Turning to Terpenes: New Opportunities in Cannabis Products

Turning to Terpenes: New Opportunities in Cannabis Products

Terpenes – the aromatic compounds found not only in cannabis, but a wide range of plants – are a largely untapped source of revenue for firms across a wide range of industries. As more isolate-based cannabis products enter the market, producers are seeking to keep the chemical profiles of their products true to nature by reintroducing the natural terpenes before retail.

What are Terpenes?

Terpenes are organic compounds that occur in a wide range of plant sources, largely pine and citrus plants, as well as some insects. These compounds are responsible for the complex and unique scent and flavor profiles that make particular plants so easily recognizable. For instance, the terpenes found in pine trees are the source of the well-known and widely adored smell of a Christmas tree, while the terpenes in lavender give it its one-of-a-kind scent. Both have their place in drinks and cuisine as well. For example, the alpha-pinene found in juniper berries is responsible for giving gin its famous (or infamous) taste, reminiscent of pine trees.

Terpenes have recently been thought to have some psychoactive effect when combined with flavonoids and prominent cannabinoids, such as cannabidiol (CBD) and tetrahydrocannabinol (THC). Cannabis plant strains each have their own complex profile of these compounds, and they are thought to be responsible for the unique effects observed in each – often called “the entourage effect”.

Terpenes Torn Away

The process of removing CBD or THC from cannabis plant matter is typically carried out using ethanol or another solvent. This results in the production of an isolate product, or extract – a product consisting of only the desired compound, thereby increasing the potency by volume of the end-product. Demand growth for such products is strong and shows no signs of slowing as legal restrictions continue to loosen. In fact, an entire industry comprising third-party cannabis processors catering to companies with a focus on growing has emerged to fulfill extract production needs. A side effect of isolate production is the volatilization, and therefore the loss, of the valuable terpenes in the raw cannabis.

Both CBD and THC may be marketed in their isolate forms, but consumers are increasingly seeking products with full terpene and cannabinoid profiles – often referred to as “full spectrum”. In order to meet this demand, cannabis product manufacturers regularly turn to outside sources.

Transplanting Terpenes

With around 350 terpenes already identified in various strains of cannabis, opportunities for investment and market entry abound. Producers of cannabis products often fortify their products with purchased terpenes. With the increasing need for additional sources of terpenes, an opportunity exists for firms in a number of seemingly unrelated industries to fill demand. There is significant crossover with firms that extract terpenes and other organic compounds from plants for use in products such as soaps and essential oils. Alternatively, firms may find a role growing cannabis specifically for the purpose of terpene extraction, rather than CBD or THC isolate products. These terpenes may not only be used to reintroduce the original strain profiles, but also may be used for other products – such as cologne. However they are used, the fact remains that terpenes are likely to continue expanding in importance as the cannabis market evolves and matures.

Want to Learn More About Cannabis?

Don’t worry, we have you covered! For additional information and analysis of US industry trends, see Cannabis: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. This report forecasts to 2028 US cannabis production in pounds and demand in nominal US dollars. Total production is segmented by product in terms of:

  • marijuana
    • commercial indoor
    • commercial outdoor
    • private-use residential
  • hemp

Total demand is also segmented by end-use product as follows:

  • marijuana
    • recreational/adult-use
    • medical
  • hemp

To illustrate historical trends, total production and demand are provided for 2016-2018. Forecasts are provided for all segments for 2019-2023, with a five-year projection to 2028.

Production volumes and values in this report cover only the dry weight of usable cannabis plant, and exclude the value of downstream processing. While a significant portion of this marijuana production total is eventually sold through illicit channels, these volumes are included to avoid significant underreporting in the marijuana growing supplies market. This is particularly important for California – by far the country’s leading marijuana producer – which sees only about 20% of local production sold legally within the state. Excluded from this report is cannabis grown by unknown and unrecorded operations, marijuana grown illegally by individuals at home, and cannabis illegally imported into the US and sold on the black market.

You can also check out some of our related reports, which include:

About the Author

Chris Dyer is a Market Research Analyst for Freedonia Focus Reports. He holds a Master of Arts in Security Studies, and his experience as an analyst covers multiple industries.