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Achieving a competitive price point for high quality cannabinoid ingredients such as distillate, is due in large part to scalable extraction technology that can process cannabis biomass into high purity and high potency oils at an industrial scale. This ensures the ability to keep up with fluctuations in consumer demand and accommodate any oversupply of biomass.
To best understand what the cost of distillate is in Canada, there is a combination of fixed and fluctuating variables to consider that can affect the price. These are relevant to cultivators looking to maximize the value of their harvest, and for manufacturers looking to create competitive pricing in their portfolio of cannabis derivative products.
1. Potency / Purity:
Nextleaf’s patented cryo-ethanol extraction process is capable of achieving a distillate with up to 95% pure cannabinoids (THC, CBD). The average potency achieved through CO2 extraction is 60-70%, and the remainder is waxes, fats, chlorophyll and other impurities.
2. Volume of Distillate:
Our phase 1 closed-loop extraction plant at Nextleaf Labs can process the same amount of biomass into a refined oil as 10 large CO2 extractors.
3. Quality of Input Material (Biomass or Crude Oil):
Ethanol is a more efficient solvent for cannabinoid extraction compared to CO2. An ethanol-based extraction process is capable of handling lower quality, or lower potency biomass. This versatility allows cultivators to maximize the value in each harvest. This is especially relevant when cannabis is cultivated outdoors as environmental variables can dramatically affect yield, but this can be offset through extraction, and conversion into value-added products.
4. Operating Expenses:
To achieve a daily throughput of 600kg/day it would take thirty people operating ten CO2 machines to keep up with only three team members operating one of Nextleaf’s custom designed cryo-ethanol skids.
5. Availability of Input Material (Biomass or Crude Oil):
There is over 400,000 kg dried cannabis in inventory industry wide. Furthermore, fall 2020 will be the largest legal outdoor cannabis harvest not only in Canada, but Globally. 21M sq. ft. of agricultural land became licensed for outdoor cannabis cultivation in the first year of eligibility through Health Canada (versus 13M sq. ft. of indoor cultivation licensed after 6 years).
6. Scope of Contract:
The type of agreement established can affect price. Depending on whether the contract includes toll processing, revenue splits, or includes value-added services such as post-extraction processing prior to product formulation can all impact cost.
7. End Goal:
A variety of products can be manufactured from distillate including vape cartridges, infused products such as beverages and edibles, or even THC-O Acetate, a pro-drug with potential unique medical benefits. The final formulation, or types of formulations (if multiple product formats are sought) can often dictate the required potency, volume of distillate, or scope of contract.
The cost of distillate in Canada is closely tied to these 7 factors, and while not all equal in their impact to the end price, each must be considered to create the most accurate and competitive pricing.
A Note on Defining Quality:
At Nextleaf, we define quality through value, and purity/potency. The ability to maintain quality at scale is a challenge faced by any industrial scale processor. Our team of Engineers, Chemists, and Extraction Technicians have overcome this challenge by designing a patented closed-loop process for cryo-ethanol extraction, refinement and purification that allows us to achieve high purity and high potency oils at an economical rate.
Suitable for a wide variety of end products, our distillate is a versatile ingredient for formulating into vape pens, concentrated oils, and can be emulsified into beverages, and edibles. Beyond cannabinoids such as THC and CBD, any additional ingredients used in product formulation are ultimately a measure of the overall product quality as well. This becomes relevant to brand positioning and consumer perception, which are integral to creating products that have wide appeal.
Due to the purity of our distillate, product developers can reduce or avoid the need for excess flavours, stabilizers, or additives if they choose. This reduces formulation costs, enabling a more competitive price, and a cleaner product for the end-consumer. A win-win all around for cultivators, brands, retailers, and consumers.
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