Extraction companies looking to stay competitive in a sector growing more crowded by the minute need to consider how to keep costs as low as possible.
An extraction company executive looking for ways to save should think about:
- Automation to lower labor costs.
- Asking for bulk discounts from vendors.
- Streamlining packaging.
- Equipment quality.
- Facility design.
“The biggest problem we see in costs is in downtime and bottlenecks in the extraction process,” said AC Braddock, CEO of Seattle-based extraction company Eden Labs.
Automation Versus Labor
Labor costs are one of the largest expenses for an extraction company. Finding ways to automate processes can significantly cut down on the need for labor.
Patrick Mitchell, director of sales for Phoenix-based vaporizer manufacturing company Jupiter Research, recommends automating the hardware process.
“There are ways to work with automation and get more strategic in your operation,” he added.
For example, Jupiter Research collaborates with a company that offers a pre-rack filling solution that loads racks of cartridges straight into a filling machine, fills them in batches, then puts the racks into another machine for the cartridges to be capped.
A larger company producing 15,000-20,000 cartridges a month or more could save tens of thousands of dollars in that time period on labor costs, according to Mitchell.
“This is the biggest scalable solution we’ve seen to date,” he added.
As extraction companies scale up, they can use size of orders to leverage better deals with vendors, including packaging companies, solvent providers and marijuana flower producers.
At Sisu Extracts in Eureka, California, co-founder and CEO John Figueiredo recommends ranking costs of production, then determining if the vendors at the top of that list can provide
Asking for a bulk discount works especially well if the company amounts to a large portion of the vendor’s bottom line.
“Once you hit a certain size, you definitely can have concessions, because you’re a larger portion of a company’s client list,” Figueiredo said.
Extraction companies often have several products on the market at any one time.
Packaging all of those products in the same type of container, with discounts for bulk orders, can help save money, said Josh Rutherford, owner of Denver-based extraction company PurePressure.
“We have every single one of our SKUs come out in the same jar,” he added. That way, the packaging vendor can bring down the cost per jar.
The company’s products include live rosin, bubble hash, terp diamonds, wax and more.
Rutherford also recommends using packaging that can be easily altered—particularly in the event that state regulations change.
Using unalterable packaging could cost an operator thousands of dollars if the rules change and new versions must be ordered.
“It’s one of the biggest mistakes I see people doing time and time again,” Rutherford said.
To combat this problem, PurePressure uses a generic-style label that can be changed without too much hassle.
When it comes to extraction, buying the cheapest version of equipment could cost a company in the long run.
“Spend the money and do it right the first time or you’ll pay for it later,” Rutherford said.
Also, pick equipment that’s configurable and scalable so, as the company grows, the equipment allows for add-ons to increase throughput as well as add more SKUs to the product line.
Equipment is the main cause of downtime, according to Braddock. To avoid this bottleneck, she focuses on post-processing equipment as one key sticking point.
“There are a lot of extraction companies coming into the market, and they don’t understand that
this isn’t a single process,” Braddock said.
If a fledgling extraction company doesn’t understand the extraction process from end to end, a common mistake can be to buy quality processing equipment but fail to select the correct post-processing machines.
“The biggest bottleneck is in solvent recovery, so, for that, you need high-throughput capacity,” Braddock said.
When it comes to automating extraction equipment, Braddock recommends keeping a technician on hand who understands the machines in the event the computer breaks down and the system needs to be operated manually.
“If you have an operator and the system can be run manually and keep going, then you don’t have any downtime,” she added.
Both Rutherford and Braddock pointed to facility design as a key consideration regarding cost savings.
Braddock recommends facilities be designed with a safety mindset. That should lead to a good flow of product because the facility will cut down on inefficiencies that might be unsafe or slow down production.
She also advises that a lean production model—an approach to management that focuses on efficiency while maintaining quality—can help with your overall budget.
Rutherford suggests designing a facility around the building and the business’ needs, rather than buying a prefabricated room.
An extraction executive could save up to $40,000 by designing the room rather than buying a plug-and-play model, according to Rutherford.
Prefabricated extraction rooms are less efficient in terms of production flow and don’t use the space as effectively, he said.
With this equipment, a business ends up paying for space it’s not using, according to Rutherford. “Designing your space is going to be very important to the success of your business,” he added.