Extraction is a key part of the production process for many cannabis companies. There are so many possible products that can be created starting from flower. Properly managing the human capital aspect of extraction can be difficult. There are numerous pitfalls that can emerge from hiring the wrong people to design and run your facility.
This is a two part series about how to properly manage the human capital challenges that arise from developing and scaling an extraction facility. Part one focuses on developing the proper production plans upfront, while part two focuses on how to find and hire the right staff to execute on those plans.
Part 1 – Determine your Production Strategy
The first step in an effective production strategy is to understand your objectives. It may sound obvious, but it’s shockingly common for the entrepreneurial spirit to prompt business owners to put the cart before the horse, so to speak.
Whether you’re starting anew or expanding your operation, it’s crucial to “start with the end in mind.” That means determining what kind of products you want to produce and your customer set, then designing your strategy accordingly. Having clarity will enable you to invest wisely.
Clarify Your Intention
Here are a few key questions that will help you approach your strategy planning:
Are you focused on finished products?
Concentrates, edibles, vape pens, tinctures, tablets, capsules, beverages, and topical creams will all require different production approaches.
Do you want to produce raw ingredients?
Will you produce isolate, distillate, terpenes, etc.?
Are you going to white-label products or toll process?
White-labeling can change the operational workflow and output capabilities. A single facility may need to produce several brands’ products, or some of your equipment may be used for toll processing.
Who are you selling your products to?
You’re likely selling to retailers or distributors if you produce finished foods. If you’re vertically integrated, you may be selling to dispensaries and your own stores using a hybrid model. If your plan is to white-label products, do you plan to produce numerous competing brands? You should prepare for companies to take production in-house if sales go well.
Determine Extraction Methods
Once you’ve established your production strategy, you can choose the extraction methods and equipment you’ll need and what sort of scale you’ll need to accommodate. Many decisions need to be made about facility design and equipment early on.
Here are some examples of decisions that need to be made early on:
The primary extraction methods are CO2, hydrocarbon, ethanol, and solventless. Each of these methods has different capabilities and advantages/disadvantages. They have differing upfront and operational costs.
Most craft concentrates are produced through hydrocarbon extraction. If you don’t build out your C1D1 room, it will be a significant investment you’ll need to make later on if you decide you want to use hydrocarbon equipment. Many states also require it for ethanol extraction as well.
You also need to factor in some flexibility and redundancy for refinement equipment. This applies especially to hemp refinement to produce CBD and more rare cannabinoids such as CBN, CBG, etc.
Leaving space for a commercial kitchen is not a requirement for every operation, but choosing not to will present a significant challenge if you decide to make an edible product line in the future.
Engage a Consultant
At this stage, it is beneficial (even crucial) to have the assistance of an experienced consultant rather than relying solely on advice from equipment manufacturers. Working with a consultant will ensure you receive input based on a bigger-picture strategy.
I always recommend that whoever runs a processing facility gets involved as early as possible with design and equipment. It can be helpful to engage a consultant to “pick their brain” for a fee. Later, you may hire them to produce deliverables like equipment lists, lab designs, SOPs, and more. The timeline from planning to operational status can be lengthy, so you may need to engage someone as a consultant early on.
A consultant must be two things:
- Objective in their advice. Some consultants have partnerships with equipment vendors and may not give the best advice on selecting the right equipment across the entire production process.
- Experienced in operating a lab facility. Many consultants who’ve never run a lab will design a lab that works well in theory but can have many operational issues. I have placed numerous extraction managers who have to run a lab that’s not practically designed.
Expanding Into New Markets
The phases of your company are also critical. While it’s essential to start planning early on, sometimes business plans come about from new opportunities within the marketplace.
Multi-state expansion is a major one. You may have a successful processing facility and product line in one market, but can you replicate it in others? You will need to address many regulatory and technical challenges.
- Are you going to own your production facility, or will you need to find a production partner?
- Will you be able to guarantee a consistent supply of biomass to process?
- Will your product line need to be tweaked for each market? Based on regulations as well as consumer demand.
- Ensure you understand the different regulatory requirements in other states as they can vary widely.
You’ll need to think through how you will operate multiple facilities in multiple states. Many companies now use a franchise model with a corporate team that supports their operations across all markets.
New Product Development
Developing new products or improving existing ones is important to stay competitive. You need to stay up on consumer trends to ensure you’re competitive. Recent trends like “live” concentrates and rosin have changed the concentrate and edibles market.
Due to steep competition, companies that haven’t adjusted are getting forced out of the marketplace in many states. Setting aside some budget for R&D can be helpful. Companies who are able to pivot are those willing to make capital investments to improve products to make new ones, adjusting to a changing market.
A Partner for Every Stage
An excellent resource for the production strategy process is Hunter + Esquire. We are an ideal search partner for the cannabis industry. We offer objective advice and will match you with the right talent for whatever phase your company is in. We may not be the subject matter experts on processing, but we know how to find you the absolute best ones within the cannabis and hemp industries. Developing your production strategy is hugely important to developing your processing facility. Once you’ve fine-tuned your strategy, it’s time to find the staff.