New Technology Enters the Market as Demand Rises for Hemp Processing Power

CannabisNewsWire Editorial Coverage: Rising hemp production is putting pressure on processing.

Sugarmade Inc. (OTCQB: SGMD) (SGMD Profile), a provider of cultivation equipment, is adding processors to its catalog of products, focusing on next-generation machinery. Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) will be among the companies with a rising demand for processing, as it increases both its cultivation capacity and its product lines. Demand is rising in part thanks to CBD’s public profile, with deals such as the partnership between Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB) and UFC shining a spotlight on the plant and its potential. New uses for CBD are also increasing demand for the plant, with R&D led by companies such as Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) and Aphria (NYSE: APHA) (TSX: APHA).

Hemp can be processed to extract both fibers and cannabidiol (CBD).
CBD is currently the most valuable segment of the North American hemp market, though demand is likely to grow for fiber processing.
Larger machines offer one option to increase the scale of processing.
New technology may provide a more efficient answer.

To view an infographic of this editorial, click here.

Masses of Hemp

The year 2019 looks to be a bumper year for the U.S. hemp industry. Rising consumer demand has met the legal relief of the 2018 Farm Bill, whose passage in December paved the way for legal hemp cultivation and processing across the country. The industry is preparing to make hay while the sun shines — or in this case, make heaps of hemp.

This rise in production, which is expected to continue into next year and beyond, is inevitably creating complications. Most important among these is the challenge of processing the hemp. U.S. hemp-processing businesses are relatively new and small scale, as is much of the machinery with which they work. If the industry is to profit from the massive rise in hemp production, then it needs to ramp up its processing capacity. Otherwise today’s bumper crops could become tomorrow’s waste.

What We Get from Hemp

Hemp production and processing has risen from nothing to become a huge business in just the last few years. Companies working in the sector, such as Sugarmade Inc. (OTCQB: SGMD), cover a wide range of products and services, from providing cultivation supplies to marketing new products to consumers.

Those products usually incorporate one of the two main ingredients that can be extracted from hemp: fibers and cannabidiol (CBD).

Fibers are how hemp has been traditionally cultivated and used. For centuries, hemp was the basis of rope and cloth, playing an essential part in equipping navies and clothing people. This use fell out of fashion in the 20^th century, as sailing was replaced by mechanical shipping, and hemp became caught up in drugs criminalization efforts. As a result, America is not well positioned to produce hemp fiber, and imports most of what it uses from China, a country with a more advanced hemp fiber industry. But with growing interest in hemp and the disruption of trade wars, home-grown fibers have moved onto center stage, with more companies recognizing the significant opportunity the crop offers.

The product that has brought American companies such as Sugarmade into the hemp space is one of the breakaway commercial phenomena of the past decade — CBD. A natural chemical found in hemp and related plants, CBD has recently been the subject of much research and development. Claims have been made for its effectiveness in relaxation, pain management and countering anxiety. The component has become a popular ingredient in health and well-being products, including supplements, foods and toiletries.

With a bumper harvest of hemp expected this fall, companies throughout the value chain are asking how raw hemp can most effectively be processed to provide for the massive demand for CBD.

Scaling Up

The industry is clearly going to have to scale up to meet the challenge of hemp processing. This burgeoning increase is creating unprecedented levels of demand for processing machinery.

“Our staff has done extensive research into the fast-growing hemp industry,” said Sugarmade CEO Jimmy Chan. “We continue to see an imbalance between cultivation outputs and extraction capacities within the industry. This leads us to believe the market for extraction services and the equipment required by these extraction companies will continue to accelerate.”

The company has responded by entering the market for hemp extraction technologies and equipment. As a supplier of cultivation supplies, Sugarmade has already benefited from the green rush surrounding the Farm Bill and the growing interest in hemp that preceded it. Moving from cultivation equipment to extraction equipment is a natural next step for a company whose business model is built around supporting cultivators.

In addition to increasing the number of machines available, many companies are looking into providing bigger machines that can process ever bigger volumes of biomass. But the drawback of this “bigger is better” philosophy is cost. The larger machines being installed in many extraction facilities are expensive, not just for the machines themselves but also the associated costs. Expenses such as real-estate square footage and ethanol storage have to be factored in, and once those costs are included, a modern hemp-extraction facility can easily cost tens of millions of dollars, a cost passed on to cultivators through processing fees.

While the industry’s processing capacity clearly needs to increase, the best solution may not be the most obvious. Sugarmade is looking at a different approach.

New Technology

Rather than focus on larger versions of current machines, Sugarmade is exploring the next generation of hemp-processing technology.

Most CBD extraction in the United States currently uses ethanol to chemically separate the CBD from the rest of the plant and make it available for use. But other options are available and are becoming more sophisticated. New technology using water-based sonication extraction, microwaves and other techniques may transform the way extraction is carried out — and significantly impact costs as well. These machines, which Sugarmade plans to make available to its customers, could reduce the cost of extraction and so help cultivators increase their output without exorbitant increases in cost.

These technologies may also help with other steps in the processing of hemp. New machines could perform additional functions that currently require auxiliary equipment, such as THC remediation and removing heavy metals. Skipping steps in processing would only add to the efficiency of operations, reducing costs and increasing speed of processing.

To bring this new technology into the American market, Sugarmade is working with Chinese manufacturers. The Chinese market is advanced in its approach to extraction, thanks to its reliance on essential oils for herbal medicines. For more than a thousand years, Chinese farmers have been cultivating and extracting essential oils from hemp. This expertise has led to an in-depth understanding of the process and the equipment needed to complete the task. Working with Chinese manufacturers could allow Sugarmade to provide its customer with more advanced and efficient technology.

Hemp processing needs to scale up. But just because eventual outputs need to be bigger doesn’t mean that bigger is necessarily better where machinery is concerned. In many cases, bigger may be just more expensive, whereas improved technology could bring real benefits.

Companies in Need of Processing

The pressure on processing capacity for hemp and related plants comes in part from the emergence of large companies in the sector. Among these is Canopy Growth Corporation (NYSE: CGC) (TSX: WEED), a leading player that has benefited from investment from other industries. The company has been steadily growing, including through the acquisition of a company making hemp skin-care products, creating demand for more CBD from within the company. To help meet this demand, it has been preparing another acquisition of Acreage Holdings Inc.

Another of the large Canadian companies with an interest in hemp and CBD, Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB) is exploring new ways in which these products can be of use. The company recently announced a partnership with mixed martial arts company UFC. As part of this arrangement, Aurora will explore ways in which its research and products might help athletes, whether in pain relief, dealing with the strains put on muscles, or helping with rest and relaxation. The partnership could help raise the company’s profile by association with an exciting sport and some of the world’s most impressive athletes.

Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) is also looking for new approaches to CBD, with the creation of a recent R&D facility. While R&D work may only consume relatively small amounts of plants, its results include new products that could expand the market and increase demand for processing facilities. The company’s CEO, Mike Groenstein, has also been raising the profile of this work through a series of conference appearances, as the sector becomes better connected and interdependent.

The law around CBD and related products continues to evolve, and with it the products that can be sold. Aphria (NYSE: APHA) (TSX: APHA) is developing vaporization products in anticipation of changes in Canadian law later this year. As more states and countries bring in ever more liberal laws, product ranges should continue expanding, and with that growth will come the sector’s rising demand for equipment.

For more information on Sugarmade, visit Sugarmade Inc. (OTCQB: SGMD)

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Acquisitions, Licenses, Research Key in Consistent Cannabis Market Growth

CannabisNewsWire Editorial Coverage: The cannabis sector continues its steady shift toward big business and big money, with much of growth based on acquisitions, agreements and consistent research.

TransCanna Holdings Inc. (CSE: TCAN) (FRA: TH8) (TCAN Profile) is focused on creating a large operation with various licenses and recognized brands, with several key acquisitions, being part of that strategy. Medmen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) is in the process of acquiring PharmaCann, which recently received an extension to complete the development of its cultivation facility in Ohio. Cronos Group Inc. (TSX: CRON) (NASDAQ: CRON) just entered into a multiyear supply agreement that will help the company provide high-quality products to consumers in anticipation of the derivative market launching in Canada this fall. Tilray Inc. (NASDAQ: TLRY) recently completed its acquisition of Manitoba Harvest, the largest hemp food company. GW Pharmaceuticals Plc (NASDAQ: GWPH) continues its march forward as a leader in cannabinoid prescription medicines sector with its recent announcement of positive, top-line results of a Phase 3 clinical trial of Epidiolex® in the treatment of seizures associated with a rare and severe form of childhood-onset epilepsy.

Cannabis companies are engaging in multimillion-dollar acquisitions in growing numbers.
This strategy supports a consolidation of the industry as it moves from scattered creativity to efficient large businesses.
The trend is built in part on intangible assets, including brands, licenses and research.

To view an infographic of this editorial, click here.

A Very Different Business

The image of the cannabis industry varies significantly depending upon an individual’s point of view. To supporters, the market is a transformative sector aimed at bringing the world together. Detractors call the industry one more vice threatening public morals. For many standing in the middle ground, the sector is a space where hippies and stoners can thrive but not necessarily one that encourages the buzz and dynamism of mainstream business.

In reality, the cannabis sector fits none of these images. The industry is emerging from its early nascent steps into legality to become a significant business sector much like any other, with all the elements of modern capitalism. This growth appears to be reflected in the sector’s recent burst of mergers and acquisitions.

Big-Money Deals

Certainly one of the most eye-catching aspect of mergers and acquisitions in the cannabis sector is the significant amount money involved. Take just two recent examples from a single company: TransCanna Holdings Inc. (CSE: TCAN) (FRA: TH8).

