, Linalool, etc. Since the terpenes are the hormones of the plants, they play an active role in the manipulation of our moods and emotions.

Diagram with CBD entourage effect and related terpenes.

The “entourage” effect is based on utilizing all natural compounds present in cannabis working together to create “the magic power of cannabis”

  • CBD – collagen recovery
  • THC – central nervous system recovery
  • THCV – obesity-associated glucose intolerance
  • CBDA – anti inflammatory effects
  • CBC – antitumor effects in breast cancer
  • CBDV – anticonvulsant effects
  • CBN – peripheral Nervous system
  • CBG – Stem cell activator
  • Flavonoids – powerful antioxidants
  • Terpenes – mood and bioavailability

When we discuss entourage effect and bioavailability the next logical question is do we preserve all those values in the oils we use to formulate our medicine. The Cannabis industry has been yang in its maturity and product formulations and a lot of quick decisions have been made. As an example, for the extraction of the active components, a number of methods have been implemented. Most of them do not transfer all the medicinal components to the extracts.

That is why PURE5™ scientists have developed an extraction methodology that maintains all plant vitality and does not degrade the components from the original strain. The PURE5™ equipment uses safe aerosols and performs the extraction at ambient temperature on either freshly cured or dry decarboxylated flowers, gently extracting the oil-based components without creating any undesired byproducts. The terpenes are also gently extracted along with the full spectrum of cannabinoids thereby preserving all-natural values in a natural pristine oil extraction forming pure strain specific oil.

Terpene Profiles Table

On the diagrams above one can see the original terpene profile (1) of the plant preserved by utilizing the PURE5™ gentle, ambient extraction process in the order and quantity over and over in the Live Resin (2) and Full Spectrum (3) oil fraction.

Building the Value

We already discussed all the basics of the plant, raw materials and processes to obtain them and have all the building blocks to create the value.

Cannabis value chart

Starting with the cost that the customer is always willing to pay and bringing the values we have achieved in the process as example: organically grown strains, maintaining full body entourage cannabinoids, full phenols and terpenes recovery, that directly address the metabolic and neuro stimulation of the body systems with high health benefit, extracted in such a gentle way that they preserve all natural values and complete terpene profile that enhances the bioavailability. 

All of the above along with properly built consumer trust would increase the value of the products to the customer and will more likely have that customer returning back for the same products and services over and over. This is how the PURE5™ process offering is creating values in your products and overcomes the crowded marketplace general offering.

Economics

The below discussion is usually kept as the proprietary extractor knowledge and no extraction company will rarely discuss with customers. The reason for that is that the numbers differ between systems and vendors and since the extraction companies are focused on selling their machines most often shorten the process explanation especially in numbers. 

Below is a parallel in between the Capital Expense (CapEx) and Operational Expense (OpEx) that an extractor should know. In those numbers only the hard cost of operation (power and loss) is included without taking into account labor and Time to Market. 

ParameterCO2EthanolButaneR134a
CapEx$450,000.00$125,000.00$250,000.00$125,000.00
Facility Compliance$50,000.00$100,000.00$200,000.00$0.00
10L Volume3333
particle size0.5NANANA
Extraction Time120404060
Efficiency90%85%95%97%
Recovery Time1801806060
Solven per run121088
Pressure310169
Recovery Efficiency90%85%90%99%
Solvent Loss1.21.50.80.08
Solvent Cost$10.00$7.00$10.00$7.00
Cost per Run$12.00$10.50$8.00$0.56
Power2010102
Energy cost$6.00$3.00$3.00$0.60
Total per Run$18.00$13.50$11.00$1.16
Run Cost per Month$3,240.00$2,430.00$1,980.00$208.80
Cost to Install$500,000.00$225,000.00$450,000.00$125,000.00

The only extraction we have not discussed above is the “solventless” Rosin press. That extraction is not really solventless since it may oftenly to go through ethanol as a secondary step for wax removal that comes from the melted trichomes. Rosin winterization is more likely necessary to remove impurities, like wax, left behind in the rosin. By removing the impurities in the rosin, it keeps and looks fresh for longer and also increases in THC content.

Knowing your process

Each extraction method delivers quite different extract consistency. That is so because of the properties of the solvent and what it is its selectivity within the plant values. It is essential to understand the nature of the active ingredient to be obtained. In the case of extraction oils it is a fairly non polar compound that would be extracted easily with other non polar compounds. 

The other important topic is the aggressiveness of the solvent and the byproducts that may be created during the process very often by oxidation or chemical reaction. As example CO2 under supercritical pressure would create acid with the moisture, rosin will burn terpenes and convert cannabinoids, ethanol is a polar solvent, allowing it to extract both water and fat-soluble plant compounds and need to be purged heavily due its high boiling point. Hydrocarbons should be purged thoroughly as well to avoid aftertaste and major health complaints. 

Solubility chart

PURE5™ uses safe aerosols for extraction that have been used in the pharma industry for decades and the inert nature of the solvent along with the ambient process does not create byproducts which makes it one of the most natural single run processes. It also minimizes the pre-processing since the extraction can be done on a complete or grinded fresh or dry plant. The processing is quick and the pure natural extracted components are separated from the raw material under the most favorite conditions. Since it is an extremely selective process extracting only the plant resins and terpenes there is no post processing required.

Time to Market

The Time to Market (TTM) is as important as the CapEx and OpEx for the success of the business. Utilizing CO2, ethanol, rosin and butane needs lengthy pre and post processing which requires stock of a product to be maintained to satisfy demand. Utilizing the PURE5™ single run process can put a product on the market within 24 hours. Pelos is an example chart of how multiple products can be created from each fraction the method can produce. 

Extraction process block schematic

What the PURE5™ process creates is an unique type of extract containing all terpenes and cannabinoids that differs by values from every other extract obtained. We simply called the extract “Hash Resin” which means hash drug made by compressing and processing parts of the cannabis plant, typically focusing on flowering buds containing the most trichomes and resin is a solid or highly viscous organic substance of plant or synthetic origin that is typically convertible into polymers.

Summary

Our 10x formula for success in the competitive cannabis market is simple and comprises the answers from few simple questions keeping a full awareness of the customer, market and the tolls you are using to get to your target profit:

  1. Who is your customer (what is the psychology)?
  2. How much will it cost you to acquire it (plan your expense)? 
  3. What products will you plan to produce (capture the demand)?
  4. What process will you choose (build the value)?
  5. How much is your CapEx (startup capital)?
  6. How much is your OpEx (keep the cost low)?
  7. What is your ROI (be successful in months)?
  8. What is the Time-To-Market (on demand delivery)?
  9. What type of people (partners) do you need?
  10. What are your 1, 5 and 10 year goals?

Share your success with PURE5™. We offer a cutting edge worldwide exclusive technology that can deliver a post winterized terpene rich oil in one gentle extraction pass. The oil is fully strain specific, highly potent and ready to formulate in products right off the extraction. 

For inquiries or comments contact:

George Stantchev, PhD

george@comerg.com 

(602) 284-8038

www.pure5extraction.com

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