Automation Vs Manual for Pre-rolls Production with Lease Benefits

Automation Vs Manual for Pre-rolls Production with Lease Benefits

Market

The cannabis market is currently expanding at approximately 35% CAGR making it one of the fastest-growing opportunities in the last 30 years. The market is also rife with volatility and extreme pricing fluctuations. This makes entry into the direct cannabis-to-consumer market unattractive and fraught with risk. However, supplying best-in-market equipment to automate slow, manual processes and packaging is a unique and significant opportunity.

 

Unique Market Conditions – USA

• Cannabis cannot cross state lines.

-Each facility within a state needs to produce a product for that individual state. This creates a need for significantly more equipment that traditional businesses do not have. Most businesses use equipment to maximum capacity on one – three shifts and ship products to other states or to other countries.

– Since each state is geo-fenced, even MSO’s who operate in several connecting states will need to buy equipment for each state in which they operate.

– This creates a need for significantly more automation and packaging equipment.

• Labor in Cannabis is challenging to find, expensive to train, and difficult to retain.

– Manufacturing prerolls is a time-consuming process that requires an operator to focus on a repetitive task for 8-10 hours daily. A trained operator can fill, weigh, and crown 300-400 prerolls daily.

• Cannabis is sold at a value proposition of Price / Gram.

– In most emerging cannabis markets, the consumer purchases cannabis based on the highest amount of THC for the lowest price. This quickly creates a race to produce quality products as inexpensively as possible. Automation reduces the cost of labor by over 88%.

 

Benefits of Automation (Prerolls & Packaging)

• 350 units per day Manual vs 1000+ per hour Automated.

– 88%+ reduction in labor cost for prerolls

– Reduction from 16 employees to 2 for 100,000 units monthly

• 5% shrinkage due to loss is common in Manual fill processes

– Knocking joints in a traditional KnockBox create a loss of ~5% of the material.

• Automation equipment measures the amount of material in each PRJ assuring accuracy and eliminating 5% overfill.

– A manual fill and crown process typically “overfills” by 5-10%

• Automation reduces the cost per unit sold by 15%-20%

– Creating a low-cost high-quality product is essential in Cannabis for market share.

• Automation creates Contract Manufacturing and White label opportunities. (co-packing)

– Successful brands from other states will seek out high-quality low-cost manufacturers to create their products and sell into the local market.

 

Benefits of Leasing Program (Customer)

• Low cost of Entry

– Many cannabis companies are cash constrained and cannot purchase equipment for $300-500K.

• Up to 100,000 units per month can be produced by a single operator.

– Run rate of up to 1,300 units per hour

• Payments out of cash flow savings

– Significant labor savings (up to 88%) provide cash flow for automation equipment and provides the customer with significant additional profits.

• Maintenance and Service included.

– One price with no unexpected charges and no significant downtime.

 

Benefits of Leasing Program (Manufacturer)

• Increased sales opportunities
• Recurring monthly revenue
• Machine margins of 100%-200%
• Payments based on monthly minimum or based on volume