In the past few months, the Vancouver-based cannabis company has made announcements on two major deals. First came the acquisition of a 196,000-square-foot vertically integrated cannabis facility for a total purchase price of $15 million. Then came a letter of intent relating to Californian company Lyfted Farms outlining TransCanna’s plans to acquire Lyfted’s business and assets for $5.5 million.

By some standards, these might not seem like significant deals. But when a company is investing $20 million on expansion in the space of a couple of months, stability seems evident. That TransCanna can make these deals is a show not only of the strength of the company but also the strength of the industry.

The financial growth of the legal cannabis industry has been a positive move for everyone from company leaders to their lowest-paid employees. The legalized trade is pulling money out of the black-market economy and allowing those at the top to earn big bucks while also providing employees with a decent wage. Far from weakening the power of legal providers, paying employees properly is leaving them with enough money to go around buying up competitors, as TransCanna is doing.

Success has also brought funds from outside. From private individuals to big alcohol and tobacco companies, investors are pouring money into pot, allowing businesses to expand while keeping their employees happy. There are living wages at the bottom and big money at the top.

Tidying Up the Market

The progression of the legal cannabis industry started with a scattered approach. TransCanna is one of many companies that started in the market with a relatively small presence. Some began as entrepreneurs seeing a new industry within which to operate. Others were experienced cannabis cultivators moving from the illegal to the legal market. Still others were pharmaceutical companies dipping their toes into a new medicine and, from there, into the recreational industry.

As a result, the cannabis industry was initially made up of diverse and disconnected businesses. Now, however, the sector is moving toward a space of consolidation.

This doesn’t mean that the variety created in that early surge is being lost. When larger companies buy up smaller ones, the aim is often to continue supporting and growing the individual brands and styles the smaller companies have created. For example, TransCanna has announced the acquisition of GoodFellas, allowing TransCanna to take control of the Daily Cannabis Goods brand. TransCanna CEO Jim Pakulis has talked not in terms of absorbing the Daily brand into TransCanna’s existing identity but in terms of maintaining Daily and expanding its sales.

The consolidation of multiple brands and businesses into a smaller number reflects a dialectic process that’s common in new business areas. First comes a burst of creativity. With few precedents and no big players dominating the market, entrepreneurs and creatives have free rein. Some of their experiments fail, but the ones that succeed get consumers interested and fill the market with ideas.

While this creates plenty of exciting idea and products, it’s also inefficient. In the phase that follows, bigger companies step in or emerge from among the smaller ones. Consolidation creates efficiency, providing more reliable products for consumers and better value for companies.

The Power of the Immaterial

In the illegal market, product was the main focus for cannabis sellers. In the legal market, the focus is different. When a company relies on the full complement of marketing, intangible assets become important. That’s why GoodFellas is valuable to TransCanna — not just for its cannabis but for the Daily brand attached to it.

And while intangible assets are normally talked about in terms of brand and IP, there’s another sort of asset that gets much less publicity and that the cannabis industry is bringing to investors’ attention: legal licenses.

Licenses of various sorts are important for a wide range of industries, from food production to mining. But they have a particular prominence in the cannabis industry because tight regulation has created a scarcity of licenses. When TransCanna subsidiary TCM Distribution Inc. gained cannabis manufacturing and distribution permits from the City of Adelanto, California, it was an important step in the company’s growth within the state. And when a deal like TransCanna’s acquisition of Lyfted is announced, the target’s cannabis licenses are often mentioned. These licenses are a crucial asset and one that investors are concerned about. Without the licenses, the business can’t function.

The prominence of licenses is a new feature of investment for those going into cannabis. But it could be a feature that helps investors recognize these assets in other companies. Cannabis companies are increasingly about immaterial assets, and immaterial assets are increasingly about licenses as well as IP.

Keeping Profiles High

In such an atmosphere, cannabis companies are working hard on keeping their profiles high while building up their portfolios of products.

Last year Medmen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) soared 60% in one week when the company announced the deal to buy PharmaCann. PharmaCann is working to complete its $20-million cultivation center, which must be operational before the acquisition can be completed to comply with Ohio law, which requires a licensee to have operating certification before transferring a license to another owner. The deal will double the number of states where Los Angeles-based MedMen has licenses to operate – expanding the firm’s reach to 12 states with 66 retails stores and 13 cultivation facilities.

The agreement between Cronos Group Inc. (TSX: CRON) (NASDAQ: CRON) and MediPharm Labs Corp. will supply Cronos Group with approximately $30 million of high-quality, private-label cannabis concentrate over 18 months and, subject to certain renewal and purchase options, potentially up to $60 million concentrate over 24 months. In addition, Cronos Group and MediPharm Labs have entered into a multiyear tolling agreement, where Cronos Group will supply bulk cannabis to MediPharm Labs’ state-of-the-art extraction facility in Ontario.

With the completion of the acquisition, Manitoba Harvest will operate as a wholly owned subsidiary of Tilray Inc. (NASDAQ: TLRY), leveraging the expertise of Tilray’s global cannabis industry expertise. “Tilray’s acquisition of Manitoba Harvest is a milestone for the cannabis industry,” said Tilray president and CEO Brendan Kennedy. “It builds on the strategic partnerships we have formed with consumer brand industry leaders and demonstrates our track record of disrupting the global pharmaceutical, alcohol, CPG, and functional food and beverage categories. We’re excited to work with Manitoba Harvest to develop and distribute a diverse portfolio of branded hemp-derived CBD food and wellness products in the U.S. and Canada.”

The newest test results from GW Pharmaceuticals Plc (NASDAQ: GWPH), the world leader in the science, development, and commercialization of cannabinoid prescription medicines, expands the company’s knowledge of Epidiolex and its potential use beyond the current indications. “Data from previous controlled clinical trials of EPIDIOLEX have shown clinically meaningful seizure reductions and consistent safety and tolerability in children and adults with Lennox-Gastaut syndrome and Dravet syndrome,” said Dr. Elizabeth Thiele, the lead investigator of the trial, director of the Herscot Center for Tuberous Sclerosis Complex at Massachusetts General Hospital, and a professor of neurology at Harvard Medical School. “Based on the positive results of this trial in TSC patients, Epidiolex, if approved for this additional indication, may become an important treatment option also in this disease state with significant unmet medical need.”

The cannabis industry is clearly evolving with big money, consolidation and growing intangible assets playing pivotal roles in the growing strength and consistency of the sector.

For more information on TransCanna Holdings, visit TransCanna Holdings Inc. (CSE: TCAN) (FRA: TH8)

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Searching for the Next Super Nova

CannabisNewsWire Editorial Coverage: Skepticism has been squashed and all apprehension eliminated. There’s no longer any question about either the viability or the profitability of the newly respected cannabis sector. Huge money has already been made in the nascent industry, and the only real question left is: where’s the next super nova?

Quarter-over-quarter sales growth is one of the indicators used to target explosive upside potential. Similar growth patterns were exhibited by many of the cannabis behemoths prior to parabolic price increases. In what may be an equally telling indicator, Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) (WLDFF Profile) revenues have now increased 11 consecutive quarters, quarter on quarter, ever since the company started selling its hemp-based CBD products. Similar quarterly sales spikes and strategic acquisitions foreshadowed dramatic price increases in some of the largest names in the cannabis universe. Last October Medmen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) soared 60% in one week when the company announced a deal to buy PharmCann. Florida-based Trulieve Cannabis Corp. (OTC: TCNNF) (CSE: TRUL) went public last September through a reverse merger in Canada and soared 200% after a strong 2018 Q2. Already up big on Canadian exchanges, Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) became the first pure-play marijuana stock to list on NASDAQ around $7 and just bounced off $23 a share. Last year, Tilray Inc. (NASDAQ: TLRY) became the first cannabis company to IPO on the NASDAQ at $17 per share and by September skyrocketed to $300. Despite price surges and fluctuations in the big cannabis names, there’s bound to be more money made in the sector; the run is far from over.

Cannabis run is far from over, new winners emerging
Branding, marketing and retail reach signals of success
Quarter-over-quarter revenue increase helps identify future potential

To view an infographic of this editorial, click here.

Good Times Have Just Begun

Legal cannabis is a recent global phenomenon, and the emergent market appears to be nowhere near reaching its potential. The worldwide legal marijuana market, valued at just $9.3 billion in 2016, is expected to blow past $146 billion within the next six years.

According to a United Nations report, cannabis is the most widely consumed drug on the planet. Approximately 270 million global consumers use cannabis, equivalent to about 4% of the world’s population and a mere pittance in market penetration. As marijuana muscles into the mainstream, usage among all age groups is on the upswing. However, among the most coveted 18-to-34-year-old demographic, there’s an explosion of acceptance as they mature in a world where cannabis is common.

Millennials are about three times and Gen Z about four times more likely to use cannabis than aging Boomers. Forward-leaning cannabis companies are full throttle in product and brand development to corral this coveted demographic and capture market share, now and for decades to come. As public perceptions change and legalization expands, the number of users is certain to skyrocket in an essentially untapped market. A global transition is underway, and the good times for cannabis have just begun. Growth trajectory is virtually vertical, presenting a once-in-a-generation investment opportunity.

Retail Reach

Founded in 2012 as a private company, Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) went public in 2014 and has been on a tear ever since. Wildflower is an integrated health-and-wellness company creating distinct brands that incorporate the synergistic effects of plants and their extracts. The company’s latest quarterly sales set records, up 78% over the previous quarter, validating corporate strategy, the popularity of its products, and the continued expansion of market share. Intent on supercharging revenue and earnings even further, Wildflower is about to finalize the acquisition of a preeminent cannabis retailer in Vancouver that also owns multiple cannabis licenses.

Wildflower’s latest press release is further evidence of the company’s rapid growth and global reach. The company reported third-quarter sales were up by 78% over the second quarter, the 11th consecutive quarter of revenue growth, since Wildflower Brands began selling products. On top of these stellar results the company is further expanding its retail footprint and product distribution with the accretive acquisition of Vancouver-based City Cannabis Corp.

