OEMs Needed for $32 Billion Budding Cannabis Industry
Automated operations are the wave of the future in a growing industry that is expected to reach $32 billion globally by 2024, with a CAGR of 28%. Off the record, OEMs report cannabis companies get sticker shock!
PMMI Business Intelligence’s new white paper, “Cannabis Market Update: Unique Packaging Challenges for THC and CBD Products,” states that “every participating company interviewed for this white paper, whether they are growers, processors, or packagers, is looking toward a future of automated operations to meet demand.”
The cannabis industry is predicting growth in food and beverage, health and wellness, cosmetics, skin care & topicals, pet supplements and pharmaceuticals. Recreational growth is expected to quickly outpace medical, and the regulatory landscapes for both CBD and THC are expected to continue to become more relaxed, especially restrictions on retail CBD. As public support for the cannabis industry - particularly CBD use - continues to increase, it is expected that in the next decade some form of cannabis will be a part of many consumers’ daily routines, either as a functional ingredient in foods, beverages, and beauty products, or as a wellness mood enhancer in health.
With all of this growth and change, packaging has become a major concern for producers. There are specific regulations for labeling and packaging that producers must adhere to carefully, especially child-resistant packaging. The white paper says, “the market is primed for OEM players to partner with the cannabis industry to offer specialty machinery and forge industry-wide standards and practices.”
The majority of the cannabis industry still relies on manual labor for processing and packaging, yet also experience labor shortages. Producers and packagers struggle to maintain volume, and while there is interest in automating processes and acquiring more equipment, many industry players are not fully aware of the possibility and potential benefits of adding machines.
Most cannabis manufacturers are small operations - 92.9% of CBD manufacturing companies categorized as “low tier” with sales under $1 million or availability in less than 100 stores, according to Brightfield. “Our industry is not familiar with capital equipment purchases and we are relying on the partnership with OEMs to provide their manufacturing expertise,” said one Director of Packaging at a medical and recreational cannabis company that cultivates, processes, and packages the product.
The majority of cannabis companies are looking for a bundled solution to achieve a fully integrated line. And much like the CPG industry, these companies are searching for recyclable materials that address the consumer’s desire for sustainable packaging.
There is a need for OEMs to provide flexible, reliable machines that will adapt to a number of different product types and packaging formats, with a machine size and price that tailors to fit an operation’s specific requirements. “We prefer a bundled solution to speed up the entire process of moving toward more automation,” said one General Manager of a medical and recreational THC company.
One concern about automating is cost and payment plans. “The cost of automation is our biggest hurdle since suppliers want full payment upfront for equipment; even though investors are supplying a revenue stream, it remains a cash business,” said oneSenior Process Engineer at a provider of medical THC and CBD products.
Cannabis manufacturers suggest that OEMs need to understand the complexities of a totally new business and offer recommendations and expertise on automating procedures. OEMs and suppliers should aim to fully understand the intricacies of the cannabis industry, from its state-by-state network of regulations to the challenges faced by cannabis processors and packagers on a daily basis. With such a young industry, there are no standard best-practices guides for cannabis, requiring OEMs, suppliers, and cannabis companies to work together to understand production and packaging processes and craft a set of guidelines and suggestions.
With operations varying significantly in size and available capital, OEMs and suppliers will need to recognize that solutions for each cannabis company will need to be specifically tailored, keeping in mind that they may need to innovate an entirely new process.
Providing customer service technicians for troubleshooting, while educating and training the industry on lean manufacturing practices is also key, as is designing cost effective equipment for smaller operations.
Source: PMMI Business Intelligence “Cannabis Market Update: Unique Packaging Challenges for THC and CBD Products”
Download the FREE White Paper below.
Make plans to visit PACK EXPO East in Philadelphia, March 3-5, to see processing and packaging machinery and materials for the cannabis industry.
Sticker Shock
Off the record, several OEMs have reported that they do get a ton of interest from cannabis companies across the country inquiring about packaging equipment such as labelers, sealers and form/fill/seal machinery. Some even inquire about robots and fully integrated lines. Unfortunately, people who specialize in licenses, land acquisition, crop science, irrigation, lighting and security do not have any experience with packaging machinery and the investment required. Or they have purchased used or inferior equipment from off-shore sources that last only a few months before breaking down. A handful of OEMs report that these tire kickers experience stick shock when they receive a quote.
There is hope for growing new U.S. equipment sales, however, with the latest generation of cannabis companies reaching into the CPG industry to hire brand managers, logistics, processing and packaging professionals. These packaging engineers will be familiar with the level of investment required, and have the know-how to handle issues such as start up, training and maintenance. And there are other options as well.
Some predict contract packaging operations could work with multiple producers in a region although we have not heard about any just yet. Or they are keeping quit about it--which is not unusual in the cannabis market. Last year sister publication, Automation World, reported on one cannabis grower in Washington State, Soulshine, becoming the area's contract packager--for local competitors.
Soulshine has found tremendous value in the purchase of a weighing and packaging machine. “When you have people hand packaging, the scales might be off and the variances are unknown,” co-owner Steve Wlaznak says. “I don’t know how much I’m losing as there is no way to account for that loss, and that is unacceptable.”
Soulshine bought a machine from Paxiom Group that automates the weighing and packaging process. The machine can measure down to 0.1 g. “It will tell you exactly how much you are over so you can minimize that loss,” Wlaznak says. In addition, the Paxiom software is programmed based on the density of each strain of the cannabis bud and adjusts the machine vibration to ensure the perfect amount of product falls into the hopper. If it’s sticky, for example, it shakes faster.
It’s important for any manufacturer to control the amount of loss, of course, because that means money. Not only did the Paxiom machine cut the packaging time by 30 percent, but Wlaznak estimates that it can save Soulshine about $400,000 a year in product by eliminating hand weighing and small scale errors.
There’s more money to be made with the machine as Soulshine contracts packaging out to other cannabis producers in Washington state. “The machine is so efficient that we can pre-package all of our inventory in four to five days each month, and we are done. The other days of the month we have other growers bring in their inventory and package up their material, paying a contract fee,” Wlaznak says.
See more Cannabis Industry coverage in Packaging World:
Editors report on distinguishing characteristics that define each new product and collected video demonstrating the equipment or materials as displayed at the show. This topical report, winnowed from nearly 300 PACK EXPO collective booth visits, represents a categorized, organized account of individual items that were selected based on whether they were deemed to be both new, and truly innovative, based on decades of combined editorial experience in experiencing and evaluating PACK EXPO products.
Hiring remains a major challenge in packaging, with 78% struggling to fill unskilled roles and 84% lacking experienced workers. As automation grows, companies must rethink hiring and training. Download the full report for key insights.
