cannabis extraction

The cannabis extraction industry is growing and diversifying at a rapid pace.

This is necessary in order to keep up with the constantly evolving government regulations and consumer demands across the globe.

As this occurs, innovation in methods and technologies are pushing the boundaries of what is expected from extraction processes in terms of efficiency, precision and pricing. Cannabis and hemp products are increasingly becoming commoditised, which is fuelling the development of diverse forms of extracts for products such as vapes, oils and edibles which include a wide and growing range of major and minor cannabinoids, terpenes and other active compounds.

At the early stages of the market, extraction facilities for cannabis were primarily operated by vertically integrated cannabis companies that had complete control of the supply
chain from seed to sale. However, as the industry has developed over the years, there
has been an increase in specialist extractors who use their expertise to develop new techniques and methods to produce extracts for specific sectors. The supply chain is now
more diverse than ever, with a variety of extraction business models servicing an array
of clients without the facilities or ‘know-how’ to produce high quality extracts themselves.
The methods of cannabis extraction are continuously developing with companies seeking
various ways to target specific compounds while focusing on cost efficient, safe and
scalable extraction methods to stay competitive in the market. The variety of techniques
that extractors may use can be primarily justified on the desired extract product they
choose to produce, the capital available to them and the sectors they aim to serve. As
the market matures, a higher standard of quality assurance practices will be a necessity rather than a luxury.

The North American extraction markets are the most mature markets today; however,
Europe is witnessing growth as supply chains are becoming more robust and extract
demand is on the rise. Both markets still hold a set of significant challenges and barriers
to entry in terms of; regulation, distribution channels, capital costs, access to capital and
a lack of expertise. Nevertheless, it is expected that, as the markets mature and regulatory
frameworks are established, the barriers hindering growth will begin to diminish.
In the face of a rapidly evolving and highly competitive market; the ability and willingness
of companies to leverage the latest technology and services in the cannabis extraction
sector will mean the difference between their success, or failure, in the space.

Within the rapidly expanding cannabis markets; extraction is arguably the most active
area of innovation and growth. The ability of a
company to meet the growing and diversifying
consumer demands for cannabis extracts in a
precise, reliable and cost-efficient manner is
critical to maintaining competitiveness. This
report outlines some of the basic knowledge
that operators and investors need to know
in order to succeed in the space, as well as
painting a picture of the market as it stands.
Extraction of cannabis can be defined as the
process of removing or separating essential
oils, which hold cannabinoids, terpenes, vitamins and other antioxidants, from the cannabis plant material or biomass to create cannabis extracts and concentrates. Extraction
methods commonly use solvents including
propane, butane, ethanol and/or supercritical carbon dioxide to separate the desirable
components from the plant material. However,
there are other extraction methods that are
solvent-free and use heat, pressure, water, or
a combination of the three to produce cannabis concentrates.
Depending on the methodology and solvent
used, cannabis extracts are refined into
various forms and concentrations; these
include full-spectrum, broad-spectrum, or
isolate products. Full-spectrum extracts are
those which contain the entire cannabinoid
and terpene profile of the plant, in concentrated form. Broad-spectrum extracts are similar,
but with at least one terpene or cannabinoid
removed (generally tetrahydrocannabinol,THC), so they do not contain the full profile
of the plant. Isolate products are so called
because they contain only one target cannabinoid or terpene, generally between 95-99%
purity. Products of extraction are generally sold
in the form of a waxy/oily paste (crude extract),
oils (distillate), or crystallised powder (isolate).
Obtaining higher purities of cannabinoids and
terpenes in extract products requires additional stages of refinement. The first extraction
phase, which yields crude extract, also retains
plant waxes, chlorophyll and other lipids which
are simply impurities in the product, and these
are not desirable. Extra steps, such as winterisation, decarboxylation, distillation etc.,
remove these impurities and raise the cannabinoid concentration of extract products, with
‘isolation’ being the eventual end product of
further and further refinement and purification.
As knowledge and research around cannabis
continues to grow, there has been a significant interest in the ‘entourage effect’ which
refers to the synergising effect of major cannabinoids, minor cannabinoids and terpenes
to provide health benefits. For this reason, and
due to a general perception of there being additional benefits of using the plant holistically and organically (i.e. naturally), full-spectrum
and broad-spectrum extract-based products
are sought after by patients and consumers.
Even in the medical sphere, many doctors take
the same approach, preferring to use wholeplant-based medicine than isolated cannabinoids. However, in production, isolate-based
products are preferred in many spheres, particularly wellness, cosmetics and food/beverages
due to regulations regarding THC limitations.
Stages of extraction
After the cannabinoid-heavy flower is separated from the rest of the plant, it is ground
into a fine consistency.
During the extraction stage, the ground
flower is normally mixed with a solvent (e.g.
ethanol, hydrocarbons, CO2
), which separates
chemicals and compounds from the plant
fibre. These include; cannabinoids, terpenes,
waxes, chlorophyll, lipids and other substances. Depending on the nature of the extraction, some of these chemicals and compounds may be damaged or lost during the
process, and therefore do not make it into the
crude extract which is produced.
Winterisation involves diluting the crude
extract in ethanol, and chilling the mixture to
between -20 and -80 degrees Celsius. This
causes the waxes to solidify, so that they can
be easily removed from the mixture by filtration, leaving an oily ethanol solution. The
solution is heated, and the ethanol evaporates, leaving only the oil.
This process uses heat to ‘activate’ cannabinoid compounds – converting cannabinoid acids like tetrahydrocannabinolic acid
(THCA) or cannabidiolic acid (CBDA) to cannabinoids like tetrahydrocannabinol (THC)
and cannabidiol ( CBD). This can be done
before extraction (heating the ground or
whole flower) or after extraction and winterisation (heating the solution).
Distillation is a process where the extract
(crude or refined through extra stages beyond
extraction) is purified to isolate specific cannabinoids and other compounds like THC
or CBD. During distillation, the substance is
heated at specific temperatures to vaporise
desired compounds without destroying them.
This is followed by condensing the vapour to
a liquid, thereby separating the targeted compound from the original extract.
The distillate can be further refined to achieve
an ‘isolate’ with a very high purity rate of the
targeted cannabinoid or compound through
continuous heating and stirring. This is followed by rinsing the cannabinoid isolate crystals of any unwanted impurities with chemical
solvent solutions.

