The Cannabis Industry: Money Maker or Myth ? Who is actually making Money.

PDF Review: 20171027-infinity-supercritical-cannabis-industry-profit-myth

Profit or Promise ? In the past three years, we’ve worked in the Cannabis and Hemp Industry, and would like to ask the question, “Who is actually making a profit – the small entrepreneur, or big corporate ?”

All you see on the news, online, and in print media is the hordes of cash, and instant millionaires. But is it true ? It’s a difficult question to answer, since the industry is still very secretive, and coming out of the black and grey market.

In this review, we’ll start with the status quo, then look at the industry and who is making money.

The Addiction Industry

As with any Gold Rush (and the Cannabis industry is no different) there is the promise of fast wealth, and lots of cash. The reality is that lots of cash is just cash flow. Most groups in the industry have negative cash flow. Most so-called consultants are more myth propagators, than profit instigators. Many in the industry unfortunately only exasperate and perpetuate the myth, and enable well-meaning entrepreneurs to spend more cash, instead of tried-and-true profit making procedures. The logic here is you need to spend more, to earn more. But in reality, it doesn’t work that way.

 

Tricks of the Trade

If you’ve sold equipment, or have worked with the less-than-professional people in the industry, here is what you can expect. It’s right out of the addictions playbook. It includes trying to manipulate, distract, doubt, and display behavior that is unlike anything you’ve seen.

Here is a list the red flags that you are working with a nonprofessional, that is wielding the addictions behavioral sword, and how to work with this group of people.

 

Red Flags:

It’s Your Problem, Not Mine: It’s not untypical for the nonprofessional to blame others for their problems. If something is not working to their liking, the first line of defenses is a good offense, and that is to make the problem, your problem.

The best response is to clearly explain (written is best) and outline to the individual expectations, procedures, and a clear path of success. If the individual does not follow those guidelines, then they can expect to fail. It’s almost like coaching. Offer help and assistance, but recognize when people refuse to listen to directions, and point that out.

It’s a Warranty Issue: “Something is wrong with your product.”

This is probably the most typical statement you’ll get, when people want something free.

The first knee-jerk reaction for a nonprofessional, is to look everywhere, but from within. Greed based businesses have little time for learning, training, operations, or listening to good advice.

Your best response is to make training mandatory, and part of the warranty. Clearly outline what is, and is not included with a product purchase, and support. Make a point of explaining what consumables are, and typical operational costs.

Training – What is That ?

Education and training are essential foundations for success. With complex machines, it’s a necessity for safe and proper operation. The faster you learn how to operate properly, the faster you make product, sell to a customer, and make money. Just because the nonprofessional has self- proclaimed experience, means little in the case of operating a new machine, process, or procedure. Rest assured, it will become your problem when failure ensues. While we are a big believer trial- and-error, that really belongs in product development, not in learning to operate a machine, process, or way to do business.

Aggression – Phone Versus Email: It all starts with a simple phone call. When the nonprofessional doesn’t get the answers they are looking for, their aggression increases and the volume gets ramped up. Then, expect the anger escalation to start flowing.

Your best response, and option here, is to simply hang-up the phone, call block the person, and send them a email which outlines the rules for courteous communications. Email is always preferred since you can refer back to what was actually written down. It reduces the gas lighting (revisionist history). The angry nonprofessional likes to use the phone. It’s a people manipulation technique to get very upset, and create doubt, and what better way than to use the phone. It provides immediate gratification to the nonprofessional.

Trust But Verify: In the new age of social media, false truths, fake news, and rearranging the truth, you can’t be too sure what you are being told. This is ramped up in the Cannabis industry.

Verify what people are telling you. Don’t believe what people say, unless you can actually see the evidence, that it’s true. Unfortunately, in our current political and social climate, people lie all the time. Since there is little consequence to not having any character, people get away with it, and make it a habit. Surround yourself with good- character people and businesses. If somebody is lying to you, move on.

