November 21, 2023

Three key decisions in cannabis processing & manufacturing facilities

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For cannabis processors and manufacturers, spooling up to get compliant – and staying that way – is one of the key operational challenges faced on a daily basis. Everything from storage and shipping to waste management and product testing has to be carefully managed as part of a strict protocol. The consequences of getting it wrong can be serious, ranging from damaging fines –, which can reach hundreds of millions of dollars – to loss of funding support and complete facility closures.

Working with an experienced team to help get your facility properly set up is essential, and an experienced owner’s rep can help connect you with the necessary expertise for zoning, permitting, legal consultation, and everything in between. Here are a few of the key decisions our team at J2H has guided processors and manufacturers through over the years, in highly specialized markets all over the country.

1. What exactly will you be making?

There are numerous ways that cannabis can be processed, depending on how the end user consumes it. The way a processing facility is laid out and outfitted should reflect whether the product will be smoked, eaten, added to a beverage, formed into a pill, or used in topical formulations, such as tinctures and oils. Each of these possibilities is complex and requires different expertise and equipment. Many cannabis purchases are for the flower itself, but as the market matures, produce demand is shifting — and rapidly.

When a new market opens, the flower category starts with a high market share, as it is the easiest product to manufacture. And then, over time, in every market, flower tends to decrease in market share drastically at first, then more slowly as operators get up and running with other, more sophisticated product formats such as edibles, vapes, and concentrates. MJ BizCon, 2023

Edibles, such as gummies, are widely considered more discreet and safer to consume than smoking, which also makes them more socially acceptable. As the cannabis market matures and evolves, manufacturers must be aware of the trends that impact product demand – much like any other CPG company would.

Regardless of the type of processing method, any of the considerations to take into account for a facility share similarities with other large-scale manufacturing operations, such as a carefully planned layout based on the processor’s workflow.

2. What equipment is essential?

Today’s cannabis manufacturers have the potential benefit of lower equipment costs compared to when the industry was in its infancy. With equipment being one of the major areas of investment in the industry – even on the low end, lighting, HVAC, and other equipment alone easily add up to hundreds of thousands of dollars – this is a welcome development, especially as the market becomes more competitive. Another way J2H has identified meaningful cost savings for processors is by taking advantage of the emerging secondhand market for cannabis equipment. As the industry has grown in the last decade, businesses have come and gone, leaving behind valuable equipment and materials that can be put to good use.

In the lab space, you need to consider air quality regulations, such as particle count and precautions to limit cross-contamination. This is both for the safety of the product and the staff. Likewise, lab spaces must carefully manage the facility’s waste and by-products. HVACs need to vent to avoid polluting the surrounding areas, and wastewater needs to be processed and filtered to mitigate sewer contamination. And, like any regulated laboratory in operation, there are requirements for managing cleanliness and waste disposal and conducting periodic inspections.

For facilities that extract cannabis oil, one of the stricter requirements to prepare for will be building the necessary C1D1 rooms – these are designated rooms labeled as high-hazard spaces since the oils are extracted through flammable substances, such as propane or natural gas. An experienced owner’s rep can help navigate all the complexities around the necessary regulations, permits, and other unavoidable red tape required to get these rooms built and signed off on.

3. What do your operations look like, and how do they map to your layout and security needs?

Within the packaging space of a processing facility, there are considerations such as product and packaging storage, much like any facility creating consumable packaged goods. Operations must be laid out to minimize transfer waste during packaging, and measures must also be taken to preserve the product’s integrity, such as temperature and light control.

Take a measure twice, and cut once when it comes to design and layout, rather than rushing the process. Thinking through everything and making adjustments at this early stage will save a lot of headache. Impatiently plowing ahead means that instead of moving a line on a mockup, you’ll have to be moving a wall.

And, as with all facilities operating in the cannabis space, security is an important overall consideration. The right owner’s rep can help determine what decisions to make, decisions that boil down to which security measures are required by law, and which, if any, should be added to ensure a level of security that makes sense for the specific owner and the operation. These can vary depending on the overall security of the location’s neighborhood, the type of product being produced, the size of the facility, or any requirements or preferences imposed by the business’s investors or other stakeholders.

For prospective customers that hesitate about the added expense of an owner’s rep, we often explain that the earlier we’re involved, the more our experience can help unlock value at every step of the process.

For one of our processing facility clients, for example, our knowledge of the complex regulations of the space allowed us to prevent them from wasting thousands of dollars on a flooring upgrade they mistakenly assumed would be required throughout the entirety of the space. Instead, we helped them by identifying exactly where it was – and wasn’t – required.

We’ve also helped our clients find the right teams – a trusted, experienced group of builders, vendors, consultants, and all the other expertise they need to get the job done right the first time.

The only thing more valuable than experience is being able to share it and use it to benefit our clients. The team at J2H is here to help in whatever way we can – contact us to get started, or read more about our insights and learnings in our newly published white paper.