Cannabis concentrates have grown in popularity because of the wide variety of uses they have. Legally produced concentrates are sold for direct consumption in small containers and are odorless when sealed. The market is booming more so, however, because cannabis concentrates are used to make edibles, topical ointments, capsules and other packaged products that require a more professional extraction.

When concentrates are purchased for direct consumption, they are named for the different consistencies created by the extraction. These waxes, oils and shatters are formulated for use in portable vaporizers and elaborate vaporizing rigs.

According to cannabis strain database Leafly, some extract concentrates have tested as high as 80 percent in THC, the psychoactive compound found in cannabis. That is significantly higher than the THC content found in flower form of the strongest strains, which typically tests in the mid to high 20s.

Ryan Long, the head of business development for California-based Absolute Extracts, figures that there are probably “hundreds” of concentrate producers across the country.

That estimate includes companies focused specifically on making concentrates, dispensaries that produce and sell their own concentrates, and small one- to two-man operations in places where concentrates are still either illegal or only partly legal, such as in Michigan.

Many of today’s larger concentrates companies started as tiny operations, but a good number have quickly moved out of basements and into industrial warehouses featuring high-tech equipment that costs tens of thousands of dollars.

From a business perspective, the profit margins can be huge, in some cases up to 60%. And demand is growing rapidly as the availability of concentrates increases.

Customers are also willing to shell out top-dollar for these products. Nationally, patients and consumers who favor concentrates spend an average of $4,800 each year, more than double the average amount spent by cannabis users in general, according to What Cannabis Patients and Consumer Want, a marketing research report published by Marijuana Business Daily.

Nearly 70% of edibles manufacturers produce other products such as concentrates and topicals. Sixty percent of concentrates manufacturers also offer a diverse product mix. Despite the dominance of edibles and concentrates, less than a quarter of infused businesses produce these types of products solely.

Edibles 68%
Concentrates 63%
Topicals 45%

Trend:

Companies are going to be constantly on the lookout for ways to improve their processes and maximize their returns on the cannabis plants they use.

Cannabis Concentrates Market Size and Growth

One of the key hurdles that concentrates must face has to do with a negative public perception of the extraction process. However, as innovation and technology becomes a more integral part of the industry, producers of concentrates are developing cleaner, safer, and more efficient tools and processes to overcome this stereotype.

Demand for cannabis concentrates and edibles is exploding, offering a window into trends that will likely play out in the larger cannabis industry over time.

In 2014 when adult-use just launched in Colorado, over 70% of sales came from dried flower; in 2016, that was down to 55%. In contrast, concentrate sales were $20 million in 2014, or 13% of sales. By the end of 2016 they had jumped to $85 million and 25% of sales. Edibles (including candy, beverages, tinctures, and all food) more than tripled during the same period, from $17 million to $53 million, moving from 11% to 14% of sales. Vape pens and vape products, candy, and other portable and convenient methods of consumption are especially popular with Colorado consumers.

Similar trends occurred in Washington State. By the end of 2016, 23% of Washington cannabis sales were concentrates, 9% were edibles, and 10% were pre-rolled cannabis cigarettes, with dried flower accounting for only 57%. In Oregon where concentrates and edibles were only allowed for the first time in the adult-use channel in July 2016, concentrates quickly picked up 19% of the market, while edibles 7%.

Colorado, Washington and Oregon cannabis market was about half the U.S. cannabis market in 2016. These three markets showed the main trend with concentrate sales reached about quarter cannabis sales.

 

If you intend to produce edibles and topicals with In-House Processing or Purchase Extracts From Third Parties Or Combination you could be interested in our Cannabis Infused Products Manufacturer Financial Model.

If you intend to start a Cannabis Processing business you can find our Cannabis Extraction/Concentrates Business Plan Template.