Create Doubt: Probably the best tool for the nonprofessional, is to create doubt. This type of behavior is meant to produce guilt, shame, and very judgmental that something you are doing is wrong. It begets experience, which the nonprofessional lacks, and so it becomes your problem.

When the nonprofessional creates doubt (successfully), it opens the door for free time,support, replacements, refunds, harassment, etc.  The best way to respond to doubt, is to clearly outline (written) expectations, outcomes, procedures, and becomes great drama-free conflict management. We’re all here to make money right ?

Who Makes Profit ? That’s a great question. The simple answer is that those who make profit, have a good customer base (who are willing to pay more for your product, or are loyal to your product, than anybody else). This means you have to have a better quality product, regardless of price. If you are running a CO2 extraction business, you are in direct competition with the BHO extractors, who can blow out their concentrates and oil at a much lower price. But that comes at a cost – lower quality oil (contains heavy metals which are bad for the consumer) and have little to no shelf-life (product goes bad quickly). The most important thing is to listen to your customers, what they want and need.

Does Anyone Make Money ? Lots of cash exchanges hands. But the market is flooded with product. Lots of supply, means low or no margin, so very few (if any) make profit. For the larger corporate groups that are vertically integrated, including a dispensary to sell their product, yes. Does a cultivator make money ? No. Or at least we have yet to see anyone that does. With lots of product, wholesale prices are low, and with low wholesale, the grower makes little, or nothing. Most growers pay zero attention to managing utility or production costs. Like any other business, you need to produce lean.

Why Do Cultivators Continue To Grow, If They’re Losing Money ?

It’s the promise of better things to come. We always hear, “Just wait until it’s legal all over the country.” Looking at that logic, the supply will only increase, and profit margins will go further south (decrease). As smaller producers lose money, or go bankrupt, they are swallowed up and engulfed by larger corporate groups. Market consolidation begins. It’s not easy for the small entrepreneur to make any money, unless they are well verses in a profit-based business organization, that has a bottom line that is black, not red.

Inefficiencies Add Up: With huge amounts of cash exchanging hands, it’s not uncommon for inefficiencies, and poor business practices, to add up. It adds up to losing money. Then groups continue to hemorrhage money, hoping things turnaround, which they don’t. Have a business plan, that outlines when to get out, or when to expand. Make goals, as well as limitations. Always run with the attitude, “Can I provide the same product and quality, but which costs me less ?” Never stop trying to look for alternatives where others do not, and look to produce at lower costs. Saving a few dollars here and there really add up at the end of the year.

Outdoor Versus Indoor Grow: If you’re a purist, then you appreciate the outdoor grown product. But the reality is that most consumers don’t care. Trying to make a profit on a one crop per year model, doesn’t make money, unless you have a niche market. A indoor grow, that has a staggered harvest for a weekly or biweekly basis, becomes a potential profit machine. Look around who is selling the most product (at a profit) and emulate what they do. Success begets success.

Hydroponics Versus FogPonics: The most efficient energy, grow time, and oil production model, is FogPonics. Set up on a staggered growth and harvest schedule, this can provide a weekly harvest production format, that keeps the fewest amount of workers, busy all the time. It has the lowest energy consumption in the industry (this would apply to both cannabis and vegetables). The basic concept is vertical using PVC piping, sharing one intensive HID lighting element. FogPonics can reduce water and nutrient cost by up to 80 percent, and requires less cooling (HVAC). It has 10 times the production versus other grow formats. LED’s only work for seedlings and veg stage.

Taxation Without Representation: Yes, your local government will make lots of money on your licensing fees, and fees related to production. The downside to vertical farming is that many municipalities will base licensing fees on a per-square-foot basis (on a three dimensional space), so if you go vertical, you get penalized and charged more. Before you start a grow or extraction business, check on local licensing costs. You may be surprised how expensive it is. Be sure to be clear on licensing costs per square foot, and if that includes vertical space.

Target Oil Production And Varieties That Produce Faster: Some varieties of Cannabis produce the maximum amount of trichomes at 75 percent of their growth stage, which means that the specific variety can be harvested for oil extraction before the full growth, which results in little additional oil, but more biomass. In this case, focus on Indica (Cinderella). Faster indoor growing varieties will produce consistently more oil than outdoor grows. The name of the game for profit is production. Look at varieties that get you to your end product faster.

