# Cannabis Extracts – the fastest growing sector on the planet

The Global cannabis market was worth just on $9 million in 2016 and will grow at a staggering 35% year on year for the next couple of years, to be worth an estimated$146 billion by 2025. That's phenomenal growth, and yet inside of the industry is a sector growing even faster than that – the extracts market.

Grandview Research predicts that the oils segment of the market is expected to grow at over 40% per year for the next eight years. And historical facts validate this growth rate. In mature recreationally-recreationally-legal US States such as Colorado and Washington, extracts make up over 50% of the market.

Sure, flower is still the dominant form and sector of the industry, but extracts and concentrates are growing, faster, and on the reasons for this is the dramatic difference in taste between flower and extract. Extracts contain not only the cannabinoids (CBD, THC et al) but also, the beneficial terpenes.

Terpenes are chemical compounds found in cannabis that produce the distinct flavour and smell of the cannabis flower. That means that mango scent of Mango Kush or the blueberry, sour smell of Green Crack is created by different terpenes.

The real benefit to extraction, is the ability to extract the full-spectrum of cannabinoids and terpenes, and with it fuller flavour, potency and effectiveness of the "entourage effect", a term coined by Dr. Ethan Russo following his 2006 study of the relationship between cannabinoids and terpenes and their combined effects on the human body.

It is important to bear in mind that although most concentrates are easily identified or known by their appearance, the real difference between most products is how it's made, not its final form.

### Extraction Methods

Essentially, there are two different ways to create concentrates – solvent-based and non-solvent based extraction. Solvent-based uses solvents (usually propane, butane, CO2 or Alcohol) which are then used to separate the compounds from the flower.

Solvent-based extracts use highly flammable chemicals to strip the flower of their compounds and terpenes, and then purge the solvent from the final product to produce the leave behind extract.

Non-solvent extraction processes typically involve using ice to chill cannabis flowers to sub-zero temperatures, to detach the trichomes from the flower. Heat and pressure extraction methods are sometimes also implemented to make non-solvent concentrates.

### Form Factors

The beauty of extracts is that they can take on a variety of form factors, which can then also produce form factors, all of which do not involve smoking. The types of concentrate include oil, wax and budder, live resin and shatter, which can then be used to produced gel capsules, vape cartridges, gummy bears, and oral sprays.

And the market is showing significant signs of growth. In a recent report by BDS Analytics, they estimate the extracts market will grow from the $2.9 billion in 2018 to a staggering$8.5 billion by 2022. By 2023, they estimate it will surpass flower sales.

"We believe the growth of the concentrate market will continue as the cannabis industry evolves and consumers look toward new and innovative delivery methods that fit their lifestyles."

Once you look a little closer under the hood, it becomes quickly apparent that there are many advantages of extracts over flower that are driving this growth boom, and it is not only about not smoking.

### Safety first

Oils, concentrates, extracts – you name it – are all considered safer than flower, and for two primary reasons. The first, and most obvious, is the fact that people simply do not want to smoke anything. Anything you smoke creates carcinogenic smoke, which if consumed for a long period of time can kill you. Yet, cannabis itself, cannot. Vaping oils are far less impactful on your lungs than smoking and are usually accompanied with no smell.

It is also safer, as there can be no pesticides or mould residue left in oils. Oils and extracts are created under a combination of high temperature and high pressure. In doing so, they "purge" the oils of anything harmful. Purer, cleaner and simply…safer.

### Consistency is everything

Oils are far more consistent and reliable than flower. Given the levels of automation and extraction technology that exist in the industry today, superior levels of processing are creating very consistent levels of dosing. Companies are now able to fine tune components of the cannabis plant and create personalised dosages with regulated combinations of the various compounds and terpenes.

By being able to really extract the finest distillates, the level of accuracy when it comes to dosage is simply in another league compared to flower. Flower has differences in mass, weight, shape, and size, and consistency in strength and potency. Doctors can easily titrate oils and can do so in the most consistent of manners, free of any margins for error.

### Supporting the growth in the medicinal market

Oils and extracts allow for many more options when it comes to form factor. With the option of gel capsules, oral sprays and vape cartridges, they create many more pharmaceuticals use cases. The dosage can easily be controlled, and the onset can be controlled and measured.

Those suffering from insomnia may want to have the onset come on slowly as they take the tablet or edible before bed. Whilst pain sufferers may want an immediate onset to deal with the effects of chronic pain. Oils and extracts support both the effect and form factor of medicinal cannabis.

### You are what you eat

Edibles are driving increased acceptance of cannabis in both the medicinal and recreational markets. It's an entirely new form factor and one that does not have any association with smoking or vaping. It's very appealing to an entirely new market who do not want to smoke anything.

It's also made it more socially acceptable. It is now commonplace at dinner parties in recreationally legal States in the US, for the hosts to bring out a tray of gummy bears early (or later) on in the evening. Guests know exactly what they are getting (in terms of dosage and strength) and can all enjoy a dinner "buzz" without having to get drunk.

There is also no doubt that the global "wellness phenomenon" has accelerated the development of hemp and cannabis-derived CBD oils. This has now been given another boost with the passing of the Farm Bill of 2018, which has removed hemp from its Schedule 1 status and legalised it for industrial production.

### Higher Margins, Higher Prices

Oils command higher prices per gram and come with larger operating margins as a result of decreased production costs (when produced at scale). Oils cannot simply be manufactured by anyone. You need the equipment, the solvents, and the know how. You can also use the entire plant, and given the final distillate is so refined, it does not matter whether the plants were grown outdoors or indoors.

In addition, it offers a higher retail price, which is great for the dispensaries and opens the door for large scale consumer goods company to develop market-leading brands. For, in the end, that is where the ultimate value will lie.

### The Bottom Line

This is a booming sector and one that is being driven by both medicinal and recreational cannabis legislation around the world. As the world moves to a higher level of consciousness – allowing for the propaganda surrounding cannabis to dissipate – so there is a move away from smoking anything and this provides the perfect platform for extracts to take center stage.

"Much of the growth can be attributed to the beginner-friendly, brand identified vape cartridge subcategory."

– Cannabis Business Times September 2018

They offer infinite variety in dosage form, composition and consumption method. Clean, more consistent and far more potent, they offer the consumer market the ultimate in choice. From the medicinal patient not wanting to smoke flower to the recreational user looking for a premium high from a dab of budder, extracts and concentrates cater to all tastes.

The Cannabis Industry is growing faster than any other industry on the planet. The extracts market is the fastest growing sector of the industry. And it benefits both medicinal and recreational markets and users.

And with its premium pricing and higher margins, it starts with the two key ingredients that large scale consumer good companies look for when identifying areas for high conviction growth in products and brands.

##### Get the Latest Marijuana News & Content in your Inbox!

All your support helps The Green Fund keep writing content for all you
marijuana enthusiasts and potential pot stock investors

###### Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.