Cannabis Extraction Business

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.

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%

Cannabis Concentrates Market Size and Growth

Based on statistics from the more mature cannabis market in North America, we can see that medicinal cannabis, despite being dominated by flower products in the early stages of the development, will lean towards extract-based products. We can already see this transition in Europe. The most recent European numbers show an increase in extract focus: Austria produced 100% extracts in 2021; Czechia produced 83% capsules in 2021; Denmark’s Q1 2022 registered 78% extract sales; 46% of Germany’s public reimbursed sales were extracts in Q4 2021; the United Kingdom’s May 2022 extracts accounted for 30% of total market sales. According to Prohibition Partners, many emerging markets in Europe are expected to see exponential growth in sales of extract-based products, with sales expected to reach €1.5 billion by 2024.

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. Solventless products are characterized by more stable retail prices and contributing to the growth of the cannabis concentrates sector overall.

How Much Does it Cost to Start a Cannabis Extraction Business

€1 million scenario:

€150,000 legal and professional fees, insurance
€50,000 building renting (including security deposit)
€60,000 marketing campaign
€50,000 space improvements including finishing/painting, kitchen, office space, bathrooms, etc.
€300,000 extraction equipment
€125,000 post-processing lab/refining equipment
€35,000 security system
€5,000 computer system
plus direct costs, including material
plus salaries, direct and managerial
plus operational and administrative costs

= approximately €1,000,000 start-up expenses

Sample of a revenue model for a cannabis extraction business (3rd year):
Revenue = €5,085,600 (100%)
-Direct Costs = €2,640,051 (52%)
Gross Profit = €2,445,549 (48%)
– Operating Expenses = €678,572 (13%)
Operating Income = €1,766,977 (35%)

Cannabis manufacturing business conditions differ from country to country and state to state and if you have planned to set up your own business, then you must comply with the laws of your particular location. Licensing requirements will also depend on the type of business you wish to start.

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'70% ready to go' business plan templates

Our cannabis extraction financial models and cannabis extraction business plan templates will help you estimate how much does it cost to start and operate your own cannabis extraction business, to build all revenue and cost line-items monthly over a flexible seven year period, and then sums the monthly results into quarters and years for an easy view into the various time periods.

Should you have any questions, please do not hesitate to contact us.