Cannabis Alternative – Oregano Oil Extract: Interested in other options for cultivation and oil extraction ? This is one of the most disruptive industry secrets, which will be out soon. Oregano oil extracts may have the same, or better medical implications than CBD’s, and there’s already lots of research on it. Nobody is doing CO2 extraction’s for Oregano oil, it’s all steam distilled, which damages the valuable terpenes and other valuable compounds. CO2 extraction’s preserve the valuable terpenes, and other antioxidant components. Best of all, it’s legal everywhere. Who knows, you might come up with the next best pizza tincture !

It’s A Niche Market: Why produce a Budweiser, when you can cultivate a fine Bourbon?  Seek out niche markets. Less competition, and higher end prices, give you more opportunity for profit. Make it a habit to ask your customers what they want, what they like, and what they don’t like. Marketing is all about discovering what people want, and how to sell them that product. Don’t make a product, just to sit on it hoping prices will get better. The customer desires, as with your product, have a shelf-life. You need to look beyond what is out there now (and not selling well). It’s a technique which you have to train yourself to do, but has great rewards.

Conclusion: If you are entering the Cannabis space, or are looking for avenues to actually make a profit, and stop the hemorrhage of negative cash flow, educate yourself. Ask questions. Visit and tour successful operations. Trust only what you can verify.

Running a profitable business is not an endgame, but a dynamic process of learning to take what doesn’t work, and building on what does. Don’t repeat or recycle failure, repeat success.

Heisenberg Honey uses Infinity Supercritical CO2 Extraction System to Produce some of the Best Products on the Market in Southern California

Located in Southern California, Heisenberg Honey produces a CBD Infused Oil and Tincture, and concentrates for gourmet edible candy, using organic ingredients. The group uses a Infinity Supercritical CO2 10L extraction system, which runs on almost a daily basis. The system produces a superior extract, which is then winterized and distilled into a pure concentrate, which is then used in medicinal products.

Website: http://www.heisenberghoney.com/

Website: http://candyfactorium.com

Customers say it’s some of the best extract they’ve had. And that’s a result of a experienced professional running a great extraction machine.

From Todd at Heisenberg, “What’s unique about our lab is that is it run by licensed chemists who know exactly what they are doing. We do not use any kind of Butane and do not make BHO as Butane extraction can be very toxic as it is from petroleum derivatives. Instead we only use CO2 for our extraction process SFE (supercritical CO2 fluid extraction) which is a “green solvent” and safe for consumption. We want to make sure that everything that leaves our lab is 100 percent safe for the consumer to use. This is why we also have our own testing lab to make sure that all product is tested before it goes into our extractor for pesticides or toxins. The product is also tested after processing for potency so you will know exact dosages.”

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An Example of Cannabis Terpene Rich Oil Extract From a Infinity Supercritical CO2 Machine

Todd himself has about six years of organic chemistry, and likes how the Infinity Supercritical machine works. And the results are outstanding. Todd has built up a experience and knowledge-base on the system so that the CO2 pump rarely has to be cleaned. Todd likes the simplicity of the machine and that it is semi-automated. “The fully automated extraction machines tend to blow out all the CO2 when there is any issue during the extraction cycle, which can result in large CO2 supply costs, not to mention software updates. With a semi-automated system, you can set the pressure and temperature zones, and they will automatically maintain those settings by use of feedback sensors, which results in some great extraction results,” Todd said.

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The Infinity Supercritical 10L System Uses Semi-Automated Pressure Regulation and Temperature Zones to Produce a Terpene Rich Product

“If you make a effort to run the machine properly, and and focus on collection of oil instead of blasting through the closed-loop cycle, you don’t have to clean the pump,” Todd commented. Todd has his botanicals tested for both pesticides and total oil content. That insures that the botanicals are organic (pesticide free) before processing, and knowing the oil content helps to determine the amount of crude oil extract that will be  produced. “Typically, we expect about 5 percent oil content from trim, ” Todd said. “After the post processing and concentrated distillation (polishing), you can expect to lose about 20 percent of the total crude oil extract from waxes, which make the concentrate even more pure, clear, and produces a wonderful aroma (terpene rich oil).”

