Your Guide to Cannabis Extraction: Q&A With Guild Enterprises' Claudio Miranda

As the co-founder of one of the most reputable innovators in the field of cannabis concentrates, Guild Extracts, Claudio Miranda knows the ins and outs of the extraction business.

Ahead of Miranda's session at Cannabis Conference 2023, he shares critical considerations and steps for operators to launch or expand into the extraction business successfully.

Editor's note: Claudio Miranda will speak at Cannabis Conference on the session, "Your Extraction Game Plan: A Guide To Winning The Long Game," which will run from 11 a.m. to 12 p.m. on Thursday, Aug. 17. In this session, extraction professionals will discuss the different extraction methods and products, key considerations for launching or expanding into the extraction business, the importance of a data-driven approach and market analysis, and much more. Visit www.CannabisConference.com for more information and to register.

Andriana Ruscitto: What are some critical considerations before launching an extraction business or expanding into extraction?

Claudio Miranda: First and foremost, you always want to start with your goals and objectives. On the most basic level, operators need to determine whether they want to focus on B2C (business-to-consumer) versus B2B (business-to-business); that is, whether they want to create an in-house consumer brand and/or provide B2B services to other cannabis operators, such as contract manufacturing or bulk sales. From there, one needs to decide what type of products they want to make and what extraction methods are best suited to reach that objective. How you build and design your facility and what equipment you choose should all be dictated by what products you want to make and whether your goal is to make craft products or commodities at scale. You also want to look at factors such as your target geographical market, how developed the supply chain is within that market, and what regulatory framework and restrictions are at play.

AR: What are some key ways operators can evaluate product demand, price points, trends and opportunities in their markets?

CM: There are a few different ways to understand product demand and how to go about your product strategy. One key way is to utilize data analytics tools that are available in the marketplace, like Headset and BDSA. Another way of going about it is to conduct field research by talking with retailers and consumers on the ground: getting a sense of supply and demand on a market-by-market basis, going in-store, talking with budtenders and buyers, and doing that field marketing analysis. I've personally used tools like Headset in my cannabis career, and the great thing about their solution is once you identify the product category that you might want to operate in, Headset lets you look at all the category data on a per-market basis, which includes sales figures, pricing, best-selling brands and SKUs, etc. Take concentrates, for example. Not only can you see total category sales for your target market, you can see the breakdown of pricing tiers, unit sizes, and which types of concentrates have the highest market share. And that's helpful because you can develop your product strategy based on this data—targeting specific product types based on price point, projected unit sales, competitive factors, etc. That's one way of looking at the data. Alternatively, say you're looking for "white space," as it's called, which is assessing which areas of the market are being underserved or where there isn't a lot of competition. For example, you can see that solventless is a relatively small slice of the market, but you notice strong month-over-month growth trends. So, you can move to where the hockey puck is going and look at that emerging market opportunity within the concentrates category. Solutions like Headset let you do all that analysis, and that really helps inform your product strategy.

AR: What are the top business and financial aspects operators should consider when building an extraction lab?

CM: The primary success metrics that people optimize for are gross revenue, market share, and of course, maximum profit margins. But oftentimes the products that have the highest sales volume tend to be the more commoditized products, which are highly competitive and have razor-thin margins. For example, you might find that an extract product like distillate is one of the highest volume sellers in the market because it’s widely used in cartridges and infused products. If you're looking to drive aggressive top-line revenue growth, choosing to make distillate could be a great product to focus on to meet that financial objective. However, because the market is flooded with distillate, and it's been rapidly commoditized, what you find is that the cost per gram has plummeted, so your margins are little to nothing, depending on the market. Although you'll benefit from a lot of revenue growth and sales volume, you may be sacrificing profit margins and sustainable growth. Conversely, you could choose to make more specialty products like solventless hash rosin, which command higher price points and tend to enjoy greater margins, but it’s a more niche product that does not have the same revenue potential as distillate. Within any business, you want to look at the trade-offs between top-line revenue growth versus profitability, and you need to figure out which end of the spectrum to optimize for.

AR: How can a data-driven approach and market analysis help to determine the business case and equipment needed for the extraction lab?

CM: Per my previous statements, always start by defining your goals and doing the market research. Any consideration of equipment has to start with the end product in mind, on what scale you wish to produce that product, and whether that product best serves the needs of the market. Over the course of my cannabis career, I have seen countless labs built with equipment and process flows that did not properly serve the needs of business or the market, which results in a considerable waste of capital. This is because those businesses didn’t do their homework ahead of time but rather used a “one-size-fits-all” approach to their buildout and design. If operators take the time to research their market, understand the trends, and assess the best opportunities, they can develop a well-informed approach to building their lab and choosing the best equipment to yield their desired outcome, which results in the most efficient use of financial and human resources.

AR: What is one thing you'd like attendees to take back to their business after attending your session this year?

CM: First and foremost, I would like them to walk away with a deeper understanding of the process one needs to follow to make the most informed and impactful business decisions. Everything that we just finished talking about is an example of that. A lot of people go into cannabis and don't use a data-driven approach. They're not thinking about defining their goals clearly, whether that's an end product or financial goal. They just kind of shotgun it. So, I would like people to walk away with a good understanding of that research process and due diligence checklist, which will better position them for success against someone who doesn't go through that process.

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