Extracts are sold in many different formats
and compositions, and for a wide range of
uses. They vary by content, quality and potential usability depending on; the stage of
refinement in the extraction process that
they were produced, the extraction techniques and technology used, the strain
of hemp or cannabis which provided the
biomass and the standards and certifications
of the facilities which were used to produce
them. Many vertically integrated companies use the extracts, which they themselves
produce, to manufacture finished products
for the consumer or patient. However, many
others look to the wholesale market to supply
them with the extracts which they need to
manufacture their extract-based products. In
each case, the producer will need to source
an extract, which is both compliant with relevant regulation and suitable for their processing requirements, in order to manufacture the
final product which they will sell.
Below are the most common types of wholesale extracts currently available in the wholesale market.
Based on the targeted segment for which the
extract is produced, facilities and companies
need to comply with certain quality standards
and attain the necessary certification. To use
a cannabinoid extract in a medicinal product
in Europe, for example, the extraction process
must take place under pharmaceutical European Union Good Manufacturing Practice (EU
GMP) conditions, in a certified facility. To use
a cannabinoid extract to make a CBD cosmetCrude CBD extract
Winterised CBD
CBD distillate
CBD isolate
THC isolate
CBD terpsolate
Full-spectrum CBD oil
Whole plant extract
Concentrated extract with most
plant waxes, lipids and other
impurities removed
Highly concentrated, refined
extract containing mostly
cannabinoids and terpenes,
often with THC removed
Pure CBD extract
Pure THC extract, ‘dronabinol’
CBD isolate with added terpenes
Crude CBD oil diluted in a carrier
oil (hemp seed, olive, coconut etc.)
Product Typical Concentration Comment
ic product for sale in one of the various countries in which its sale is legal and unrestricted,
EU GMP certification is mandatory. In the US,
cosmetics do not need to be GMP certified
however many companies are still compliant to
its standards. Despite this, there is a growing
trend across segments towards a preference
for products containing extracts with high
quality certifications, in order to guarantee
quality and standardisation of product.

Medical and
pharmaceutical products
The majority of extract and oil-based medical
cannabis products are unlicensed medicines
which are available to patients through formal
programmes or special pilot schemes in
Europe, and available through licences and
prescriptions in North American markets.
These products are produced by a range of
cannabis operators, with the largest players
being based in Canada. Examples include;
Tilray, which produces a variety of medical
cannabis oil drops with varying THC:CBD
ratios, and Aurora, which holds brands including MedReleaf and CanniMed in its portfolio,
and produces extract-based medical oils,
softgels, vape cartridges and resins.
Beyond these products, the market for precise,
pharmaceutical-like extracts has been dominated by Delta-9 THC isolate (also called
‘dronabinol’), especially in Europe. Dronabinol
refers variously to synthetic or plant-isolated
THC. In the US, dronabinol is used mainly
to refer to the generic versions of Marinol®
which are produced by several companies. In
Europe, dronabinol is used both as a generic
version of Marinol® and as an active pharmaceutical ingredient (API) which pharmacists
compound into magistral preparations e.g. in
Germany, Austria and Switzerland. Though the
conditions for which it is prescribed vary, it is
primarily used for pain relief.
The price of extracts for the medical and pharmaceutical sector is considerably higher when
compared to other sectors as licenced API and
To date, only a few cannabis-based medicines
have obtained full marketing authorisation
by completing all phases of the clinical trial
process. No flower products have gained such
approval to date. The pharmaceutical drugs
with widespread approval are listed in the
table below.
Examples of widely marketed Tilray oils
CBD isolate
Broad-spectrum extract
Synthetic THC isolate
Synthetic isolate
Rare forms of epilepsy
Spasticity in multiple sclerosis (MS)
Nausea and vomiting in chemotherapy
Nausea and vomiting in chemotherapy
Product Primary Indication Type of Extract
medical extracts have to be produced under
stricter conditions. Companies are obliged to
maintain higher standards, employ staff with
greater expertise and monitor production to
ensure the product is of sufficient purity and
quality. The company must also hold the necessary licences to handle and produce pharmaceutical grade cannabis products. The price
for API and medical grade extracts also varies
significantly depending on whether extraction
is from cannabis plants with higher levels of
THC or from hemp, as the value of biomass
for API grade cannabis plants is significantly
higher than that of hemp biomass.
The base assumption average for the price of
THC API extracts is approximately US$300-
350 per gram and for CBD API extracts
is US$150-200 per gram if sourced from

