Concentrates Makers Struggle With Low-Level Competitors

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By Fred Dreier

Brandon Hamilton, owner of a Seattle-based cannabis concentrates company called WAM Oil, was concerned with the way his products were being marketed and then sold at area dispensaries.

So he enlisted secret shoppers to go to dispensaries and ask budtenders about the various oils on the shelf.

He was not happy with what his secret shoppers reported back. Dispensary employees did not know the difference between his product, which was produced in a closed-loop extractor at his laboratory, and lower-quality products that were likely made using rudimentary methods.

“The level of sophistication at the point of sale was really disappointing,” Hamilton said. “It’s hard to differentiate between how one was manufactured versus another.”

Hamilton and other concentrates manufacturers believe the low level of sophistication within the market is costing them big bucks.

Professional concentrates manufacturers can easily invest tens or hundreds of thousands of dollars into their equipment. Closed-loop CO2 extraction kits range from several thousand dollars to well over $100,000 for large custom-built machines.

Hamilton estimates he’s invested a quarter of a million dollars in his lab alone – while some of his competitors have spent just a fraction of that amount on rudimentary equipment.

Does Cheaper Sell Better?

It’s no secret that many concentrates on dispensary shelves are produced using cheap and somewhat primitive methods.

Anyone with a few hundred dollars-worth of cannabis, a PVC pipe, a few bottles of butane and a Youtube account can produce cannabis wax that, in many states, could sit on store shelves alongside products produced using more professional methods.

While these concentrates do not look drastically different, they usually cost around $5 to $10 less per gram at the point of sale than professionally produced ones. Sometimes the difference in wholesale price is much higher. And that price discrepancy often steers consumers to the cheaper ones.

“Some kid who is shooting butane in his garage, he can show up and say ‘hey, I have this really beautiful amber [wax]’ and now it’s on the shelf,” said Samuel Decker, CEO of the Oregon-based extract company Udoxi Scientific. “And it will be cheaper than our product.”

Within the market for concentrates, price point plays a major factor, because many of consumers who prefer these products are in their early- to mid-20s. So the cheaper waxes and oils tend to sell better than the expensive ones.

Another factor in the extract market is reputation. Similar to the connoisseur-class of cannabis consumers, concentrate manufacturers can create a name for themselves based on the perceived quality of their product.

Concentrates made by well-known artisan manufacturers can sell at substantially higher prices. But that reputation does not always mean the producer has invested thousands of dollars in a production facility or machinery.

“Most patients don’t know the difference between closed-loop or not,” said Aaron Justis, owner of Buds and Roses dispensary in Los Angeles. “They just want a reputable versus a non-reputable brand.”

A Need for Regulation

Hamilton said he remains competitive with cheaper brands by offering a wide range of products, from oils and waxes to cartridges that are used in vaporizer pens. He also invites legislators into his laboratory to show them how a professionally-operate concentrates company looks and feels, compared to backyard operations.

Decker said he tries to work with shops to self-regulate how the products are being sold.

“The shop buyers are the ones who are at the forefront of all of this, and they need to be the ones who are self-regulating,” he said. “If they’re not self-regulating, at this point there won’t be any regulations.”

Both Decker and Hamilton think that there needs to be some type of regulation to weed out the less-sophisticated producers.

Both men believe that their products contain fewer contaminants – both pesticides and residual solvents – than the cheaper product. And both believe that their products also contain more of the active agents, both CBD and THC, than the cheaper extracts.

Regulations could be coming with the onset of recreational laws.

In Colorado, for example, the Marijuana Enforcement Division recently released a new set of rules for processing and extraction. All concentrates manufacturers must use closed-loop systems and pass a four-week inspection process. They must also submit their final product to testing labs, which will test for the presence of solvents and other contaminants.

Until other states roll out similar restrictions, professional concentrates manufacturers will continue to have to find other ways to compete in the market.

Photo credit: Image of closed-loop hydrocarbon extraction machine produced by Udoxi Scientific. Photo by Samuel Decker of Udoxi Scientific