City Cannabis is a premier cannabis retailer holding two of the three City of Vancouver licenses to sell cannabis and os the only company with multiple licenses in British Columbia. With margins of 50%, City Cannabis had revenues of $1.8 million for the reporting period that began with the opening of its two stores in early January. The combined quarterly revenues of Wildflower Brands and City Cannabis equates to an impressive $4.3 million. Wildflower expects to close on the City Cannabis deal before the end of June, and the acquisition will immediately be accretive to Wildflower’s earnings upon closing.

Bringing City Cannabis and Wildflower together will result in revenue operations in three U.S. states and two Canadian provinces with a combined North American target market of more than 75 million people. The positive net income generated by City Cannabis comes from just two operating properties, even though the company holds an additional seven leases at various stages of permitting approvals.

Commenting on the financials, Wildflower CEO William MacLean stated, “We are pleased with the financial results of both Wildflower and City Cannabis. Sales through every Wildflower distribution channel are up, and sales at City’s licensed retail outlets continue to grow month over month. The positive net income is particularly impressive with City Cannabis carrying a total of nine leases, which are at various stages of the permitting process.”

Grow, Grow, Grow

Already an established presence in California, Wildflower owns 14 cannabis licenses for recreational and medical cannabis cultivation, manufacturing, retail distribution and delivery. The company’s expansion into Canada with the acquisition of City Cannabis bolsters Wildflower’s global growth strategy, which is includes strategic distribution deals already in place in the European Union and South Africa. In addition to capturing revenues from retail operations, the City acquisition gives Wildflower another channel to market its enormously popular products and launch into the over-the-counter market with its CBD formulations and accessories.

Wildflower continues to capture ever-greater market share with innovation, retail expansion and a growing family of popular brands. The company’s strategic partnerships, acquisitions and organic growth are all bolstered by its marketing genius to lock in more loyal consumers. Grabbing national and celebrity attention, Wildflower used ingenious product placement during the 2019 Oscars by including its CBD+ Healing Stick in each of the gift bags of the stars.

The company has also employed an innovative pop-up store approach in SoHo, New York, to introduce Wildflower Wellness products. Wildflower identified a compatible high-profile retail venue and struck a deal with the outlet, then marketed its products in the upscale establishment for a limited time period, raising market uptake and visibility.

Big Names

Medmen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) is a cannabis retailer with operations across the United States and flagship stores in Los Angeles, Las Vegas and New York. Company objectives are to capitalize on first-mover advantage by opening stores in top markets and building brand awareness and customer acquisition. The company is also intent on expanding retail footprint and creating an omnichannel consumer experience.

Trulieve Cannabis Corp (OTC: TCNNF) (CSE: TRUL) is a vertically integrated, seed-to-sale company and is the first and largest fully licensed medical-cannabis company in Florida. Trulieve cultivates and produces all of its products in-house and distributes those products to Trulieve-branded stores (dispensaries) throughout the state, as well as directly to patients via home delivery. Trulieve also operates in California, Massachusetts and Connecticut.

Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) is a global cannabinoid company with international production and distribution across five continents. Cronos Group is committed to building disruptive intellectual property by advancing cannabis research, technology and product development. The company is committed to responsibly elevate the consumer experience and is building an iconic brand portfolio.

Tilray Inc. (NASDAQ: TLRY) is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids. The company currently serves tens of thousands of patients and consumers in 12 countries spanning 5 continents. Tilray was the first licensed producer of medical cannabis in the world to have its facility Good Manufacturing Practices (GMP) certified in accordance with European Medicine Agency (EMA) standards.

The cannabis markets have already produced some amazing profits, but all indications are the industry is only at the beginning of an amazing ascent. There’s little doubt that a plethora of new winners will be created in the burgeoning sector. When searching for the next super nova, Wildflower Brands is certainly one to watch.

For more information on Wildflower Brands, visit Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF)

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Dramatically Improved Delivery Systems Promise More Effective Cannabis Treatments

CannabisNewsWire Editorial Coverage: Experiments with next-generation delivery systems appear certain to lead to better cannabis-based products.

Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) (LXRP Profile) has recently seen spectacular improvements in the effectiveness of cannabinoids thanks to its proprietary chemical delivery treatment. GW Pharmaceuticals Plc (NASDAQ: GWPH) (OTC: GWPRF), which has won widespread praise for its innovative medical work, has seen good trial results for a new treatment for seizures. Tilray Inc. (NASDAQ: TLRY) is supporting studies into the uses of cannabinoids to treat behavioral problems and HIV. MariMed Inc. (OTCQB: MRMD) has set up a subsidiary focused on CBD, currently the highest-profile cannabinoid product. Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) has established a new research lab to develop devices for CBD consumption.

Currently, cannabis medicines are poorly absorbed by the body.
Delivery challenges increase costs and reduce effectiveness.
Select companies are working on better delivery systems.
Others are working on new medicines so that cannabinoids can improve more lives.

To view an infographic of this editorial, click here.

The Cannabinoid Waste Conundrum

The popularity of cannabinoid products — those containing active ingredients from cannabis — has created a challenge for producers. While these producers are extracting larger volumes of CBD from cannabis and hemp, much of the precious ingredient goes to waste: the human body only absorbs a small fraction of these molecules because of delivery system limitations and human physiology.

This delivery challenge causes several problems. Manufacturers must comply with regulations limiting the amount of active cannabinoid ingredients, but consumers may not be able to obtain the effect or benefit they are seeking, even when needed to overcome serious medical conditions. People could end up consuming more cannabis than they would otherwise, which is both expensive and ill-advised. And in an age when the waste of human society is ravaging the environment, it means that the cannabis industry may also be doing unneeded damage to the environment.

But thanks to the fast pace of cannabis research, a solution may be on the horizon.

Improving the Delivery of Cannabinoids

Across the industry, researchers are looking for ways to more effectively deliver CBD into the human body. Thanks to their latest breakthroughs, the scientists at Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) appear to be leading the way.

A biotech company based in British Columbia, Lexaria is currently focusing on its proprietary DehydraTECH(TM) technology. This unique technology has been developed to make medicinal compounds more suitable for human consumption in a number of ways. By combining molecules such as CBD with fatty acids at a molecular level, DehydraTECH makes it easier for the CBD to cross the body’s internal barriers. Higher levels of CBD are absorbed, and they are absorbed more quickly.

Consumers need to know this: the quantity of CBD, or any other drug, in the bottle is unimportant. What matters is how much of that CBD actually reaches the bloodstream — and even more importantly — how much reaches the brain.

Most CBD sold in CBD-infused products in America today does not reach the bloodstream. CBD mixed in water and fed to animals demonstrated the incredible power of DehydraTECH. Results announced in May showed that DehydraTECH, in combination with generic nanotech techniques, delivered CBD to the brain 1,137% more efficiently than existing industry formulations. In addition, Lexaria’s patented DehydraTECH delivered CBD into the bloodstream in just two minutes and delivered as much CBD in 15 minutes as generic doses did in 60 minutes.

Not content with these sorts of results, the company has been working on improving the power of DehydraTECH through a new second-generation version called Enhanced DehydraTECH. Lexaria’s Enhanced DehydraTECH showed remarkable properties in crossing the blood-brain-barrier, delivering 1,937% more CBD into the brain than a generic industry formulation. It also delivered between 717% and 1,098% more CBD into the bloodstream than generic CBD formulations.

Lexaria’s technological advances make it possible to manufacture capsules and edible products that deliver CBD and THC more effectively than ever before.

Satisfying Customers and Regulators

This vastly superior delivery performance holds promise to radically change the CBD industry, at a time when the sector is already going through huge change and growth.

On one level, the benefits of technology such as that being developed by Lexaria are obvious. A more efficient delivery system can do one of two things: it can make the same dose of a drug or vitamin more effective, or it can allow the same consumer effect to be achieved with a smaller dose.

The latter approach may have the widest impact and certainly has potential to shift prices. Recent legal changes in Canada and the United States have led to a surge in demand for CBD, a demand that suppliers have been unable to meet. With demand for CBD outstripping supply and a production process that involves complex technical steps, the price of CBD is relatively high. But if companies can make products that are just as effective but use smaller amounts of CBD, they can reduce their production costs and provide more products with the same raw resources. This change would allow companies to meet currently unmet demand and reduce prices, thus benefitting both the customers and the industry.

There’s also a less-obvious factor, one that industry outsiders might not consider but that companies such as Lexaria are acutely aware of. With the legalization of cannabis across Canada and hemp in the United States, regulators are stepping in to control the production, sale and dosage amounts of CBD or THC products. Limits are being set on how much CBD or THC a product can contain.

Improved delivery systems such as DehydraTECH allow companies to produce more effective products within the same legal limits. Customers can experience the highest benefit from their products while everyone stays inside the law.

Beyond CBD?

But while CBD is proving a profitable testing ground for DehydraTECH, the impact of this first-of-its-kind delivery system could potentially go far beyond this, extending into the wider medical sector.

Recent research results have shown that DehydraTECH is effective in delivering both cannabinoids and nicotine into brain tissue, thus improving the speed and effectiveness of these ingredients. The delivery system also comes with a fast-on/fast-off element, in which the effect of the drug both starts and ends quickly and clearly, providing better control over the use of the products in which drugs are used. DehydraTECH is being evaluated by the largest nicotine company in America for products utilizing oral delivery, bypassing the known disease conditions associated with current pulmonary delivery.

As a result, Lexaria’s technology already has potential medical benefits because it can be used to deliver CBD- and THC-based medicines, in addition to its applications as a solution to cigarette use. But what if it could do more?

