- Increased consumer interest in personal health and wellbeing has bolstered the hemp industry in 2020
- New compounds, such as cannabigerol (CBG), are gaining traction within the industry due to its potential benefits and applications
- Hemptown Organics is one of the largest global producers of CBG and the company is in a favourable position to capitalize on newfound interest in the compound
If you’ve heard anything about the cannabis space, then you’ll likely know that the cannabis plant is made up of roughly 400 different compounds – although only about 100 have been uncovered so far.
Conventionally, much of the focus surrounding cannabis has been on THC and CBD, but now there’s a new frontrunner gaining traction in the industry: CBG.
CBG is often touted as the “mother of all cannabinoids” simply because all other cannabinoids derive from its initial form, which gets broken down and becomes the base for the other cannabinoids to take shape.
Due to CBG’s potential benefits and relative rarity — making up about one per cent of a cannabis plant — it sells at 10 times the price of CBD and represents a new opportunity in a market that is crowded with CBD brands.
“With any emerging market, you’re going to have tons of products coming out with varying quality, and because of our government certified facility, our products have transparency and traceability all the way from before planting right through to the finished product.”
– Derek Du Chesne, Chief Commercial Officer, Hemptown Organics Corp.
Since the passing of the 2018 Farm Bill, which legalized the production of hemp at a federal level, the CBG market and the wider hemp market in the U.S. have greatly expanded. By 2027, the North American hemp-derived CBD market is expected to reach US$16.1 billion.
Amidst rapid growth, many companies have begun capitalizing on new cannabinoid markets. However, few have found as dominant of a foothold in the CBG space, as Hemptown Organics.
One of the largest producers of CBG globally, Hemptown found success through their decades of farming experience and top-notch plant genetics, allowing them to produce hemp with higher levels of CBG.
Since 2017, the company has harvested over 1 million pounds of hemp at their 40,000 sq ft harvest processing facility in Oregon.
Much of Hemptown’s success comes from their vertical integration strategy. At Hemptown, hemp is not only farmed, but also processed into raw ingredients, formulated into branded products and sold directly to consumers.
The setup allows for strong margins and a high level of quality control, which is especially important in a new industry where many competing products are not able to live up to claimed quality standards.
The Procter and Gamble of the hemp industry
Hemptown aspires to become the Procter & Gamble of hemp. Their ambitious strategy centres on offering a diverse array of CBG products through their direct-to-consumer channel. They offer everything from flower and tinctures to topical creams, salves, supplements and even CBG chewing gum.
The company’s vertically integrated operations include a CGMP and FDA registered manufacturing facility, which means that the company can offer a wide variety of products while keeping the quality top-notch.
Chief Commercial Officer, Derek Du Chesne, notes “With any emerging market, you’re going to have tons of products coming out with varying quality, and because of our government certified facility, our products have transparency and traceability all the way from before planting right through to the finished product.”
He adds, “We test at all stages, from planting to ingredients to manufacturing to formulation and packaging.”
One of Hemptown most recent and exciting forays into new markets was their rollout of a new hemp smokables line in 2020. This new line of hemp cigarettes stands to provide substantial incremental revenue and compete against tobacco companies in the market as an alternative smoking option.
The smokables and the diverse product line are a result of one of the company’s key differentiators: nimble product development and marketing. Hemptown can innovate on products quickly, without compromising on quality or safety, and then go to market with those products.
“Most cannabis brands either have strong infrastructure or they have strong leadership, Hemptown has a rare mixture of both.”
– Derek Du Chesne, Chief Commercial Officer, Hemptown Organics Corp.
Doing this successfully can largely be credited to the company’s acquisition of Kirkman, a trusted nutraceutical manufacturer with FDA and CGMP certifications that has operated for over 70 years.
An aggressive acquisition strategy
Beyond Kirkman and in line with their P&G constellation brand strategy, Hemptown is aggressively pursuing acquisitions that allow the company to help smaller brands grow under their umbrella.
When asked about their acquisition criteria, CEO Eric Gripentrog says that “the two criteria for brands are that they are EBITDA neutral and have a specific distribution strength. Through the acquisition and cross pollination of those brands, we can exponentially grow each brand simultaneously at the top line while improving gross margin.”
With each acquisition, Hemptown can leverage their operations to make the most of each brand’s distribution channel, leading to a potential increase in consolidated revenue to over US$100 million.
Hemptown is currently setting their sights on e-commerce brands with sound marketing strategies. However, the company is still casting a wide net and is looking for brands that would like to be part of something bigger and distribute through multiple channels but don’t have the capacity to do so.
Gripentrog believes that, through their rollup strategy and continued capital, they can drive value for these brands.
Hemptown is set to go public in the coming months, aiming to use their IPO to provide additional liquidity and leverage their stock to bolster their acquisition strategy.
For investors, the appeal comes through a combination of strong product development pipelines and financial management coupled with a management team that draws from Fortune 500 experience as well as decades of work in the farming space.
On Hemptown’s position in the market, Du Chesne notes that “most cannabis brands either have strong infrastructure or they have strong leadership, Hemptown Organics has a rare mixture of both.”
Our new chapter is expected to unfold quickly, utilizing the resources that our cash infusion will bring.— Hemptown USA (@HemptownUsa) March 5, 2021
Read our letter to shareholders to learn more about the current state of #HemptownUSA: https://t.co/mqTFb9DKoL#Cannabis #Invest #Hemp pic.twitter.com/S9xL5nQjG0
Plans for additional products following the IPO have already been laid down. The company is planning to launch mushroom-based supplements as well products centered on addressing inflammation, gut health, and skincare. The formulations for these products are ready to go, and Hemptown plans to leverage their IPO to market these products in a timely manner.
A strong position in a newly forming industry
Like most industries in 2020 and 2021, the hemp industry has faced many challenges. However, a silver lining for cannabinoids like CBG and CBD is the increased consumer interest in their wellbeing and personal health.
While spending has gone down during the pandemic in many areas, sales in the health and fitness space have skyrocketed, spelling good news for future demand in the industry.
For Hemptown Organics, the combination of a Fortune 500 experienced team, diversified revenue streams and a strong M&A strategy have placed them in a dominant position within the newly forming CBG industry.
To learn more about Hemptown, visit their website here.
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