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The Infinity Supercritical CO2 Botanical Extraction System is Certified in California, for use in the Cannabis Industry: The system is completely silent in operation, and has several energy saving features which make cost of operation low, and low demands on a electrical system.

Todd is also offering classes on post processing, including winterizing,  distillation, and the nuances of licensed cannabis extraction for the Los Angeles, and Southern California region. His experience in the industry can help new entries into the cannabis space, which will go recreational legal in 2018.

Contact Info For Heisenberg Honey, Extraction Consulting and Post Processing Classes: 

Todd  – Chief Chemist and Extraction Professional
TEL 310.508.6476
todd@heisenberghoney.com

 

 

 

 

 

 

 

 

Infinity Supercritical 10L vs NuAxon CO2

Review: 20171012-infinity-supercritical-vs-nuaxon

NuAxon Website: https://www.nuaxon.com  and https://www.nuaxontech.com/co2-extractors

Overall Comments:

NuAxon: They offer 10L (2 x 5L) and 50L (2 x 25L) and 5,000 psi fully automated system, which requires a PLC (included with the system) to run the system. Made in India. Proprietary software. Company: New to the Cannabis space. Website is hard to look at, with moving train in the background. Machines built: Unknown. Footprint for larger 25L: Huge. 17.5 ft tall, by 25 x 25 feet floorspace. 24+ weeks to build and ship. Location: Indiana and mfg in India. Price of larger 2x25L system: Approximately $500,000+

System: Collection:

NuAxon: They offer several collection vessels, and waste collection vessel, unsure of capacity to collect or prevent carry-over of oil. Design of system looks industrial and complicated.

Infinity has three collection vessels at 1.5 L each, and they use electrostatic precipitation and filter to prevent any carry-over. Fractionation can be controlled by Back Pressure Valve(s) BVP, chiller temperature, and electrostatic precipitation. Infinity has built systems in the USA that are currently running on Cannabis/Hemp, and build time of 2-3 weeks. Shipping takes a few days.

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Infinity Supercritical Uses 3 Collection Separation Vessels

Extraction Vessel:
NuAxon: They offer multiple vessels with quick closure tops. They use high pressure components, which means 1/16 or 1/32 tube size (may have clogging issues) and use pneumatic valves which require external compressor. Typically external air compressors are loud, and require a chiller for cooling.

Infinity System has horizontal or vertical extraction vessels, no moving parts, and includes baskets which allow easy loading and unloading. System interconnecting tube size is 1/2 and 1/4 inch (no clogging).

Baskets also allow flash freezing from harvest, which allows extraction of high-value resin.

Extraction Time:

NuAxon: They claim cycle time of 90 minutes but don’t provide any details, nor any lab results running actual Cannabis. Fast extractions can happen with 5,000 psi systems, however a fast extraction is not the complete story. High pressure extraction will extract everything from the botanical, which results and much longer post processing times to remove the unwanted material (such as waxes and other compounds). High pressure = more waxes. See: https://www.google.com/patents/US7344736  Removing such material can add huge amounts of time to the post processing schedule, which eliminates and time savings originally obtained from extraction of the crude oil. System is build in India. Unclear if how support is done, since manufacturing plant is in India.

Infinity has a 1-3 hour run time, and is experimenting with 30/30 and 45/45 cycle times. Infinity has lab results posted on their webpage running Cannabis, and does lots of testing in the shop in Ferndale, Washington. The extraction pressure is at or below 2,000 psi, which specifically targets the Cannabis or Hemp oil, not the waxes and other materials which have low to no value, and need to be post-processed out. Manufacturing and support is in USA. Parts can be overnight shipped.

