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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!

Machine used to extract CBD from Cannabis plants
Machine used to extract CBD from Cannabis plants
Lauren DeCicca/Getty Images

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 one Senior 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.

Cannabis 1

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.

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