Budding prospects

Industrial hemp legalization opens new revenue streams

Posted on Apr 29, 2019 :: Insight Insider
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Posted by , Insight on Business Staff Writer

Bob Aykens was on the lookout for a way to diversify his family’s business, Memorial Florists & Greenhouses in Appleton, when opportunity found its way to him.

Just over a year ago, Aykens came across some information about industrial hemp and connected with Front Range Biosciences, a Colorado-based company that sells hemp starter plants to farmers. It turned out to be a perfect fit. Aykens brought in a new revenue stream, Front Range found a new place to grow its starter plants, and the amount of hemp starter plants available to farmers increased.

“We’re still able to serve our customers here in Appleton — they don’t notice a change at all. I was also able to diversify the business — something my dad always stressed to me,” he says.

Aykens is not alone in seeing the business opportunity associated with industrial hemp. While most people associate hemp with marijuana — and marijuana is a type of hemp plant — industrial hemp does not contain more than 0.3 percent of tetrahydrocannabinol, more commonly known as THC, the substance that provides users with a high.

Hemp is one of the oldest cultivated plants in the world and can be used to make products including textiles, food, paper and paint. It was a popular crop grown across the country — George Washington grew it at Mount Vernon — but its popularity declined as the cotton industry took off. (Cotton and other commodity crops such as corn are easier to grow than hemp.)

In 1970, farmers stopped growing industrial hemp altogether after the Drug Enforcement Agency lumped it in with marijuana and classified it as a Schedule 1 narcotic.

Then in 2014, the door to begin growing hemp again opened slightly when the U.S. Farm Bill added a small section drawing a distinction between the two plants, giving states the ability to create an agricultural pilot program allowing farmers to grow the plant.

Wisconsin launched its pilot program in 2018, and farmers and processors joined quickly — 247 grower licenses and 100 processor licenses were issued. This year, the program’s popularity soared, with 1,405 individuals or businesses signed up to grow hemp and 692 businesses enrolled to process the crop. As part of the program, the state tests hemp to make sure its THC levels do not exceed 0.3 percent. Anything higher and the crop is destroyed.

“The (hemp) industry is definitely growing and a lot of people are jumping in,” says Aykens as he picks up a starter hemp plant that looks exactly like a marijuana plant. “Some people coming into the industry to make a quick buck may struggle. Hemp isn’t the easiest plant to grow.”

For example, light — both the quality and duration — is important, and growers need to keep the plant feminized.

At Memorial Florists, Front Range leases greenhouse space for use as its clean stock nurseries, which means the plants produced provide hemp growers with consistent, disease-free harvests.

“We’re the only place they’re using east of Colorado,” Aykens says. “We propagate new plants from cuttings on a ‘mother’ plant. From that cutting to a starter plant going out the door, it takes about four weeks. They are shipped all over the country, and it’s a year-round business.”

Front Range hired one of Memorial’s employees and plans to hire additional employees as the Appleton operation grows.

“It’s a heavily regulated industry, but we have a great partner with Front Range. This definitely provides us with another revenue stream,” says Aykens, adding that his business struggles to compete against big box retailers when it comes to selling bedding plants.

For farmers, especially dairy farmers, hit by low commodity prices, adding hemp to their crop mix has provided a much-needed source of revenue, Aykens says. “It’s a tough time for farmers, so if they can branch out into hemp and make additional money, that’s huge.”

 

Oil rush

So, what is all that hemp being used for? The majority goes into CBD oil. A cannabinoid found in both hemp and marijuana plants that is non-intoxicating, CBD is extracted from the hemp plant and diluted with a carrier oil such as coconut or hemp seed.

Proponents say CBD oil can do everything from alleviating anxiety and pain to improving management of chronic conditions. Researchers have already established a link between using marijuana and some health benefits, and CBD oil has all the same properties minus the “high.”

CBD oil is used in a range of products from capsules and tinctures to pet and skin care products, which plays a key role in its popularity since consumers can choose which method they like best.

Sarah Fabry, who has Crohn’s disease, struggled for years to manage her symptoms, but after trying CBD oil, she saw immediate improvement. A registered nurse, Fabry decided to open her own business, Apotheke Wellness LLC in Appleton, to sell CBD oil.

“It’s not just about selling the product, but also educating people about what it can do,” she says. “CBD is a billion-dollar industry as it sits. It is very therapeutic for people from overall wellness to severe conditions including childhood seizures and cancer.”

Fabry’s store is one of the dozens that have opened in the region within the past year or so to sell CBD oil products. Some vape stores also carry CBD products.

Personal experience also led Jason and Kayla Tokarczyk to jump into the CBD oil business. Last June, they opened Happy Trails CBD in Kaukauna, followed by a second store earlier this year in Ashwaubenon. Jason Tokarczyk says while there’s a place for conventional medicine, sometimes prescription medications are too expensive or have unwanted side effects.

“We saw how much the product changed our own lives, and we wanted to share the simpler solution with others,” he says. “Our goal is to share and educate in an effort to help others in this new era of legalization. Hemp has the potential to make the world a much healthier place to live in.”

To help alleviate customer concerns, Tokarczyk says all products Happy Trails carries come from companies that provide a certificate of analysis, including complete lab test results, so customers know just what they are putting in their bodies.

Fabry says social media plays a vital role in CBD oil and its popularity. “Word-of-mouth is how a lot of people find out about it,” she says. “People try it, it works and then they tell their friends. In our store, we focus on education and how not all products are the same. You need to make sure you choose quality products or else you won’t get anything out of it.”

CBD products are not only sold at specialty stores or vape shops. Pharmacist Nic Smith, owner of Smith Pharmacy in Little Chute, began offering the product almost two years ago. He had area oncologists and hematologists ask about it — CBD oil can help alleviate cancer-related pain and some treatment side effects — and customers also approached him with questions. After researching CBD oil, its benefits and possible suppliers, Smith decided to begin selling it.

“There’s a high demand out there and we sell (CBD oil) in a number of forms, from capsules to topicals,” he says. “Consumers need to be careful since everyone and their mother is trying to make money off of CBD oil. You need to have not only good quality, but also the right amount. By selling it here, I feel like we can answer people’s questions and help them make wise choices.”

Legal ramifications

As the cousin of an illicit drug — while some states and Canada have legalized marijuana, the U.S. federal government still considers it illegal — hemp and the industrial hemp industry can at times walk a legal tightrope.

Hemp farmers in Wisconsin are aware of laws they need to follow — in addition to abiding by THC limits, only licensed farmers can grow industrial hemp. At the same time, businesses must remain alert to any interstate operations related to CBD and possible U.S. Food & Drug Administration regulations, says Jeff Mark, an attorney with von Briesen & Roper, S.C.

“Federal and state rules governing hemp and hemp-derived products, including CBD, are rapidly evolving. Businesses need to stay apprised of these developments in order to ensure compliance with the laws,” he says. “In Wisconsin, there may be regulatory ramifications for failing to follow these rules, including losing licensure to grow hemp or produce hemp-related products and civil penalties for noncompliance.”

As the industry grows, Mark says laws likely will change, and it’s vital for businesses involved in the industry to stay up-to-date.

As for Aykens, he’s happy Memorial Florists was able to connect with Front Range and develop a plan that benefits everyone involved.

“I think we are only seeing the beginning of this industry and that it will continue to grow. It’s a natural product that is helping a lot of people,” he says.