Photos of Extract from the Infinity Supercritical CO2 Botanical Extraction System

Separation Vessels:

NuAxon: They use a two separation vessels. Lack of detail limits ability to decipher quality of extraction collection.  Unsure how collection vessels are heated with their system. In general, the vessels need some type of heating system. This can be a enclosed hot water bath (slow heating time and requires a chiller that is actually used for heated water), or solid state electric heat (fast response).

Infinity CO2 system has three collection separation vessels, which use electrostatic precipitation to assist in recovery of oil extract and produces a crude oil. Any crude oil (applies to all CO2 extraction systems) needs to be post processed (dewaxed/rotovaped) and then ready for either direct use for vape pens, or further flash Chromatography or distillation for separation of fractions, which will then be recombined into a recipe for vape pen and concentrates. Infinity uses the solid state heat on the collection/separation vessels.

tribo-gen-static-electricity
Infinity Supercritical Uses Electrostatic Precipitation (ESP) to Assist in the Collection of Cannabis and Hemp Oil Extracts – Infinity discovered the static effect during testing. The action of CO2 moving over Teflon (closed-loop) makes a static charge. The production of a static charge does not require any outside power source – it’s all done just from the tribo-effect of the CO2 moving over Teflon (in-situ). Infinity uses a specially designed (and patent-pending) Teflon device to produce the static charge. Better collection of oil means reduced or eliminated carry-over of oil (i.e. reduced pump maintenance).

CO2 Pump:

NuAxon: High pressure diaphragm pump? Type of pump is unclear. Rated at 350 bar or 5,145 psi. Pump reliability is unknown. Typically high pressure pumps are prone to breakdown, and require more maintenance. More details would be helpful on their website. In large batch systems, it’s important to get CO2 to soak through the entire botanicals, which is more difficult in larger vessels. Typically, CO2 is put in one end of a vessel, and exits out the other end.

Infinity uses a liquid pump (silent operation) with up to 4 gpm per minute CO2 flow. However, we have found through testing that less flow, results in better botanical soak (CO2 permeation) has better results. Combine that with a FlowBar (CO2 distribution tube which runs up through the entire extraction vessel) results in better soak, in less time, and less flow. We also use a heat exchanger that recovers heat from the gearbox and puts that heat into the CO2 flow which reduces power demand. Infinity has been testing and refining our pump for over two years, and it has a good track record of operation in the Cannabis industry. You can add co-solvent in the Infinity machine manually, and a pump cleaning device as an optional add-on to reduce maintenance and clean seals in place. This reduces pump cleaning time with the system, and faster turn-around time to the next cycle/extraction. The name of the game is processing. The more time spent extracting oil in the most efficient time, results in more profits.

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Infinity Supercritical Uses a Swagelok Back Pressure Value and a Automated Pressure Sensor PID to Maintain System Pressure from the VFD Controlled CO2 Pump

Pressures:

NuAxon: They claim to go up to 350 bar or 5,145 psi, which is the full extraction range. That should be good for any plant extracting process. Anything above 2,000 psi will extract waxes and chlorophyll. That requires a great deal of post processing (which can be up to 5-10 times the amount of extraction time, depending on type of post processing procedure and staff available). Waters uses a system that goes up to that pressure as well, and for groups that want high pressure, most will purchase a Waters (which dominates the Denver market) that can also fractionate oil extract output into three vessels.

Infinity goes up to 2,000 psi and output is targeted for Cannabis or Hemp oil concentrate, not waxes or chlorophyll. Infinity offers a CO2 pump cleaning system.

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Infinity Supercritical Uses CO2 Sight Glass to View Liquid CO2 in System Processing

Pressure Maintenance:

NuAxon: They use a proprietary pressure maintaining system (other information is unknown, and not provided).

Infinity uses a Swagelok BPV (Back Pressure Valve) to precisely regulate pressure, and a automated pressure sensor feedback loop, which is controlled by a VFD. The Variable Frequency Drive regulates the pump RPM, to maintain pressure. Set it, and it maintains pressure. The VFD also has ModBus which allow external communications to network with monitoring and control. Parts made in USA. Spare parts available overnight. Infinity also offers a ethanol based pump cleaning device. This bolt-on option to the 10L Infinity system allows the pump to be cleaned in-place, without removing the pump-head. The system not only cleans the pistons of the pump, but also the seals. By not removing the pump head or seals, can result in huge time savings (and less staff time).