Since DehydraTECH has been shown to work with multiple molecules, people are asking if it could be used with central nervous system drugs. By delivering drugs quickly and efficiently across the blood-brain-barrier, this innovative delivery system could enhance the speed and effectiveness of a wide range of drugs and potentially usher in a new era of treatment for a wide range of debilitating diseases. Lexaria has quietly filed patent applications for innovation in treatment options related to central nervous system diseases such as Parkinson’s and Alzheimers.

Experimenting with Cannabis

Given the importance of cannabinoids in treating some of these debilitating diseases, improved delivery systems already have clear medical advantages. Among the companies applying cannabinoids to life-changing medicines is GW Pharmaceuticals Plc (NASDAQ: GWPH) (OTC: GWPRF). With more than 20 years of research in the cannabis sector, GW is a global leader in developing cannabinoid medicines and was named one of Time Magazine’s 50 genius companies for this work. The company recently announced successful clinical trials of EPIDIOLEX, in which this CBD drug was used to reduce the frequency of seizures associated with tubular sclerosis complex.

Tilray Inc. (NASDAQ: TLRY), a world-leading cannabis company based in Canada, has been working to address the shortage of cannabis and CBD, investing $32.6 million in an expansion of its cultivation and manufacturing facilities. But the company isn’t just working on meeting current needs. Tilray is providing support to two clinical studies that could lead cannabinoids to transform more lives for the better. Through studies like these, the use of cannabinoids is spreading beyond its traditional territory of pain and nausea management.

MariMed Inc. (OTCQB: MRMD), a multistate cannabis company, has been improving the efficiency of its operations through vertical integration and the addition of new product lines, allowing it to more effectively deliver cannabis products to a wide range of customers. At the start of this year, the company established a subsidiary focused on CBD in response to rising sales and the changed legal status of hemp manufacturing in the US.

Lexaria’s work on DehyrdaTECH isn’t the only area where the interests of cannabis and tobacco are merging. Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), a global cannabinoid company, has had its fortunes and its profile improved by an investment of C$2.4 billion from tobacco giant Altria. The company’s growth has also allowed it to establish a new global research and design center, Cronos Device Labs, in Israel. There, the company will work on devices specifically designed for the consumption of CBD.

As the technology around cannabis improves, so will the efficiency and effectiveness of cannabinoid products, lowering prices and improving outcomes for patients around the world.

For more information on Lexaria Bioscience Corp., visit Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)

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CBD Surge Puts Pressure on Cultivation Supplies

CannabisNewsWire Editorial Coverage: Growing demand for CBD is increasing pressure on companies that provide key cultivation equipment and industry supplies.

As part of its commitment to build a large and well-supplied sales channel, hydroponic supplier Sugarmade Inc. (OTCQB: SGMD) (SGMD Profile) is in the process of making acquisition of companies that supply the hemp industry. An increasing need for supplies is coming from companies such as Canopy Growth Corporation (TSX: WEED) (NYSE: CGC), a major cultivator and processor making moves on the CBD drinks and well-being markets. Cronos Group Inc. (TSX: CRON) (NASDAQ: CRON) has entered into a supply agreement with another provider to ensure the materials it needs for its products. Global efforts by companies such as New Age Beverages Corporation (NASDAQ: NBEV) and Aphria (TSX: APHA) (NYSE: APHA) may further strain U.S. supply chains, due to greater cultivation restrictions in other parts of the world.

Many hemp growers use hydroponic techniques for indoor propagation.
These techniques allow greater control over genetics and produce higher quality plants.
The extraordinary rise in the North American cannabis sector is creating unprecedented demand.
Suppliers are responding with growth and mergers.

To view an infographic of this editorial, click here.

CBD Popularity Pushes Agricultural Supply and Demand

The popularity of CBD is creating new trends in the agricultural supply sector. Thanks to legal changes in Canada and the United States, farmers and agricultural companies are rushing to increase production of hemp and other CBD-bearing plants. For some, this involves a shift from growing other crops to hemp, as struggling farmers chase the profits promised by the sector. For others, it means expanding existing hemp production to make the most of the staggering rise in demand.

This concentrated movement is fueling demand for equipment, in particular the specialist equipment used for indoor growing. The agricultural supplies industry faces the possibility of real shortages, and companies that act to solve that problem by meeting the need could seize upon a chance to make this moment work for them.

Hydroponic Agriculture — Is a Supply Shortage Looming?

Growing hemp is a sophisticated business. Aside from the legal, licensing and security issues surrounding the process, growers need specialist equipment and seeds or clones from which to grow crops. It’s on the equipment side that companies such as Sugarmade Inc. (OTCQB: SGMD) are getting involved.

Sugarmade has moved into hemp equipment from another support sector — restaurant supplies and packaging. As with its more recent work, the company didn’t make its mark in the restaurant world by providing products directly to customers, but rather by providing businesses with the materials they needed to get their products out into the world. It may not be as glamorous or high profile as producing the end product itself, but the supporting the backend of the business is vital to keeping those industries going.

With the dramatic expansion of interest in CBD over the past few years, Sugarmade has taken the opportunity to diversify its work. Still focused on growth through brand expansion and acquisition, the company is now making those expansion and acquisition moves in the Hemp sector, where it provides cultivation equipment and supplies.

There are two approaches to growing hemp: outdoor cultivation using soil and indoor cultivation using hydroponic equipment. The choice often means the difference between quantity and quality of plants, with the latter increasingly dominant because of the improved reliability of supplies.

Providers of hydroponic equipment such as Sugarmade have therefore seen a surge in business from hemp growers. As cultivators look to increase their hemp harvest, they also need to increase the size and effectiveness of their growing spaces, and that means a higher demand for equipment.

The Benefits of Hydroponics

Hydroponics is a catch-all term for a number of indoor growing techniques. Sometimes the plants are grown in an inert layer that substitutes for soil, providing something for the roots to grow through. In other approaches, such as deep-water culture and nutrient-film techniques, plants that would naturally grow in soil are instead grown in liquid settings, with their roots floating free. Aeroponics goes a step beyond this, with the roots exposed and fed by sprays of artificial mist.

What each of these approaches have in common is that food for the crop is provided in the form of nutrient solutions direct available to the plants’ roots, instead of those plants having to take nutrition from the soil. This technique gives growers more control over what goes into their plants. Because hydroponic cultivating takes place indoors, farmers also gain greater control over the conditions in which the plants live, including temperatures and quantity and quality of light. Together, this allows for more consistent, higher quality growth, which can also be tailored to increase the quantity of CBD in a plant. It’s that quality and consistency that drives demand for the products offered by companies such as Sugarmade.

Sugarmade provides a wide range of products. These include equipment needed for setup, nutrients used to feed the plants, lighting systems and tools for testing the quality of the environment, which are essential to getting the desired results. The surge in demand caused by rising interest in CBD has put serious pressure on hydroponic suppliers. There have been reports of extensive back ordering and customers having to wait for supplies to come in. In a fast-growing industry where new or expanding cultivators are rushing to establish their positions, that could become a serious problem.

So what are supply companies doing to prevent an equipment shortage?

Ensuring Flow of Hydroponic Supplies

It might sound obvious, but one of the answers is larger businesses. Companies such as Sugarmade are dramatically expanding their operations, thus seeing an increased level of power over their supply chains and the capacity to both stock and sell greater volumes of agricultural equipment. The efficiencies and reach of larger companies, along with their financial capacity to order supplies in larger volumes, will invigorate the hydroponic supply chain and ensure that growers’ needs are met.

To support this goal, companies have been undertaking mergers and acquisitions. Sugarmade has made two such moves — and the company isn’t stopping there. As CEO Jimmy Chan said, “Sugarmade is expecting to realize exceptional revenue growth this year from all of our hydroponic-related market sectors. . . . We continue to seek additional acquisitions to further boost our already-expected robust revenue growth rate.”

Scale brings advantages beyond efficiency. Larger companies can provide a wider range of products, and so cater to the needs of cultivators trying out different hydroponic techniques. This supports innovation in hemp cultivation, as equipment from a single supplier can be used to experiment with best practices, from inert beds and water flows to aeroponics. Variety of resources also allows growers to experiment with their nutrient mix, thus obtaining the best possible results from their plants.

By providing a large supply base and a wide range of products, Sugarmade is helping to tackle equipment shortages and get hemp growers up and running.

Relying on Hydroponics

Hydroponics are now feeding into a huge sector growing hemp and other CBD-bearing plants.

One of the biggest companies in the space is Canopy Growth Corporation (TSX: WEED) (NYSE: CGC). Already a major player, the company’s purchasing power has been further expanded over the past two years by billions in investment from drinks giant Constellation Brands. This is seen as part of a wider trend of companies looking to produce CBD drinks, which could create yet another surge in demand for hemp and the equipment to cultivate it. Canopy Growth is currently pushing forward with a multifaceted hemp and CBD strategy and, as part of that focus, has acquired skincare and well-being company This Works.

The equipment needed by the CBD industry isn’t just about agriculture. The founding of a new R&D facility by Cronos Group Inc. (TSX: CRON) (NASDAQ: CRON) appears to be good news for companies equipping biotech researchers. In addition, Cronos has also entered a supply agreement to ensure a steady flow of concentrates needed for its products, ahead of changes in rules on foodstuffs that will expand the market in Canada later this year.

While much attention is on North America, New Age Beverages Corporation (NASDAQ: NBEV) announced in April its push to become a global brand. Selling CBD products including oils, creams and lotions, as well as its specialist beverages, the company is targeting an international customer base increasingly interested in the potential of CBD. Only three years old, New Age Beverages is already making a splash with its vibrant brand and growing product range.

Aphria (TSX: APHA) (NYSE: APHA) is also expanding globally, with the introduction of CannRelief, a CBD product line targeting Germany. The emergence of a European market is likely to increase demand for CBD from North America, at least in the short term, as many European countries have not yet seen legal changes to ease the production of CBD.

