California THC Market 2020

CannaBusiness
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Hi everyone,

I wanted to hear what you guys thought about the California THC market currently (Ignoring COVID 19) .

I have the opportunity to buy a large facility out there with a THC license and start producing large amounts of distillate (at first, we would also like to offer butane extracts and “solvent-less” extracts in the future but we’d like to start with ethanol because we already have the equipment).

What kind of prices are you guys seeing for licensed trim out in Cali?

What about for CAT3 Licensed distillate?

Prices for any other extracts in bulk would be appreciated.

I appreciate everyone’s insights.

Cheers

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$5000-6000 for licensed cat3 dist (w tax), your distillate must be high TAC/THC and attractive to compete or you’ll be lowballed to hell.

I haven’t been in a type 7 in almost two years now but I remember shatter being around $8-12/g

Market is still suffering from vitEOAc/bad cart lung disease but recovering.

White label opportunities are out there, large successful brands can offload their excess on to you which would relieve the burden of floating yourself off of your own new cart/extract brand to generate revenue.

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Thanks for your input!

So are you saying you think we should also offer white labeling also, or we should team up with a white labeler?

Do you know how that price changes with water soluble?

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Yes you should offer white labeling. Some counties like sac don’t currently allow type 7 or the use of LPG so you can offer companies that run type 6 only more SKUs.

I do not know anything about water soluble for THC however Kahna is doing some type of nano or emulsion in their gummies for quick onset effects. I know edibles take up a large portion of the market (I think 30% if I remember right). However I don’t really think drinks are that popular. Kanha Treats - High Quality Cannabis Gummies

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Hey there.

We operate a type 7. We don’t sell or process distillate so can’t help much there. We’ve been paying $130-185 for really nice indoor trim. Fresh frozen is around $100. Both of these are without tax. There’s plenty of market and opportunity. You’ll have to work hard and create good-exceptional product but the juice has been worth the squeeze for us for far.

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Haha I like that terminology!

So what all are you offering right now, if you don’t mind me asking. I’m just trying to learn as much as I can about this side of the industry as I’m transitioning from hemp. Thanks for the reply your insight is appreciated.

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We specialize in BHO extracts- sauce, diamonds, batter, shatter etc. We have room to grow into other products/processing but BHO only for now. Where are you considering?

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That’s awesome I love BHO products. We are looking at purchasing a lab in mammoth lakes that has all of the equipment and license included (hence why I would be starting with distillate because that equipment “comes with” the lab/license).

It has a lot of capacity (~2500lbs/day) so now I’m just trying to figure out a way to utilize this equipment to its maximum capacity. We’d love to get into BHO at some point in the near future, but we just need to establish a revenue stream first. We are also bringing some of our tech from the hemp side over and will be selling marijuana derived CBN as well.

We’re very open to different ideas right now, while also trying to stay focused on what’s in front of us. That is one thing that worries me about white labeling, we’d have to get an entire new setup to complement the setup we would be buying (which is already a lot of money lol).

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There’s a reason they’re selling the lab. There’s too many licensed labs already in California and we are currently finding it cheaper to buy distillate than to produce it ourselves.

At 2500 lbs a day you’ll be making 50l of distillate a day. Where are these going to go? Does the lab come with buyers? The biggest operators barely need 50l of distillate a month. The biggest pen producer I know only uses 200l a month and they make it in house.

The California market is probably the most flood legal market there is. If I knew what I knew now, I would have never bought equipment and just bought product and branded it.

1000l a month is a million people smoking one gram of your distillate a month… and that’s just your production. California’s big but not that big.

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Thanks for the input! The lab does come with some buyers, we will have an established 200l/month contract to start.

Yes I do understand there is a reason they went out of business, that’s why we’re looking to incorporate other things into our operation.

I also know that 1000l/month is a ridiculous amount of distillate (also why I’m trying to find some splits because that’s way too much oil to sell ourselves).

But thank you for your input it is much appreciated, do you have any tips you could offer me?

Any advice would be appreciated, how would you operate a laboratory to make it work? What additional equipment would you incorporate?

We have the capabilities do make a good amount of cbn as well which we would also like to sell.

The one thing we do have on our side is the economy of scale with this opportunity.

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That’s the thing. I wouldn’t operate a lab in California.

I hear of more labs closing every month because it’s that rough out here. Your best bet would be to have your own grow you extract, with your own genetics, and your own brand.

California has the biggest black market of any state and it makes it that much harder out here. I’ve heard prices as low as $3500 for a litre pre tax… the last batch I bought was 97% TAC and we barely paid 5k with tax.