cannabis plants with higher levels of THC,
whereas CBD API that is sourced from hemp
is approximately US$15 per gram. The price of
medical and pharmaceutical extracts may also
vary depending on the jurisdiction in which
the product is produced, as stricter quality
controls based on good manufacturing practices found in Europe and Australia, increase
production costs.
It is expected that the demand for CBD API
will increase in the coming years as there are
currently clinical trials for CBD investigating
its effectiveness in the treatment of arthritis,
pain and diabetes. If they are successful, we
will probably see more CBD API based medicines on the market.
The cannabis wellness market primarily
focuses on the health and lifestyle properties
associated with CBD and increasingly other
minor cannabinoids. As the use of CBD has
become a rising trend for health-conscious
consumers, extractors have begun to extract
CBD for supplements, oils, vape cartridges,
capsules, food and beverage, cosmetic and
topical markets. Wellness products tend to
use CBD isolates, or distillates extracted from
hemp, to ensure that the products comply with
THC limits set by regulators in given jurisdictions. Currently, there are copious amounts of
CBD producers on the market, with Charlotte’s
Web being the leading company in North
America, and a lot of mid-sized and smaller
players in Europe; including Becanex, Eusphera, Endoca and Nordic Oil.
Cannabis extracts containing CBD from hemp,
which are used in the food and beverage,
wellness and cosmetic markets, are regulated
to ensure products are safe for human use and
consumption. However, they are not obligated
to comply with the strict standards found in
the medical and pharmaceutical sectors, and
are thus significantly cheaper than extracts
used for medicinal products.
In the wellness category of the market there
has been a rising demand for products that
include minor cannabinoids with the primary
focus on cannabigerol (CBG) distillates
and isolates. Just as with CBD, the price of
CBG extracts has been declining due to the
increased supply of hemp biomass. Additionally, the progress made in genetics has seen
the emergence of strains with far higher CBG
concentrations than was previously possible.
Currently the US price for CBG distillate is approximately US$4,500 per kilogram, whereas
isolates are approximately US$3,600 per kilogram. The average wholesale price for minor
cannabinoid extracts are higher compared to
CBD extracts as they require more biomass to
extract equivalent volumes.
In addition to cannabinoids, hemp or cannabis
products in the wellness category, and in many
other categories, contain terpenes. Terpenes
are the aromatic compounds found in many
plants including cannabis, lavender, pine and
orange peel. Terpenes are used in aroma oils
and perfumes as specific terpenes have a
certain fragrance; for example, the terpene
limonene, which is found in cannabis and the
peel of citrus fruits, has a citrus scent. Current
preliminary research has found that terpenes
have potential health properties including;
anti-anxiety, anti-inflammatory and anti-cancer properties. It is estimated that there are
over 200 terpenes found in cannabis, each
of which has their own distinct flavour profile
and potential health properties. The five most
well known terpenes are myrcene, limonene,
linalool, caryophyllene and pinene. Terpenes
are very delicate, as they are easily prone to
being diminished by heat or stress to the molecule, therefore some extraction processes use
light heat to ensure the terpene compounds do
not break down. Similarly, terpenes found in
cannabis can be sourced from multiple organic
matter including citrus fruits, basil, and sage.
One solution has been to add terpenes, which
are easily lost during the stages of extraction,
back into the extracted product, after the final
stages have been completed. This has led to a
market in which terpene extractors are serving
the CBD market by creating terpene profiles of
famous cannabis strains, including Amnesia
Haze, Girl Scout Cookies and Jack Herer, to
be infused in over-the-counter (OTC) CBD oils,
e-liquids, cosmetics and topicals.