With CBD demand growing around the world, demand for cultivation supplies is also increasing. Companies that put in the work to expand their supply channels may establish profitable ongoing relationships with a new generation of hemp cultivators.

For more information on Sugarmade, visit Sugarmade Inc. (OTCQB: SGMD)

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Celebrity Attention Fuels Rising Press Profile of CBD

CannabisNewsWire Editorial Coverage: Companies with a presence in the CBD market are seeing their profiles rise, thanks to growing media and celebrity attention.

Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) (WLDFF Profile) is one of the companies benefiting most from this attention, with its products featured in Kim Kardashian’s baby shower and the new Saks CBD store. Tilray Inc. (NASDAQ: TLRY) has seen strong market coverage as its shares rose following action to tackle product shortages in Canada. Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) has fostered its public profile through efforts by the company’s media-savvy co-CEO. Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) drew attention as its share value rose with a large external investment. Charlotte’s Web Holdings Inc. (OTCQX: CWBHF) (CSE: CWEB) has been focusing on growing better CBD-producing plants, work that has drawn attention to its VP of cultivation.

Kim Kardashian’s CBD-themed baby shower drew attention to the range of relaxing CBD products.
Other high-profile appearances are boosting upper-end CBD brands.
Broad media coverage is normalizing and drawing customers to the sector.

To view an infographic of this editorial, click here.

CBD Whips Up Media Storm

Recent months have seen CBD in the media spotlight more than ever before. The relaxing natural compound, derived from hemp and cannabis plants but without the psychoactive qualities of THC, has been grabbing attention across the internet and in print and broadcast media. What was a fringe interest only a few years ago has now grown into the subject of huge mainstream attention.

Some of the coverage comes in news and opinion pieces, where the recent legalization of hemp in the United States has driven a surge in interest. But with CBD products on sale in a growing number of shops across a growing number of states, attention has also come from fashion and lifestyle writers. Even celebrities are in on the act, with CBD products appearing in the hands of the rich and famous — a seemingly sure omen of popularity in the media age.

Garnering Celebrity Support

One of the brands that has benefited strongly from this flurry of media attention is Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF), a creator of health and wellness products. Headquartered in Vancouver, British Columbia, Wildflower has reached out of Canada and into the United States as North America has become increasingly hospitable to CBD products. The company is focused on building brands around plant-based products, appealing to those looking for natural way to relax and be healthy.

CBD is an important part of Wildflower’s stable of brands. Its Wildflower Wellness brand provides capsules, tinctures, vaporizing liquid and other CBD-infused products, all designed to support relaxation, health and wellness. With its combination of effectiveness and natural products, the brand is, like many others in the CBD sphere, designed to appeal to those looking to escape the stresses of modern life.

That’s presumably how Wildflower products came to appear at Kim Kardashian’s recent baby shower. Kardashian and her husband, Kanye West, recently welcomed their fourth child — and second born by surrogate. In preparation for the event, Kardashian threw an extravagant and well-reported baby shower. To help her guests escape the stresses of life and to prepare her celebrate the “calm before the baby storm,” the celebrity themed her baby shower around the relaxing power of CBD. The event included such tranquil activities as massages, flower arranging and mixing CBD oils to create personalize shower gifts.

As part of the event, Kardashian encouraged her guests to enjoy a relaxing puff of CBD, and Wildflower’s vaporizing products were on hand to provide this opportunity. A Wildflower vaporizer appeared in pictures from the party, as celebrities made the most of what CBD has to offer.

This isn’t the first time that Wildflower products have found their way into celebrity hands. Wildflower goods were selected for inclusion in the 2019 Four Seasons Hotel Hollywood Swag Bags, given to nominees, presenters and actors staying at the hotel for this year’s Oscars. With CBD becoming not just acceptable but fashionable, Wildflower was a natural fit for a hotel wanting to make a good impression on its celebrity guests.

The image of CBD as a prestigious, high-profile consumer luxury has been further reinforced by the creation of a CBD shop within the shop at Saks Fifth Avenue. Directly connecting CBD with other high-end brands and the concept of luxury shopping, this move firmly stakes out CBD’s place within the luxury goods market. And once again, Wildflower is visible among the products on display.

Media Eyes Up CBD

This move into the celebrity culture and the high-end shopping market has come alongside growing media attention for CBD brands.

The arrival in Los Angeles of prominent Long Island beauty boutique Botanica Bazaar gave Vogue reason to cover a range of products including CBD tinctures. For this part of the article, the magazine focused on Wildflower’s products. The company’s strongest CBD remedies, its tinctures have been designed to counter one of the big problems with cannabinoid products — the sometimes unpleasant taste. Wildflower has tackled this challenge by adding natural flavorings to create a product that’s recognized for its flavor as well as its relaxing qualities.

The Vogue piece garnered positive coverage for CBD in general, with Botanica Bazaar’s owners talking about how the pain-relieving power of these products had won a growing number of loyal customers. The article also provided positive coverage for Wildflower, with the writers noting that “Wildflower’s CBD tinctures and vapes not only kill the aesthetics game, but also taste good.”

Coverage of broader cannabis culture has brought CBD brands to the attention of a receptive audience. When Vice presented an article on the best female-owned brands in the cannabis sector, the magazine included Wildflower in a section on pain-relieving spa products. A pain-relief product designed to tackle muscle, joint and back pain, the CBD+ Healing Stick was recommended in the article as a useful cure for period pain.

Buzzfeed went so far as to publish an article on why readers should be buying CBD Christmas gifts for everyone, including featuring recommendations for products their readers might want to pick. These included a lip butter, truffles and CBD-infused sparkling water, showing the wide range of options now available to the CBD consumer.

Wildflower once again stole some of the limelight. The company’s disposable CBD vaporizer pen proved too good a novelty to leave out of the selection. All in all, the company has received mention in more than 15 different articles and media pieces, touting Wildflower products and singing the praises of CBD in general.

CBD’s Growing Press Presence

It seems like hemp and CBD can’t help but make news.

Canadian company Tilray Inc. (NASDAQ: TLRY), a world leader in the field of cannabis and cannabinoids, hit the headlines in Investor’s Business Daily after it announced its stock had jumped based on first-quarter sales. Like many companies in Canada, Tilray has been struggling to meet demand following the legalization of recreational cannabis. However, the company has responded swiftly to the supply shortage, investing $32.6 million to expand it cultivation and manufacturing space by nearly 20%, a move that should keep its profile high.

Another of the big cannabis companies, Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) has built up its profile partly through the work of co-CEO Mark Zekulin. The more outward-facing of the company’s two CEOs, Zekulin has courted public attention through media appearances such as a recent interview with Market Watch. The fact that Canopy Growth is one of the biggest cannabis companies in one of the biggest cannabis markets doesn’t hurt either. This drew the attention of drinks giant Constellation Brands, which invested billions in the company with an eye to products such as CBD drinks; the move made headlines across the business world. A push into the United States with a new hemp-growing facility in New York state has further raised the company’s public profile.

Some of the media coverage around cannabis and CBD has an air of incredulity to it. When Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) saw its share price rise despite first-quarter losses, it inevitably drew attention from market commentators. An investment of C$2.4 billion from tobacco giant Altria is undoubtedly a major factor in the company’s strong performance despite setbacks. Such investments promise future developments, and market commentators watch eagerly to see what will happen next.

Within the United States, CBD producer Charlotte’s Web Holdings Inc. (OTC: CWBHF) (CSE: CWEB) has gained attention as a business with an unpretentious brand and a strong scientific grounding to its products. Using proprietary genetics, the company is working to produce high-quality, low-cost hemp to meet the demands of an increasingly large market. Charlotte’s Web has also won attention for its vice president of cultivation, Jared Stanley, who was recently featured in a list of the hundred most influential figures in the cannabis industry.

As CBD’s cultural presence grows, companies with a strong media presence and the attention of celebrities seem certain to benefit.

For more information on Wildflower Brands, visit Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF)

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Hemp Companies Move to Tackle CBD Shortfall

CannabisNewsWire Editorial Coverage: A boom in demand for cannabidiol (CBD) has created an alarming shortage, which savvy hemp companies are aggressively looking to solve.

Cultivation supplies company Sugarmade Inc. (OTCQB: SGMD) (SGMD Profile) has acquired several other suppliers, allowing it to benefit from economies of scale. Canadian cultivator Tilray Inc. (NASDAQ: TLRY) is investing heavily in new growing space. Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) has expanded from Canada into the United States and is collaborating with other companies to meet demand. Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) has received a substantial inflow of funds from a tobacco company and is investing some of it in R&D. Charlotte’s Web Holdings Inc. (OTCQX: CWBHF) (CSE: CWEB) is focusing on growing high-quality hemp to supply a range of novel products.

To view an infographic of this editorial, click here.

Demand for CBD has soared thanks to consumer interest.
Legalization nationally in the United States through the farm bill has led to more cultivators and a rising demand for cultivation supplies.
Companies are rising to meet these supply challenges through expansion, consolidation and innovation.

CBD and the Challenge of Demand

The ability to meet customer demand is one of the fundamental challenges for any industry. If businesses can’t keep up with demand, they don’t just miss out on an immediate opportunity for profit, they risk losing the attention of customers in the long term.

For a relatively new product such as CBD, that problem is particularly acute. Though demand for the product is currently high, the industry is not well established, making it critical that companies reinforce customer habits through supplying the products they’re seeking. Being new, however, makes the supply problem particularly challenging, as production techniques and supply pipelines are not fully developed for massive consumption. The future of the industry will depend upon which companies are able to meet this demand and how they do it.

The CBD Boom

The CBD industry has seen a staggering boom in the past. This growth has created opportunities for companies such as brand expansion and acquisition firm Sugarmade Inc. (OTCQB: SGMD), which is making a strong play into the sector, as well as new companies focused purely on CBD.

