Challenges and Opportunities in the Future of the Cannabis Extraction Industry

With many years of experience in the cannabis industry, Steve Fuhr, Director of Sales at SciPhy Systems, offers a unique perspective in extraction laboratory development and innovation.

In Part I of this interview with Cannabis Science and Technology, Fuhr discusses his experience and predictions in the world of cannabis extraction. In particular, he explains challenges and opportunities faced by cannabis companies in the real estate sector with securing proper permits, properties, and dealing with restrictive banking regulations. Fuhr also highlights the importance of Good Manufacturing Practices (GMP) regulations for enabling recalls and exporting products to countries with stricter standards.

Watch the video, read a partial transcript below, and check out Part II here!

Why do you feel 9 out of 10 extraction facilities will shut down in the next 2 years?

Steve Fuhr: It's interesting. I've made what we call “armchair predictions” on what's going to happen, and now suddenly, a lot of other people making the same predictions. There are three reasons. The first is this whole issue of cannabis companies having been relegated to the worst pieces of real estate, most markets, most of the time. And the problem that creates is when rescheduling occurs and the Food and Drug Administration (FDA) starts to enforce GMP guidelines, they're in buildings that will never practically be GMP or they'll have to spend $1.6 million fixing the $1 million building that they don't own, right? And because of current 280E taxes, and all the issues facing cannabis, competing with black markets. People think cannabis owners are making millions of dollars. They're really losing millions of dollars. They don't have that money. So it's that building quality issue that's going to hurt a lot of people.

The second is going to be that when the interstate commerce barriers come down and cannabis entities are able to sell interstate. The bigger, more efficient players are going to start to take big market share very quickly. I'll be one of them in New York, where I'll be able to produce a liter of oil for $33, call it $35. Most people on the East Coast—I know because I work with them—are spending $3,000 and $4,000 to produce that same liter. They will not be able to compete with me—they might, but they're going to have to spend a million and a half on their facility.

And an interesting side point to that: to my knowledge, New York is the only state that is requiring processors to be GMP out of the gate, and that's significant. No other state that I know has mandated that. New York's going to have an edge, even though it's in a very difficult situation right now with licensing, they will have a huge edge over the other players in the country. By most people’s guess, much less than 1% of current processors are GMP.

So, you're going to have real estate issues, you're going to have problems competing with GMP, and you're going to have competition issues, which are going to really force people to scale up, not only make their facility GMP. I'll give you an example, working with a group in Colorado right now where they have a column that's a three-pound column. So they put three pounds of biomass in that column every time they do a run. They can't compete with somebody that does 50 or 150 pounds per run. They just can't. So, those would be the three big reasons.