Let’s do some math.
10% cat 3 trim runs around $120 with tax. At 40 lbs per litre you’re at $4800 without operation expense. These operators are literally selling distillate to make $100 on a 5k investment which is a horrible ROI.
That’s where it only makes sense if you’re growing it yourself and it’s a way to convert unusable product to usable product.

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How do you ignore Covid19 ?

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Because no one really knows how the whole pandemic is going to play out? And since no one knows how it’s going to play out, no one knows how the economy will actually be effected.

I’m not super interested in turning this thread into a political debate thread like every thread that mentions anything about COVID. So let’s just not speculate and pretend like we know what’s going to happen with the newest “plague”

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Worthwhile to consider there are an increasing number of voices predicting a relatively quick federal legalization of cannabis coming. As in, the next year or less.

Definitely take into consideration what effects that may or may not have on buying a super expensive state license and business.

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Thanks again for more input. Here is my issue, my investor is looking to spend millions of dollars on a lab.

We didn’t go find an investor to open a lab, this investor found us and said, “I don’t know how to run a lab but you do, how would you like to start a lab for me and get partial ownership?”

So at this point I can’t really talk him out of it, I can advise him on what kind of lab we want to start (hemp va THC) and what we are going to do (BHO vs ethanol) and how we’re going to do it (equipment wise). But if I tell him “hey I don’t want to start a lab I think it’s a bad idea let’s just launch a brand instead, or let’s do a grow instead” then I literally just replaced myself, because he wants to spend millions of dollars on a lab, not a brand (we’ve had talks like this before).

The reason I would like to do THC in California is because that is the only license I’ve seen available for sale recently.

So right now my options are hemp lab in Colorado or THC lab in Cali, I’m trying to leave the hemp side as we speak because the only thing that’s worth anything on the hemp side is minors.

So if I want to utilize this investor and have a chance at owning a multi-million dollar lab, then I have to start a lab for this guy.

The lab already has $1,000,000/month of revenue built in, now I just need to figure out how to turn that into good profit with the tools at my disposal.

We’ve been considering extracting spent biomass so we can reduce costs significantly by essential getting the material for free. The issue is obviously that you’d have to extract a lot more to get a good bang for your buck… but it’s like you said, 2500lbs per day is a bunch, so we might have an edge there (we could do 7500lbs per day if we upgraded our solvent recovery systems).

Have you ever tested spent biomass, what is the typical % after extraction? (Not from 10% trim stuff but from some actually higher grade 18%+ starting material)

We’re also in talks with lawyers right now trying to incorporate THC converted from CBD into our inventory, it’s a legal mess and we’re not sure if we can do it or not. But if we can that’s like $1200/L.

What do you think about all of that?

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Well if federal legalization was right around the corner, wouldn’t having a large scale lab be advantageous? Like the post above was saying if I made 1000L/month that’s 1,000,000 vape cartridges essentially, so if I had a larger market base wouldn’t that be ideal?

The laboratory with license is actually being offered for an incredibly reasonable price, we would be picking up a couple million worth of equipment for less than 0.40$ on the dollar.

Thanks for you input though it really is much appreciated I’m looking for criticism so I can have constructive conversations! Do you see federal legalization having an impact that I am not seeing in my basic analysis of the situation?

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I think the assumption is that with federal legalization big corporate money would get into the space and a larger sized multi million dollar lab will become obsolete when billion dollar oil refinery sized labs are set up.

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Wouldn’t a billion dollar super lab be overkill? It’s like the guy told me above, he stated that 1000L/month in California would be too much. Technically with a few “small”
Upgrades we could get up to 3000L/month which is ~3,000,000 units at a consumer level.

So if the opinion is that 1000L is to much in California, which has a population of ~40,000,000 or 1/8th the population size of the US, then for the whole US we would need less than 1,000 x 8 = 8000L/month right?

I’m not sure if I necessarily agree with that sentiment, since 8,000,000 units at 1g each would only be 2.5% of the US population smoking 1g/month, which sounds very low to me. Obviously this is a difficult question and this is an oversimplified look at it so let’s say it’s actually double that and the us would need ~16,000L/month total or about 5% of the population would smoke 1g worth of extract per month.

If we can spend a little more money to ramp up to 3K lbs per day then that would mean we could be doing 18.75% of the Distillate needed for the whole US with a multi-million dollar lab, so why would I be worried about a multi-billion dollar lab?

In my opinion the billions that are going to be spent on this plant once it becomes federally legal is almost exclusively going to focus on branding not laboratory building.

Sorry if this seemed ranty, I was just typing out my thought process to help myself. Thanks for your insights :+1:t3:

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If it’s what you got to do, do it. Remediation services are a huge service out here if you’re going to do it.

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Remediation services like Pest remediation/CRC or do you mean like THC remediation from CBD oil?

Thanks for the tip, any other ideas you’d be willing to throw my way?