The demand for CBD is easy to explain. Recent research into its uses has suggested that this naturally occurring compound can be useful in a range of health and well-being roles, including managing pain and helping users to relax. This compelling research has naturally drawn the attention of customers seeking new options to improve the way they feel, especially those consumers who prefer to avoid heavily processed chemicals.

Publicity around CBD has further raised demand. Some of this attention comes from emerging CBD companies, whose marketing efforts have raised the profile not just of their own brands but of the sector as a whole. Additional exposure has come from the battle to make hemp cultivation legal across the United States. Because hemp provides most of the available CBD, this process also brought hemp production into the public spotlight. Companies such as Sugarmade found their businesses attracting far more attention — so more demand.

This demand culminated with the passage of the 2018 Farm Bill. Signed into law just before Christmas, the bill legalized the production of hemp on a national level. This makes hemp production a far more straightforward and reliable source of income, and will allow more farmers to benefit from a profitable cash crop. As companies rush to enter the sector or expand production in response to the bill, demand for the services and equipment they need has soared. As a provider of the hydroponic cultivation supplies on which many hemp farmers depend, Sugarmade and its pending acquisition subsidiaries — AthenaUnited.com and Zenhydro.com — has found itself swamped with orders.

Shortage of CBD

This surge in demand following the farm bill has created an undeniable opportunity within the CBD sector — along with a challenge. Fortunately for Sugarmade, it’s a challenge that they appear to be instrumental in solving.

Hemp cultivators are currently unable to provide the volume of plants that customers want. One of the reasons is that the cultivation, processing and supply systems simply aren’t large enough. The CBD industry was already on an expansion path as it tried to meet growing demand before the farm bill. Now with that demand growing further, it’s going to take time and a big push to achieve what people are after. Making an industry legal doesn’t make it magically appear.

Then there’s the unreliability of the CBD levels in hemp. The chemical content of the plants is small and hugely variable. Relatively small shifts in the makeup of a crop can have a significant impact on how much CBD is produced.

Cultivating larger, more reliable crops is vital to the future of the industry. Manufacturers are eager to rise to that challenge. However, to do so they need to get the supplies to get them off the ground, including hydroponic systems, feed chemicals and the clippings, or clones, from which much hemp is grown.

Looking at the effect of this shortage in just one state, Sugarmade CEO Jimmy Chan was optimistic about the effect on his company. “With at least 42,000 acres of hemp expected to be planted in Kentucky and considering an average plant density per acre of well over 1,000, farmers in Kentucky will need hundreds of millions of clones over the coming years,” he said. “When these numbers are multiplied over the many other hemp cultivation states, it is easy for anyone to see the strong demand scenario that is quickly developing.”

Responding to the Shortage

To meet the demand for CBD, hemp cultivators will clearly need to improve both the quantity and the quality of their crops.

It’s easy to see how an increase in quantity will have knock-on effects for suppliers such as Sugarmade. The company’s pending acquisition subsidiaries AthenaUnited.com and ZenHydro.com are seeing orders for their cloning supplies skyrocket, with backorders building up as they rush to meet unprecedented demand.

The search for more reliable levels of CBD is also contributing to this demand. Hydroponic systems give cultivators control over the growing process. By experimenting with hydroponics and controlling the light, plant food and environment, cultivators can find ways to grow plants with predictable and higher levels of CBD. This experimentation will create even more demand for hydroponic materials. Sugarmade should be central to the improvement of these processes.

To provide supplies as efficiently and profitably as possible, Sugarmade has gone through a period of expansion, acquiring other companies in the hydroponics and CBD sector. This model of consolidation is being repeated across the industry as businesses seek efficiencies of scale.

“Sugarmade plans to integrate these businesses fully as soon as is possible, making us one of the larger suppliers to this growing marketplace,” stated Chan. “Additionally, we are in process of vetting other possible acquisitions to further enhance our portfolio of hydroponic and cultivation supply products. We are certainly excited about our prospects for the remaining part of this year and into next year.”

Expanding Potential

Sugarmade isn’t the only CBD-related company using acquisitions to expand potential. Canadian company Tilray Inc. (NASDAQ: TLRY) has undertaken a series of acquisitions, including Manitoba Harvest, the world’s largest hemp foods company, to strengthen its position in hemp. The company has responded decisively to the recent supply shortage in hemp and related plants in North America, in part by investing $32.6 million to significantly expand it production space across three sites, increasing its cultivation and manufacturing footprint by nearly 20%.

Another of the big Canadian companies, Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) has opted into investing south of the border thanks to the farm bill. The company has set up a hemp-growing facility in New York state and acquired another hemp company, AgriNextUSA. Canopy Growth has also been collaborating with other CBD and related companies to boost their shared output. One collaboration with PharmHouse has seen Canopy Growth provide high-quality genetic stock to PharmHouse’s growing facility. In return, Canopy Growth will benefit from an offtake agreement to obtain flowers from the plants PharmHouse is growing.

Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) has benefited from attention on the sector through a huge injection of outside cash. Tobacco giant Altria has agreed to invest C$2.4 billion in Cronos Group, providing the company behind Marlboro with a way into a new sector. Fittingly, Cronos Group is investing some of its funds in a new R&D facility that will work on vaporizer products. Vaping has become a popular way of consuming CBD, so the investment may allow Cronos to benefit from the market from multiple angles.

American CBD producer Charlotte’s Web Holdings Inc. (OTCQX: CWBHF) (CSE: CWEB) has been using proprietary genetics to work toward the goal of high-quality, low-cost hemp. The company has also been creating innovative new products to make use of the growth in CBD. Its recently expanded pet line offers the promise of calming dogs and easing joint pain brought on by age.

Rising demand for CBD has created a challenge, but it’s a challenge that smart companies are definitely ready to meet.

For more information on Sugarmade, visit Sugarmade Inc. (OTCQB: SGMD)

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Hemp Boom Spawns Lucrative Deals

CannabisNewsWire Editorial Coverage: Ever since the Farm Bill was signed into law, farmers across the United States have rushed into hemp cultivation, driving demand for the supplies needed to grow the crop necessary to meet surging CBD use.

Global hemp industry to reach $22 billion in 2022.
CBD market could increase 40 times in the next four years.
Hemp farming skyrockets to meet demand.
Serious squeeze on hydroponic and cultivation supply products.

Hemp is booming across the country, and nowhere more so than in Kentucky, where the applications to grow hemp are expected to increase fivefold, and acreage dedicated to growing the crop is set to more than triple this year. At the forefront of this explosive market growth, Sugarmade Inc. (OTCQB: SGMD) (SGMD Profile) recently inked a strategic supply contract with Hempistry Inc., a leading Kentucky-based cultivator of high CBD content hemp. Since passage of the farm bill, other major Canadian producers have also been making deals to expand hemp and CBD operations south of the border. Tilray Inc. (NASDAQ: TLRY) announced the acquisition of a large hemp foods maker, and Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is making substantial investments in New York state. Aphria (NYSE: APHA) (TSX: APHA) temporarily withdrew from the U.S. market while fighting off a hostile takeover bid. And after a $1.8 billion investment from a U.S. tobacco giant, Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) is expanding globally with eyes to the U.S. markets in the future. Even the largest Canadian licensed producers are betting on hemp CBD, underscoring titanic market growth.

To view an infographic of this editorial, click here.

The Money Pump

In the course of only a few years, CBD extracted from hemp is now marketed for everything from pain relief and reducing inflammation to relieving stress and anxiety. CBD is sold in an array of products from shampoos, lotions and oils to drinks, pet treats and granola. The popularity of CBD isn’t likely to wane any time soon, and the soaring popularity is reflected in market projections.

The CBD boom was presaged by passage of the Farm Bill, an absolute sea change in the balance of power in global hemp markets. Historically, the United States had been an importer of hemp products, but now the U.S. market is expected to lead the global hemp industry reaching an eye-popping $22 billion in 2022. With a market expected to increase 40-fold in the next four years, it’s little wonder there’s such an enormous upsurge in hemp cultivation.

To achieve quality and consistency, much of the hemp cultivated in North America isn’t grown from seed but is cloned or propagated from existing hemp plants. Known as micropropagation, this process allows for a large number of plants to be readied simultaneously, facilitating stable, consistent production and guaranteeing that the plants are exact genetic copies of the most desirable mother plants. It’s exceptionally important in hemp cultivation to produce healthy, high-content CBD plants with all the characteristics required by hemp-product producers.

This process gives cultivators more control over how their plants grow and results in more valuable crops. The rapid vegetative propagation of plants under the controlled conditions of light intensity, temperature and precise nutrient mediums requires unique equipment and supplies. The nationwide surge in hemp production has created shortages and increased demand for these much-needed hydroponic supplies. With the boom in hemp cultivation occurring this planting season, many of the supplies required for successful micropropagation operations are in short supply. This supply squeeze has spawned an unprecedented industry opportunity.

The Right Moves

Identifying the upside early, Sugarmade Inc. (OTCQB: SGMD) has been making all the right moves to capture an outsized share of this burgeoning new market. A specialty product and brand marketing company, Sugarmade invests in and develops products and brands with disruptive potential.

Expanding its footprint in the supply of high-demand hydroponic and cultivation products, the company has been on an acquisition spree and executing new supply contracts to capture an ever-increasing market share. The latest supply contract with hemp cultivator Hempistry reflects Sugarmade’s hydroponic trajectory. Utilizing advanced plant genetics and technological innovation, Hempistry is now scaling operations to approximately 2,600 acres aggregated between its subsidiaries, while adding to the product value chain and enhancing production efficiencies.

