Why Cannabis Concentrates Are a Big Deal for Investors

The term “concentrate” is widely used across the cannabis industry, but the definition is ambiguous since it encompasses any product procured through an extraction process. While hash and shatter have been staples of the cannabis industry for years, new extraction techniques and upcoming legalization could make concentrates even more important.

Cannabis concentrates contain high levels of cannabinoids and they can be incorporated into many different products formats. For example, vaporizers provide recreational users with a healthier alternative to smoking; topicals can help relieve pain or improve skincare; and, new pharmaceuticals could forever change the medical field.

Let’s take a closer look at concentrates, why investors should care, and some companies pioneering the space that they may want to consider.

What Are Concentrates?

Most cannabis concentrates are created using solvents, such as CO2 or ethanol, to strip compounds from the cannabis plant. The result is a solid, paste or liquid that contains a high concentration of cannabinoids, such as tetrahydrocannabinol (THC), cannabidiol (CBD) or other lesser known cannabinoids.

For example, cannabis distillate is commonly created using a complex CO2 extraction process. Since distillate contains no taste, smell, or flavor, it’s commonly used as a base for edibles and vape cartridges. Cannabinoid concentrates can reach upwards of 80 percent in some distillates, making them very potent.

                                                           Examples of Cannabis Concentrates

Other cannabis concentrates don’t involve the use of any solvents. For instance, hash is created by compressing the resin — or the powdery substance on a cannabis plant — to create a paste-like product that has been a staple of the cannabis industry and many home enthusiasts for years.

A Rapidly Growing Market

Cannabis flower sales have been falling across North America following the legalization of adult-use cannabis. While smoking cannabis flower is the original consumption method, many consumers are seeking out vaporizers, edibles and other products that involve fewer health risks as they are becoming legal in new markets.

Some U.S. states permit cannabis concentrates but not cannabis flower for these health reasons. For example, Florida’s medical marijuana laws provide consumers with access to cannabis concentrates but don’t allow the smoking of cannabis flower. Non-smokable forms of cannabis also continue to experience greater growth than their smokable counterparts.

At the same time, cannabis concentrates are being used across a wider range of consumer products. Many skincare products have started incorporating cannabidiol (CBD) given its anti-inflammatory properties and other potential benefits. Even pet products are starting to see CBD-infused options that promote possible health benefits.

Pharmaceutical companies are also leveraging cannabis concentrates given their greater potency and greater number of delivery options. Whether over-the-counter or by prescription, cannabinoids have the potential to relieve chronic pain, reduce seizures, and potentially address a wide range of medical conditions.

The global cannabis industry is projected to be worth $146.4 billion by 2025, according to GrandView Research, growing at a robust 34.6 percent compound annual growth rate. But even that size pales in comparison to the multi-trillion dollar wellness and pharmaceutical industries that are ripe for innovation.

The market for concentrates could open wider in October when Health Canada is widely expected to legalize cannabis edibles, beverages and other product formats that make use of cannabis concentrates. If the United States is any indication, these new product formats could reach a much wider audience and drive cannabis revenue sharply higher.

Companies Focused on Concentrates

There are many companies focused on cannabis concentrates, but few are as experienced as Xtraction Services, a provider of equipment distribution and financing for cannabis and hemp manufacturers. Xtraction Services has cultivated a team of engineers that underwrite extraction equipment as well as all post and pre processing equipment to create quality extracts. The company’s core business is to provide purchasing options including leasing, rental, and lay-away for their customers to begin extracting very quickly without a significant cash outlay.

Xtraction Services also offers trained professionals to oversee and manage the entire extraction purchasing process.

PLEASE CLICK HERE to learn more about Xtraction Services

MediPharm Labs (TSX-V: LABS) (OTCQB: MLCPF) is another leading cannabis concentrates producer, in Canada. With an extraction-only business model, the company differentiates itself from many other licensed producers focused on flower. It’s the first LP to receive an active sales and production license for oil without first getting a cultivation license.

The company already has 150,000 kilograms of dried cannabis extraction capacity with expectations to reach 250,000 kilograms of annual capacity by the second quarter. At these levels, management believes that the company could achieve revenue of $550 million to $1 billion with its focus on cannabis oils, distillates, and isolates. MediPharm Labs recently announced its first international sales agreement, signaling its global intentions.

PLEASE CLICK HERE to Download MediPharm Lab’s Investor Presentation

Valens Groworks (CSE: VGW) is another licensed producer in Canada that’s focused on cannabis concentrates. With the first colab facilitating cannabis product development for license producers globally, the company is uniquely focused on becoming a global leader in the space.

The company has one of the largest capacities to extract in Canada with near-term plans to expand its footprint by 25,000 sq. ft. With pending EU GMP Certification, the company’s concentrates will be exportable to anywhere in the world, making it a potential international play on the space.

PLEASE CLICK HERE to Download Valens Groworks Investor Presentation

Looking Ahead

Cannabis concentrates have always been around, but with new extraction processes and creative product development, they’re quickly becoming the hottest subset of the cannabis industry. With Canada poised to legalize concentrates later this year, the industry could see an enormous influx of demand.

Investors interested in the cannabis space may want to focus on companies that have dedicated themselves to cannabis concentrates given these growth rates and the potential for future growth over the coming years.

Disclaimer

The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: http://www.cannabisfn.com/legal-disclaimer/

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.