 

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Infinity Supercritical CO2 Pump Cleaning Device

Automation:

NuAxon: They have a fully automated system that requires a PLC (as part of the system) and pneumatic air system. They include manual valves, in case the cycle needs to be interrupted.

Infinity uses standard semi-automated VFD and PID systems. Customer can upgrade to a PLC to monitor the system via network computer, or via smartphone. Additional datalogging capabilities using Filemaker database software, which includes text alerts, maintenance alerts, etc. Cycle time is so fast, that an technician needs to be there at all times. As with any high pressure equipment, running high-value botanicals, an attendant should be there at all times.

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Infinity Supercritical CO2 Semi Automated System With Zone Pressure and Heat Control

Piping:

NuAxon: Unclear what diameter tubes they use. If they are using 5,000 psi compliant tubing, then they’re probably using 1/16 or 1/8 inch tubing, which will clog (ask any Waters operator). Parts made in India.

Infinity uses 1/2 to 1/2 inch stainless steel tubing. No clogging. Parts made in USA and available overnight.

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Infinity Supercritical Uses Standard Pressure Meters and 1/4 to 1/2 Inch Stainless Steel Tubes Which Do Not Clog

Cost:

NuAxon: Around $500,000+ (for 2x25L systems) and long manufacturing times and shipment from India, which can be 6 weeks+. System is huge (footprint is 25 x 25 feet with 17 ft height) and requires crew to assemble.

The Infinity System is $99,000 for a 10L system (number up for larger system configurations which result in a discounted price) compact (24 x 48 x 71 inches) and is rolled out of the crate and ready to install and operate. The Infinity System is designed to fit through any standard sized door, hallway, or elevator. It is mounted on industrial casters, so you can roll it anywhere you want. Since the system is semi-automated, you have the flexibility of running different recipes, and can change up the schedule on-the-fly. System not prone to any software glitches. Does require an attendant at all times, since our cycle times are very fast.

Engineer Review:

NuAxon: Unclear if they have a engineer peer review for the USA (it’s not listed on their website). To operate legally, you will need to have a full peer review by a certified ASME PE before installation (custom reviews can cost more than $15,000). Their larger 25L system looks like it has to be assembled on-site, which requires additional certification.

Infinity has a engineer peer reviewed system, and is already approved in the state of California, Nevada, Arizona, Colorado, Washington, and Oregon. The plug-and-play system is rolled out of the crate and ready to install and operate.

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Infinity Supercritical Engineer Peer Reviewed and Approved for Use in California, Washington, Oregon, Nevada, Arizona, and Colorado

Overall Comments:

NuAxon: Looks like they have a system originally designed for spices in India (so system may be well proven if that is the case), and converting or marketing to the Cannabis space. They don’t mention Cannabis or Hemp on their website. Unknown in the USA. Country of the pressure vessel manufacture is unknown, assume it’s India.

While the high-automation might seem attractive, unless the PLC is operating with good software 100 percent of the time, it will be frustrating to troubleshoot, especially if something goes wrong and support from India (if support is USA based then that will be better). While Apeks systems are very popular with full automation, the big complaint with Apeks operators is the software failure (which can automatically vent all the CO2) and updates.

Infinity has developed a Supercritical CO2 system specifically for the Cannabis and Hemp industry. The technological improvements have resulted in fast cycle processing time, less carry-over of oil, better CO2 pump operation, and less maintenance. While the Infinity System is smaller (10L per machine), they have found that numbering up gives the operator more flexibility in running different Cannabis varieties, and a faster more consistent processing time (less extractor volume results in faster CO2 and pressure soak). The consistency of the Infinity System results in a superior Cannabis extract. The Infinity System is more comparable to a fine Bourbon compared to a mass-produced Pabst.