To achieve these objectives requires a secure, reliable source of specialty equipment and supplies. Sugarmade recognized the potential windfall last year and locked in an option to invest $1 million in Hempistry. That relationship has blossomed into a supply agreement that should serve both companies extremely well. Hempistry is acquiring supplies for its hemp micropropagation operation from Sugarmade, and expectations are that this supply relationship will flourish as Hempistry expands operations domestically and internationally. The agreement will ensure supplies reach supply-starved Kentucky, which is on the leading-edge of the hemp cultivation boom.

“Industrial hemp is promising and is the fastest area of growth in Kentucky agriculture,” said Ryan Quarles, Kentucky commissioner of agriculture, in an interview with CNBC. “We don’t know if industrial hemp will replace tobacco, but we are going to champion it.”

Sugarmade CEO Jimmy Chan, now also a director at Hempistry, commented, “With at least 42,000 acres of hemp expected to be planted in Kentucky and considering an average plant density per acre of well over 1,000, farmers in Kentucky will need hundreds of millions of clones over the coming years. When these numbers are multiplied over the many other hemp cultivation states, it is easy for anyone to see the strong demand scenario that is quickly developing. We have already received our first shipments of micropropagation supplies, and we are in process of making deliveries. Sugarmade plans to significantly expand our operations relative to hemp cultivation.”

E Pluribus Unum

Out of many, one. The Latin phrase emblazoned on U.S. currency should be the slogan for what’s happening in the fractured and fragmented specialty hydroponic supply industry. With demand reaching epic proportions, the clutch of small and inefficient supply companies is ill prepared to service the requirements of the blooming hemp industry.

Cognizant of the shortfall, Sugarmade is on a mission to consolidate the fragmented industry by strategically acquiring other synergistic hemp-based operations. Sugarmade’s brands already include: Zenhydro.com, a comprehensive online hydroponics supply outlet; AthenaUnited.com, a specialist company providing hydroponic supplies to large commercial cultivators; CarryOutSupplies.com, a leader in paper and plastic supplies; and BudLife Cannabis Storage Solutions, which offers the world’s only patented intelligent packaging, storage and distribution for medicinal plants.

Continuing its consolidation strategy, Sugarmade recently announced that it will acquire the flagship operation of Washington State-based Hydro4Less, which is expected to produce about $5 million in revenues and be profitable this year. In the agreement, Sugarmade also gained an option to purchase two additional Hydro4Less retail operations, currently producing in excess of $20 million annually.

“Sugarmade is expecting to realize exceptional revenue growth this year from all of our hydroponic-related market sectors,” said Chan. “We are excited about having the very talented staff of Hydro4Less join the Sugarmade family of companies. We continue to seek additional acquisitions to further boost our already expected robust revenue growth rate.”

Expanding on a 2017 master marketing agreement with Bizright LLC where Sugarmade would sell its products, Sugarmade also announced that it will acquire Bzrth Inc., a sister company of Bizright. These accretive acquisitions will make Sugarmade one of the largest publicly traded hydroponic supply companies in the world.

Northern Neighbors Look to Capitalize

In its most expensive acquisition to date, Canadian based Tilray Inc. (NASDAQ: TLRY) announced that it has agreed to purchase Manitoba Harvest for $317 million in cash and stock to bolster its thrust into the U.S. CBD product market. Manitoba Harvest claims to be the world’s largest hemp food maker. With operations around the globe, Tilray now expects to launch CBD-derived products in the United States as early as this summer.

Less than a month after the signing of the 2018 Farm Bill, Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) announced plans to invest up to $150 million to establish its first U.S. production facility in New York state. The company plans to establish large-scale production capabilities focused on hemp extraction and product manufacturing. Canopy called its expansion into the United States “another example of the strategic advantage” last year’s $4 billion investment Constellation Brands provides the company.

Aphria (NYSE: APHA) (TSX: APHA) temporarily withdrew from the U.S. market while fighting off a $2 billion hostile takeover bid from U.S.-based Green Growth Brands. Aphria rejected the bid saying it was being undervalued. Located in the greenhouse capital of Canada, Aphria Inc. is one of world’s lowest cost producers.

With international production and distribution, Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) is committed to building disruptive intellectual property by advancing research, technology and product development. The Cronos Group is building a global network with partnerships, joint ventures, production and distribution spreading across five continents. Cronos Group is intent on building an iconic brand portfolio around the globe.

Evaluating what has transpired and the projections of what is to come, the hemp markets and affiliated products and services appear to be sectors that could offer incredible returns. With multiple contracts in place, several acquisitions completed with more pending and planned, plus immense opportunity ahead, Sugarmade is hotly pursuing its mission to be a dominant player in the hydroponic supply industry piece of that pie.

For more information on Sugarmade, visit Sugarmade, Inc. (OTCQB: SGMD)

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Mainstream Acceptance, Strong Growth Adds to Growing CBD Market

CannabisNewsWire Editorial Coverage: The CBD market is experiencing explosive growth as a result of growing mainstream acceptance and strong leadership.

The North American CBD market, worth more than $9 billion in 2017, is projected to be worth $47 billion by 2027.
Growth is possible partly through mainstream acceptance, with pressure on a variety of institutions to accept medical CBD.
Leaders are emerging within the CBD and cannabis markets, as leading voices gain recognition for their work.

Wildflower Brands Inc. (OTCQB: WLDFF) (CSE: SUN) (WLDFF Profile), which focuses on health and wellness products, is benefiting from this growth through the establishment of strong distribution deals. Several companies are responding to the growth by expanding operations. Canadian-based Tilray Inc. (NASDAQ: TLRY) is adding production capacity in both Canada and Europe. Aphria (NYSE: APHA) (TSX: APHA) is increasing its indoor grow operations. Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is focusing its development efforts on projects in the United States. And Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) is using a significant outside investment to make strategic growth plans.

To view an infographic of this editorial, click here.

Growing Goodness

The CBD market has seen tremendous growth in the past few years, seemingly coming out of nowhere to become a billion-dollar industry. This eye-popping growth has been fueled in large part by CBD’s potential for health and well-being, an area that many researchers are focusing on. Companies have leapt upon the opportunity to offer consumers the benefits associated with cannabis without some of the other issues regularly linked with the drug, including getting users high.

If the past few years have been fruitful, the future looks even brighter for CBD. Soaring sales, growing acceptance within mainstream sports, and the recognized influence of some of the major players within the broader cannabis industry all point to positive movement forward for CBD. And as companies overcome the challenges offered by distributing a previously obscure product to a broad market, the industry looks set to soar.

A Rising Global Market

The growth of the CBD market has so far come mostly out of North America, where the likes of health and wellness company Wildflower Brands Inc. (OTCQB: WLDFF) (CSE: SUN) have launched a variety of compelling CBD products. This geographical growth is rooted mostly in legal status, as CBD is extracted either from cannabis or from its nonhigh-inducing form hemp. Though legalization of cannabis remains variable in the United States, hemp is now legal at a national level in both the United States and Canada, with cannabis growth widely permitted.

As a result, the North American cannabis — including CBD — market, has grown in spectacular fashion. The market was worth $9.2 billion in 2017, and estimates project those numbers to reach $47.3 billion by 2027. Savvy companies, such as Wildflower Brands, are paying attention and taking action.

The European CBD market has seen less expansive growth. Within the EU, the range of processed products that can be made incorporating cannabis is more limited, and there’s been less of a concerted push towards legalization for both CBD and cannabis products. Consequently, market growth there has been less impressive.

But that may be about to change, according to analysis from market intelligence firm the Brightfield Group. The company recently predicted 400% growth in the European CBD market from 2018 to 2023, a massive rise in a short five-year span. It looks as if the CBD boom may be set to go global.

Sports and CBD

Cannabis prohibition isn’t the only thing shaping the CBD market. Society’s acceptance of cannabis and CBD cannot be overlooked as a contributing factor. The rules of entities not typically associated with cannabis have sometimes created obstacles to growth in the cannabis sector. But as the legal market develops, those institutions are shifting their attitudes as well.

The sports industry is an ideal illustration of this. During the war on drugs, many teams, leagues and professional organizations took a firm public stance against cannabis, laying down rules that prevented their players from indulging. The NFL, for example, has strict rules against cannabis consumption. Currently, however, former players are campaigning for a change to those rules, not just to allow players access to the same experiences as other people but to tackle issues specifically related to sports.

Recently, cannabis and CBD-infused products, including those such as Wildflower’s topical treatments, have provided a growing number of pain-treatment choices. Given the injuries so frequently seen in professional sports, pain management is crucial. Sports doctors, trainers, coaches and players are always on the lookout for the most effective treatment options. Currently the ban on cannabis and CBD restricts players from choosing such seemingly effective options, fueling the call for change.

Changes could also have a significant impact on the sponsorship side. Currently, only one professional sports team in the United States has a cannabis-related sponsorship, despite the growing wealth and influence of the industry. As barriers come down, the time may come for CBD, much like other recreational and medical products, to gain attention in the sport and beyond through sponsorship and supporter arrangements.

The Challenge of Delivery

This expansion doesn’t come without some challenges. As the market grows and evolves, CBD companies must find ways to distribute products to a sector that didn’t exist a decade ago. The infrastructure most other industries take for granted is being built from scratch.

Fortunately, the companies moving into this space are nimble and flexible, moving quickly to find solutions as they expand and grow. These solutions often include forming partnerships with other players within the cannabis sector to increase their combined reach. Wildflower has recently done this through a delivery fulfillment agreement with HelloMD, a leading digital healthcare platform for cannabis doctors, consumers and brands. The deal will allow Wildflower to potentially reach more customers through HelloMD’s expansive e-commerce platform.

Such moves should increase opportunities for CBD businesses to accelerate their expansion and reach a broader customer base, reversing years of prohibition. These partnerships may not only boost individual businesses but also add to the rising tide of CBD.

Cannabis Leaders Emerge

Celebrated leaders are starting to emerge at the head of the cannabis industry. Some have come from outside, their fame drawing attention to the industry. Others have come from within.

