Most states that allow medical cannabis issue at least three types of licenses to the businesses that make it work. Some states issue more. At any rate, the three main licenses go to growers, processors, and dispensaries. Each one plays a vital role in getting medical cannabis from the field to the patient’s hands.
This post will discuss the role processors play. In states like Utah, processors are the critical link between growing operation and dispensaries. Without processors, there would be no medical cannabis products to purchase.
A Specialized Skill
Cannabis processing is a specialized skill that requires quite a bit of knowledge. It overlaps some of the skills required to run a growing operation. Nonetheless, processors are generally separate from growers for the simple fact that it is best to do one thing and do it well.
Cannabis growers cultivate and harvest the plants used to make medical cannabis products. Those plants, referred to in the industry as raw material or biomass, is sold to processors. It is then up to processors to turn that biomass into usable product. Extraction is a big part of what processors do.
THC and Terpenes
In a recent podcast, the good folks at UtahMarijuana.org discussed the complexities of extraction with one of Utah’s well-known experts. Listeners learned that processors are mainly after THC and terpenes. They extract both compounds from raw biomass, then use the extracts to create products like vape cartridges and gummies.
There are different ways to extract THC and terpenes. One of the more common methods is chemical extraction. Processors subject raw biomass to chemical baths capable of separating the plant’s components. Unfortunately, chemical extraction is complicated and does somewhat dilute the strength of the final product.
At any rate, THC is the active compound that some medical cannabis users are after. Others prefer CBD, but that’s a different topic for another post. As for terpenes, they serve a couple of purposes. Terpenes are mainly utilized to create certain flavor and aroma profiles. In addition, some processors insist that terpenes can influence how patients react to THC. So that’s part of it, too.
States license processors in different ways. In Utah, they offer tier 1 and tier 2 processor licenses. A tier 1 license allows the processor to do everything involved with extracting the compounds and creating retail products. A tier 2 license includes the ability to package and label products. A subtle difference, but a difference, nonetheless.
It is advantageous in some cases to have both a grower’s and processor’s license simultaneously. Being able to process what you grow eliminates the middleman and increases profits. On the other hand, being both a grower and a processor requires more work, a larger staff, additional expenses, etc.
Selling to Dispensaries
Products produced by processing operations are sold to dispensaries. Like most other things in the retail business, there are lots of ways to approach this. Processors can, and often do, create their own branded products. One processor might start a line of branded vape cartridges while another focuses on topicals and tinctures.
The other option is to create white label products. What are they? They are products that dispensaries can apply their own brands and labels too. There are some licensing requirements that come with labeling white label products, but dispensaries with the right licenses are good to go.
For all intents and purposes, the processor is that middleman that gets raw cannabis from the growing operation to the dispensary shelf. Processors play a vital role in keeping the medical cannabis supply chain going.