What is Toll Processing & Split Processing in Solventless & What's Right For Me?
Cannabis enthusiast and student of the art of solventless extraction
Partnerships and collaborations are powerful in any industry, but they’re especially meaningful in solventless cannabis extraction. A strategic partnership enables cannabis businesses to create unique synergy and deliver more value to the market than either party could offer independently.
As collaborators find creative ways to combine their complementary expertise, new opportunities emerge for both businesses. This mutual benefit can lead to compounding gains in operating efficiency, profit margins, product quality, and brand growth.
However, structuring the arrangement is key to both brands getting the most value from the relationship, and bringing the highest value to the consumer.
Toll Processing and Split Processing are two different types of ways to structure supply and manufacturing relationships between cannabis brands. These approaches empower both brands to focus on what they do best, while trusting each partner to provide maximum value on their respective side of the coin.
While some solventless extraction companies go the single-source route, meaning they provide all the material inputs and manage all extraction processes in-house, this is not ideal for many (arguably most) businesses. Toll and Split Processing are methods that dictate the division of labor and the compensation structure which define a relationship between supplier and extractor.
So what is the difference between Toll and Split Processing, and what unique benefits does each one offer? Understanding both approaches will help your brand develop a strategy and design your operations in a way that optimizes mutual benefit for both partners.
Let’s look at the both processing setups separately and then determine which approach might be best for your brand.
Toll Processing
Toll processing in solventless cannabis extraction is the arrangement where one company (the toll processor) provides extraction services to another company (the client or customer) on a fee-for-service basis.
Typically, a cultivator will approach a toll processor to utilize their solventless extraction equipment and expertise. The grower and the extractor negotiate the terms of service, including pricing, volume, and quality expectations.
Since the quality of the starting material from the grower is crucial for the final product's quality, transparency and honest communication is essential to making sure the partnership thrives and the concentrate meets expectations all around. Trust equals meeting expectations.
This communication goes both ways. Throughout the extraction process, quality control measures ensure the product meets the client's specifications in terms of cannabinoid content, terpene profile, and overall quality.
After the extraction process is complete, whether it’s ice water hash, dry sift, or rosin, the toll processor returns the extracted concentrate to the client. Then the client can then use this concentrate to create various cannabis products like edibles, topicals, or vape cartridges. Or, the client could simply private label and sell the extract as it is.
Payment may be a flat fee per pound of plant material processed or a percentage of the final concentrate's value. This depends on what was negotiated up front.
Toll processing is commonly around $300-$500 for a 4000 gram wash, where the supplier (farmer) gets all the rosin or hash returned to them. Rosin is generally returned in bulk jars, but packaging can be done for an additional fee.
Benefits of Toll Processing
Toll Processing benefits both growers and extractors, allowing them to focus solely on what they do best. Committing to your unique specialization yields better results than getting spread too thin trying to do a little bit of everything.
Toll Processing is ideal for growers of premium flowers who want to avoid the capital expenses and operational challenges that come with setting up a solventless extraction facility.
It’s a great way for solventless extractors with access to equipment and deep knowledge of processes to monetize their extraction capabilities and equipment.
Toll processing opens up access to specialized equipment for growers so they can focus on cultivation and/or product development.
Split Processing
Split processing is the arrangement where a grower, extractor, and potentially a separate product manufacturer, collaborate to process a batch of plant material and then share the resulting extracts or concentrates. This method allows multiple parties like cultivators, processors, and product manufacturers to not only share the production costs, but also the benefits of the extraction process.
Here's how split processing in solventless cannabis extraction typically works:
The Split Processing agreement starts with a specific batch of cannabis plant material, supplied by the cultivator. A cultivator supplies the plant material, a processor provides the equipment and expertise for solventless extraction, and in some cases a product manufacturer or distributor will also be involved in the deal.
Once the extraction is complete and the final product checks out for quality and quantity, it’s divided among the parties according to the specific terms of the agreement. Typically, the division is based on various factors like volume of plant material supplied, the processing costs, or other agreed-upon metrics.
Each partner can use their share of the extracted concentrate to make edibles, topicals, or vape cartridges, or simply to private label and sell as-is.
As with any collaborative venture, it's crucial for the parties involved to have a clear and legally binding agreement outlining roles, responsibilities, profit sharing, and dispute resolution mechanisms. Compliance with local cannabis regulations and licensing requirements is also essential when engaging in split processing in the cannabis industry.
Splits are commonly 70% back to the farmer and %30 kept by the processor, for standard rosin or bubble hash extractions. Further processing, such as diamonds, jam, etc. could be a new split.
Benefits of Split Processing
Benefits of Split Processing include cost sharing, specialization, and risk mitigation.
Similar to Toll Processing, all parties can share in the costs of material inputs, extraction equipment, labor, production, packaging, and facility costs.
Likewise, each party can focus on their core competency and focus on what they do best. This optimizes the final product which benefits all partners.
Split processing also mitigates risk for each party, as all participants share in unforeseen challenges and market fluctuations. This helps shield any individual brand from taking a potentially catastrophic hit.
Which Arrangement Is Right for Your Brand?
Ultimately, the choice between Toll and Split Processing depends on your brand’s unique circumstances and priorities. It’s also worthwhile to consult industry experts or legal advisors who can offer insights specific to your region and market conditions.
That said, the following are some things to consider:
- Access to high quality starting material and reliable extraction equipment
- Control and quality assurance
- Costs of both cultivation and extraction
- How production capacity aligns with your goals for scale and volume
- Compliance and licensing
- Brand identity and marketing acumen
- Distribution channels and infrastructure
- Flexibility and business goals
- Risk Tolerance
- Partnership dynamics
It’s critical that any new partnership and corresponding agreement aligns with your long-term strategy and goals for quality, efficiency, and growth in the cannabis industry. Don’t take any partnership lightly.
Conclusion
Choosing the best option between Toll and Split Processing is the first step to setting your brand up for partnership and collaboration success. Understand the difference between these two arrangements, and the specific benefits that each one offers, will empower decision makers to chart the right path forward.
All parties should have a clear agreement in place to ensure that quality, quantity, and pricing are aligned and delivered.
As always, in the current regulatory patchwork that defines the cannabis landscape, legal and regulatory considerations also play a significant role in the cannabis industry. So, compliance with local laws and regulations should remain top of mind.
Which arrangement do you think works best? Let us know in the comments!
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FREQUENTLY ASKED QUESTIONS
What is Toll Processing?
Toll processing in solventless cannabis extraction is the arrangement where one partner (the toll processor) provides extraction services to another partner (the client or customer) on a fee-for-service basis.
What is Split Processing?
Split processing is the arrangement where a grower, extractor, and potentially a separate product manufacturer, collaborate to process a batch of plant material and then share the resulting extracts or concentrates.
Which is better Toll or Split Processing?
Ultimately, the choice between Toll and Split Processing depends on your brand’s unique circumstances and priorities. It’s also worthwhile to consult industry experts or legal advisors who can offer insights specific to your region and market conditions.
What are the benefits of Toll Processing?
Toll Processing benefits both growers and extractors, allowing them to focus solely on what they do best. Committing to your unique specialization yields better results than getting spread too thin trying to do a little bit of everything.
What are the benefits of Split Processing?
Benefits of Split Processing include cost sharing, specialization, and risk mitigation, among others.
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