A recent list of the top 100 figures in the industry includes actor Jim Belushi, former Mexican president Vicente Fox and retired boxer Mike Tyson. The list also includes cannabis executives such as Terry Booth of Aurora and Elizabeth Hogan of GCH.

Wildflower Brands CEO William MacLean was included in the list, thanks to his hands-on approach to sales and marketing. His extensive travels to hospitals in North America have also given him insight into patient experience and the benefits that cannabis and CBD can offer. Combined with years of marketing experience, this impressive background puts MacLean in a strong position to market his brand and build teams of skilled experts for ongoing growth.

Cannabis Companies Reach New Highs

As the cannabis sector expands, many companies are going through periods of growth and rising revenues. Over the past few years, this rocketing trajectory has allowed the cannabis sector to diversify in interesting ways.

Based in Canada, Tilray Inc. (NASDAQ: TLRY) is looking to expand through acquisitions. The company recently acquired the largest hemp foods company in the world — Manitoba Harvest — to strengthen its foothold in the exploding hemp market. The company is also making other strategic growth and development moves, including moving into Europe.

Aphria (NYSE: APHA) (TSX: APHA) recently received a license amendment to expand its growing space. Headquartered in Leamington, Ontario, Aphria is working to set the standard for the low-cost production of safe, clean and pure pharmaceutical-grade cannabis at scale, grown in the most natural conditions possible. Aphria is committed to bringing breakthrough innovation to the global cannabis market and has a presence in more than 10 countries across 5 continents.

One of the large Canadian cannabis companies, Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is looking to expand in the United States following the passing of the 2018 farm bill. Canopy is building a hemp-production facility in New York state and acquired hemp enterprise AgriNextUSA, moves that position the company to make the most of America’s swing towards hemp and become a leading player as the market heats up across North America. Canopy Growth boasts an extensive range of licenses and distribution deals north of the border, giving it a strong base from which to build its U.S. business.

The Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) recently closed a deal with outside company Altria, providing that company with a way into the hemp space. The C$2.4 billion strategic growth investment will provide Cronos with essential resources to expand during its critical phase of market growth in the United States.

With scientific and business innovation being led by a raft of far-sighted and innovative pioneers, the cannabis and CBD industries look set for another decade of incredible growth.

For more information on Wildflower Brands, visit Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF)

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Hemp Market Drives Hydroponics Growth

CannabisNewsWire Editorial Coverage: A surge in hemp production means big business for hydroponic suppliers.

Hemp production set to massively increase in the United States this year.
Increased production driving high demand for hydroponic supplies.
Hydroponics companies are responding with expansion and acquisitions.

Sugarmade Inc. (OTC: SGMD) (SGMD Profile) has strategically acquired several companies to meet demand and expand its foothold. Canadian-based Tilray Inc. (NASDAQ: TLRY) has expanded production in both Canada and Europe while Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is developing projects in the United States, and Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) has received massive outside investment to fuel its growth. Companies such as Aphria (NYSE: APHA) (TSX: APHA) are enlarging their indoor grow operations as they too rush to meet demand.

To view an infographic of this editorial, click here.

Hemp Bonanza

The legalization of hemp in the United States has ignited further growth in a massive new industry. Already under development through state laws and federally approved test sites, this historically valuable cash crop is now legal for cultivation across the country. With demand for CBD soaring, growers are scrambling to capitalize on an unprecedented opportunity.

However, sudden growth means a sudden need for supplies, skills and experience, none of which can be conjured from thin air. Obtaining these creates challenges for growers and opportunities for suppliers, and the match between those two varies across the map. As the hemp rush unfolds, some are doing better than others at rising to the challenges of hemp farming.

Challenges for the Hemp Industry

December 2018 saw the passing of the 2018 U.S. Farm Bill and with it the legalization of hemp cultivation in the United States. While the crop had previously been cultivated on test sites and through state-level laws, this was the first time in a century that this once-important cash crop was officially allowed by the U.S. government again. The move has created a whole new playing field, thrusting Sugarmade Inc. (OTC: SGMD) into the spotlight.

Sugarmade is a hydroponics supply company catering to the hemp market. As such, it has seen an extraordinary few years of growth. Even before the Farm Bill, the hemp industry had been growing. CBD, an active ingredient extracted from hemp, has become an incredibly popular product in the last few years. The plant is used in foods, oils, vaping fluid, drinks and health treatments. Research indicating its potential to support health and well-being has fueled consumer interest. The existing producers of hemp have seen profits soar, and now that the floodgates have opened, other businesses are rushing to get in on the act.

This creates massive challenges both for the industry and for individual businesses. Though hemp is now legal, it is tightly controlled, and producers must be able to grow hemp in accordance with strict rules, as well as to validate that both their facilities and their products meet these standards. That means employing skilled staff and using high-quality equipment.

The challenge of obtaining that equipment is made all the greater by the sudden and widespread nature of the expansion. Scores of companies all looking for equipment at once puts pressure on suppliers. If they have the supplies and the reach to widely distribute those supplies, then there’s a huge opportunity for growth. If they don’t, they’ll struggle to meet customer demand.

The struggle to meet that demand is likely to create a situation of haves and have-nots, in which some growers are able to expand while others fail to fulfil their objectives. Who succeeds and who fails will be decided to a large extent by who can find a reliable hydroponic supplier.

Equipping Growers

Despite the romantic image of farmers turning over a patch of land to a new crop, most hemp farming occurs indoors using hydroponic systems. That’s why companies such as Sugarmade are such a critical link in the hemp-farming process.

The hydroponic equipment needed to grow consistent high-grade hemp is varied and complex. A broad range of lighting equipment is needed to control photosynthesis. Specialized nutrient mixes provide plants the food they need to grow. And measurement solutions and environmental controls are necessary for staff to measure, monitor and control the myriad of factors that determine the quality, strength and health of the plants.

Given the circumstances, companies with expertise in hydroponics are imperative to provide supplies, but due to the previously restricted market, they’ve been relatively small. All that is changing in the rush to meet the needs of the burgeoning hemp market. Larger companies are desperately needed, and Sugarmade appears set to become one of those companies.

Sugarmade’s strategic intent is growth on two fronts, organically by brand expansion and through acquisitions. The company has a few deals in the pipeline that are pending audit and funding.

“Sugarmade plans to integrate these businesses fully as soon as is possible, making us one of the larger suppliers to this growing marketplace,” said Jimmy Chan, CEO of Sugarmade. “Additionally, we are in the process of vetting other possible acquisitions to further enhance the portfolio of hydroponic and cultivation supply products. We are certainly excited about our prospects for the remaining part of this year and into next year.”

The Local Picture

Even with such bold moves, it’s not possible for a company to expand everywhere at once, and hydroponic suppliers must choose where to focus. A focus on states with a strong presence in hemp is a good way to ensure a large market for supplies.

One area that’s rich in potential is Kentucky. A state with a strong history of tobacco growing, Kentucky is facing the reality that people are moving away from smoking. Hemp offers an alternative cash crop that some of the state’s farmers have been quick to leap upon. Approximately 16,000 acres of hemp were planted in Kentucky last year, and this is expected to nearly triple to 42,000 acres in 2019. The state has already received five times more applications to grow hemp this year than last. Sugarmade is catering to this boom through a supply agreement with Kentucky-based Hempistry Inc., which will help Hempistry achieve the nearly tenfold increase in hemp growing it has planned this year.

Sugarmade is also developing strong distribution channels in California, one of the first states to change its laws and embrace the rise of hemp. California’s large population and positive attitude towards CBD and hemp makes it another prime target for expansion.

By becoming an integral link in hemp production in these high-production states, Sugarmade grows organically by brand expansion, locks in revenues and is positioned to capture an outsized market share across the United States.

Competition Heats Up

The rapid rise of hemp and hemp-related markets has meant that a growing number of companies are jockeying for position in the hemp and CBD sectors, and some of them are seeing serious expansion.

Tilray Inc. (NASDAQ: TLRY), a Canadian company, has been expanding through acquisitions. The company recently acquired Manitoba Harvest, the largest hemp foods company in the world, to give it a position in a strategically important portion of the hemp market. This comes alongside other initiatives such as a move into Europe. These strategic moves have won praise for Tilray’s leadership team.

Another Canadian company and one of the largest in the sector, Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is making strong moves to expand south in the wake of the Farm Bill. It has established a hemp-production facility in New York state and acquired hemp enterprise AgriNextUSA. This allows the company to make the most of America’s swing towards hemp and work to become a leading player as the market heats up across North America. Canopy Growth already has an extensive range of licenses and distribution deals north of the border, giving it a strong base from which to build its U.S. business.

The excitement around hemp has drawn interest from companies outside the sector. Altria, the tobacco giant behind the Marlboro brand, is looking to expand its opportunities as tobacco faces ongoing challenges. Like many Kentucky farmers, Altria is looking to hemp and related products for potential solutions. It recently closed a deal to invest C$2.4 billion in Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), providing Altria with a way into the hemp sector. The funds will give Cronos resources to expand during this critical phase of market growth in the States.

In testament to value, Aphria (NYSE: APHA) (TSX: APHA) is fending off a hostile takeover by Green Growth Brands. In addition, Aphria recently received a license amendment to expand its growing space, which makes it an appealing prospect for other companies looking to increase their capacity.

The hemp bonanza has just begun. Like every new market, shakeouts and consolidations are bound to happen. The strong will survive while the weak will fail. The same holds true for the hydroponic suppliers. Given the circumstances, it’s inconceivable that many small suppliers will survive. The victors will be those who can get to markets early and scale through agreements and acquisitions. Sugarmade is making all the right moves to not just survive but also thrive.

For more information on Sugarmade, visit Sugarmade, Inc. (OTCQB: SGMD)

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