Understanding Cannabinoids for Cannabis Businesses

Marlaina Lanese
January 10, 2024

Cannabinoids are naturally occurring compounds found in the cannabis plant that are responsible for its medicinal and psychoactive effects, popular for a wide range of therapeutic benefits, including pain relief, anti-inflammatory effects, and relaxation.


Entrepreneurs and investors must understand the cannabis business landscape before entering the industry. Exploring cannabinoids is crucial in the cannabis industry because it enables both producers and consumers to make informed decisions about the products they buy and use.


Keep reading to understand the different types of cannabinoids, how they interact with human bodies, and how the cannabis business navigates the regulatory landscape with the help of cannabis insurance.

Types of Cannabinoids

There are different types of cannabinoids, and two of the most well-known ones are Tetrahydrocannabinol (THC) and Cannabidiol (CBD).


THC is the primary psychoactive compound in cannabis. It’s responsible for the "high" you experience after using cannabis products. It offers a euphoric, relaxed feeling after you consume it.


THC has legal considerations as it is classified as a Schedule I drug in the United States, meaning that it is illegal under federal law. However, 24 states have legalized it for medical and recreational use.


Alternatively, CBD is non-psychoactive and has therapeutic properties. CBD has become increasingly popular in recent years. It is derived from hemp and contains less than 0.3% THC.


It interacts with our body's endocannabinoid system to produce a range of therapeutic effects, including pain relief, anxiety reduction, and anti-inflammatory effects.

Other Major Cannabinoids

  • Cannabigerol (CBG)
  • Cannabinol (CBN)
  • Cannabichromene (CBC)

The Endocannabinoid System (ECS)

The Endocannabinoid System (ECS) is a complex network of receptors, enzymes, and endocannabinoids in the body. 


The ECS maintains homeostasis, or balance, in the body's various systems, including the nervous, immune, and cardiovascular systems.


The ECS consists of two main types of receptors, CB1 and CB2, which are found throughout the body. CB1 receptors are primarily located in the brain and central nervous system, while CB2 receptors are primarily found in the immune system and peripheral tissues.


The role of cannabinoids in the ECS is to help maintain homeostasis in the body by regulating various physiological processes. 


For example, the cannabinoid THC, found in cannabis, binds primarily to CB1 receptors in the brain, producing a range of effects, including euphoria, relaxation, and altered perception.


CBD, another cannabinoid found in cannabis, does not bind directly to CB1 or CB2 receptors but instead interacts with other receptors and enzymes in the body to produce a range of therapeutic effects, including pain relief, reduced inflammation, and improved mood.


Cannabis businesses must use this knowledge to develop products that target specific physiological functions, such as pain relief and improved mood.

A close up of someone holding up a package of CBD wellness drops.

Extraction and Production of Cannabinoids

When it comes to the extraction and production of cannabinoids, there are several methods that cannabis businesses can use.


Cannabinoid extraction and production methods include:

  • CO2 extraction is considered the safest and most efficient method, as it is environmentally friendly and doesn't leave any toxic residue.
  • Ethanol extraction is also a popular method, but it requires careful temperature and pressure control to avoid contamination.
  • Hydrocarbon extraction involves solvents like butane or propane but is not recommended due to safety concerns.


Finally, the production of cannabis products is followed by strict quality control. This includes testing and certifying the final product to ensure it meets the required safety and quality standards. Plus, regulatory compliance ensures your business complies with all state and federal regulations to avoid legal repercussions, resulting in massive financial losses.

Cannabinoids and Product Development

Cannabinoids have become increasingly popular in the development of cannabis products. The formulation of cannabis products can be divided into three main categories: edibles, tinctures, and topicals. 


Edibles:
Cannabis-infused products, usually gummies, chocolates, or baked goods.


Tinctures:
Alcohol-based cannabis extracts, usually meant for direct intake as an alternative to vapes.


Topicals:
Cannabis-infused creams, balms, and lotions which are usually applied directly to the skin.

A tray of brownies baked with cannabinoids.


Understanding Consumer Preferences

Understanding consumer preferences is crucial in the development of cannabis products. Businesses can do this through effective market research, which involves gathering and analyzing data on consumer behavior and preferences.


According to market research, the cannabis market in the USA is expected to grow at a CAGR of 14.66% through 2023-2028, reaching a market volume of $67.15 billion by 2028. Similarly, the cannabis-infused beverage market in the USA is expected to reach $2.8 billion by 2025.

A man is adding CBD drops to his drink.

Cannabis Insurance and Regulatory Framework

Cannabis businesses face numerous legal and regulatory considerations that are unique to the industry. One of the most pressing concerns for cannabis businesses is navigating the patchwork of state and federal laws that govern the industry. 


For example, the FDA has issued regulations on cannabinoids, which are the chemical compounds found in cannabis. These regulations cover everything from product labeling to manufacturing practices, and failure to comply can result in significant fines and penalties.


Given these challenges, it is crucial for cannabis businesses to have comprehensive insurance coverage. Cannabis insurance can protect against various risks, including general liability, product liability, and property damage.

The Bottomline

All in all, understanding the complexities of cannabis products and how they’re made is crucial to setting you up for a successful entry into the booming cannabis industry in the US. However, businesses must get adequate cannabis insurance to stay ahead of challenges that might come their way.

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January 2024

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