Forbes: Prophets of Hemp
Over the last few weeks, the financial news has been reporting on the gloomy outlook for the hemp and cannabis industry. This includes not only hemp and cannabis, but derivative products such as CBD oils, seed, flower and biomass. The latest quarterly filing by the largest player in the game, Canopy Growth (NYSE: CGC) gives a sense of the financial hit the sector has taken.
In Canopy Growth’s latest quarterly earnings report announced on November 14th, the Company reported a whopping $374mm (CDN) operating loss for the quarter. This and previous bad news have caused a freefall for Canopy’s stock, which is down around 75% from its highs this year. Other major players like Cronus, Tilray and Aurora Cannabis have suffered similar fates.
Many factors are responsible for the sector’s poor performance: the vaping crisis, an unclear and sluggish regulatory environment and an overly optimistic and frothy outlook for the sector coming into this year are all partially to blame for the downturn. Med Men CEO Adam Bierman was quoted as saying that “the last industry chapter was defined by growth at all costs. Now we’re transitioning out of that chapter, and the transition is harsh and quick.”
Another factor plaguing the sector is that grey and black market activity is still alive and well in an industry with a complex regulatory framework. This activity is having a dilutive effect on the revenues of those playing by the rules. Dozens of small operators are constantly popping up taking advantage of the lack of clarity in the business. They are willing to take risks and generate revenue in areas the regulated leaders in the industry won’t touch.
There are however signs of hope for the hemp industry today. New and agile players have adapted to the markets and are able to maneuver through the industry’s maze of regulations. One such company is Clone Connect. If one googles “hemp biomass”, one of the first results to pop up is Clone Connect. I recently collaborated with the company’s founder, Luke Dandrea, a millennial entrepreneur who exudes not only confidence but an energetic passion for the future of hemp.
Dandrea felt the industry needed a reliable source of hemp seed and hemp by-products. Clone Connect works closely with its customers, many of which are farmers in rural America. Hemp and its closely-related genetic cousin, industrial hemp, are quickly becoming compelling cash crops for the American farmer. Clone Connect not only sells the seed, but it also advises farmers on how to shift from growing traditional crops like wheat, alfalfa and corn to hemp. Lastly, the company also serves as an end-to-end solution for its customers by offering them an after-market for hemp biomass and hemp’s other by-products.
Up until 1937, industrial hemp was widely grown as a crop in the United States. The Marihuana Tax Act of 1937 effectively made the possession or transfer of industrial hemp and cannabis illegal throughout the United States under federal law through the imposition of an excise tax on all sales of hemp. The Act didn’t distinguish between industrial hemp and cannabis. With this began the decades-long misconception and confusion about industrial hemp and cannabis leading up to the passing of the Farm Bill of 2018, which broadly legalized the cultivation of industrial hemp in the United States.
For Dandrea, hemp is not just a cash crop to be used for extraction of its valuable oils and more traditional by-products. According to Dandrea, “hemp will save the world”. It can grow almost anywhere and uses a fraction of the water to grow it than cotton. Hemp can make textiles for apparel, paper and packaging products, resins that can be extruded to produce plastics-like materials that are biodegradable, and building materials that can be used in lieu of cinder block and concrete. In the food industry, hemp seed can be eaten alone as a snack and is an ingredient in producing plant-based burgers, pasta and milk.
According to Dandrea, hemp can “clothe you, feed you and house you”, all in an environmentally-friendly way. It has become his personal and professional mission in life to promote hemp and its multi-faceted qualities and uses. The next step in Dandrea’s plan is to add use-based businesses to his core Clone Connect platform. Next up is Drihp, which is a hemp-based line of apparel for which he enlisted the help of mega-influencer Jay Alvarrez to launch the line in the next quarter. After that will come resin-based products like trash bags, straws and containers and hemp-based foods and beverages.
With the simultaneous approach of expanding the supply-side of the business and vertically building out a variety of products made from hemp, Dandrea is aiming to diversify risk. He doesn’t want to be subject to the same pitfalls that first generation cannabis and hemp companies are now experiencing in the market.
If Luke Dandrea has his way, hemp will become more than just his passion. Clone Connect is already a business success story, but its only the very beginning for him and his team. Now is the time to capitalize on his core success and make industrial hemp and its benefits for the environment known to everyone.
Written By: Barrett Wissman
Original Article: https://www.forbes.com/sites/barrettwissman/2019/11/25/prophets-of-hemp/#5235a4f08fe7