Seven Questions to Answer for Hemp Processing Startups

6. What extraction method will I be using?

When I first started to build out extraction facilities, we looked at both ethanol and CO2 as primary solvents for extraction. Since we were involved in building and working towards GMP certification, it was important to us that we create and extract clinical grade CBD oils. Clinical grade oils do not carry any risk for residual chemicals that would come from ethanol. That is why we chose supercritical CO2 extraction as a preferred method for extracting hemp.

The second reason why we chose CO2 extraction over ethanol extraction had to do with cost. Ethanol extracts cost much more to produce than CO2 extracts. If you want to learn more about this, please contact our application specialist for calculators.

The second criteria for clinical grade oils is an organic certification. Organic certification comes from the USDA and if you are able to build your facility and your processes to accommodate organic manufacturing, it is in your best interest to do so. It’s not that you can’t accomplish organic certification with ethanol extraction, it is just going to cost you a whole lot more. Organic ethanol is extremely expensive.

The third criteria for clinical grade oils has to do with consistency, purity, and potency. As an analytical chemist, I wanted to make sure we had the most pure extracts for our customers. My reasoning was that if a solvent-based extract such as ethanol extract was not good for inhalation, by extension it was not good for ingestion either. It makes sense to invest in technologies that will give the purest extract. CO2 extraction is a great way to accomplish this.

Know your regulations

Whatever extraction method you decide to use in your facility, it is important that you know all of the criteria needed to build for that method. For example, ethanol extraction facilities typically have a H2 occupancy versus CO2 facilities that carry a F2 occupancy. H2 occupancy is a special designation for facilities that have large amounts of solvent and flammable liquids. They might also have special requirements in those buildings for deflagration systems and exhaust.

F2 occupancy is light industrial occupancy and does not have these added requirements. That is why CO2 extraction facilities often are much less expensive compared to ethanol extraction facilities in general.

We have seen many operators try to get around costly occupancy requirements by storing their flammable materials outdoors. This will need to be cleared with both insurance and fire marshal prior to operation of the facility.

One other key consideration when selecting your type of extraction method is your ability to get insurance. Insurance companies generally frown on storing and using large amounts of flammable materials as they carry a higher risk for a catastrophic event. In fact, many ethanol facilities find it hard to obtain any insurance without complete compliance with NFPA standards.

One valuable service that we offer is a hazardous materials assessment. This focuses on storage and inventory of materials in each room used by each process. We provide calculations for the amount of exhaust needed in each room to keep the amount of solvent in the air under 25% of the lower explosive limit. This is a requirement from the NFPA for use and storage of solvents that are flammable.

We have certified fire inspectors on staff that allow us to help our customers navigate the NFPA standards and also choose processes that are low cost. We also provide standard operating procedures for hazardous materials as a part of our GMP package.

7. What products do my customers want to purchase?

Some would argue that this is the most important question to answer before getting started: What do my customers want? How much are they going to purchase? And when will I need to get those products to them?.

One of the key characteristics of the market is that the popularity of products change rapidly. So, the products that you may think are hot early on in your business plan may not be so popular in a year or so. It’s important that you keep your business plan flexible enough so that you can create products that consumers want. This is applicable to the bulk business as much as it is to the consumer products category.

I think it’s also important that you talk about the nature of the market to your investors so that they are aware that you may need to adjust your products based on trends. The trend cycle in my experience is on the order of one year.

When building business plans, I would start out by understanding which products are in greatest demand. Do not build a business plan on products that have a very low demand associated with them or are considered boutique. Boutique products that cater to classes of consumers rather than masses of consumers will always lag in the market compared to high volume product categories. CO2 vapor pens, for example, is a very large target category. Edibles are also a huge category in the hemp market.

There are many questions that you need to ask when starting a new business or even upgrading your facility to accommodate more production. Since 2014, we have been heavily involved in putting hundreds of hemp manufacturers in the business of extracting hemp and creating valuable products that consumers will buy. We have done this in North America including Canada and in Europe as well. We would be honored to work with you to help define your plan, get you some budgetary numbers, and define an equipment schedule. We also deliver and install that equipment, train your staff on GMP and process, commission your facility, and provide software that will help you run your business.

We are looking forward to your phone call.