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Hemp biz is just like the natural products biz—only moreso

Fastest-growing sector is maturing in a fraction of the time

The modern hemp/cannabis/CBD/marijuana industry(ies) have a whole lot in common with the larger natural products industry. Yes, of course, it is a natural product, a botanical that has long been America’s No. 1 cash crop. And yes a lot of people got into natural products by smoking pot—the original industry pioneers were all from the hippie cloth, whose favored sacrament was mary jane.

But beyond that, there is a lot of entrepreneurial activity—start-ups with a mission, and that mission is bringing nature’s most nearly perfect plant to the masses. In whatever way possible. And as fast as possible.

“We’re looking to uproot the pharmaceutical industry,” said Gabriel Ettenson, founder and COO of Elixinol, a Colorado-based CBD company that supplies the ingredient to brand holders and also contract manufactures for clients. “Pharma is not preventive.”

That change-the-world attitude is endemic in just about everyone in the buzz biz you come across. At the NoCo Hemp Expo, in Loveland, Colorado, April 1-2—the largest hemp trade show in the world—acolytes and adherents were everywhere. And many of them got their start within the larger natural products industry but moved on over to the new booming sector related to the cannabis plant.

“There are a lot of similarities,” said Mickey Schuett, a consultant with four companies in the hemp space. “This is the future of a whole new industry that will feed the natural products industry more than anything else ever. This is growing faster than any other product in the natural products industry.”

That fast growth is trying to be harnessed by natural products industry veterans who believe they can shepherd the industry to success. From lawyers to entrepreneurs to thought leaders, they’re all out there using their learnings from natural products companies and sectors.

“The natural products industry took decades to mature. Hemp is moving forward really fast,” said Trish Flaster, founder of Botanical Liaisons and co-founder of Ingredient ID, companies that help source and validate interesting ingredients from around the world. “People in the hemp business are coming from other industries where there is sophistication, and now they’re applying it to hemp.”

Challenges both familiar and unique

There is no shortage of problems and concerns around hemp. First is trying to separate hemp from its psychoactive cousin, marijuana. In 2004 was the first big victory when the Drug Enforcement Agency lost a lawsuit and accepted that low-THC hemp was not the same stuff that people smoked to get high.

At the same time, medical marijuana laws were sweeping the country from state to state. And in 2009, the Obama Administration’s Justice Department said it would not make it a priority to bust people who were abiding by state laws that legalized pot.

And with the pot boom arose interest in a different cannabinoid: CBD. It didn’t get you high like THC, but it seemed to have effects in stopping epileptic seizures.

And on April 6, the DEA announced that it will decide whether to re-schedule marijuana away from Schedule 1 by the end of June. That would not make it any less illegal on the federal level, but would pave the way for additional research to begin to be conducted on the plant.

Even with research, the cannabis and CBD sectors will find the very same challenges as with research on commodity supplement ingredients—an inability to completely capitalize on a natural product.

“Research is a tough row to hoe,” said Robert Clarke, who heads BioAgronomics Group, an international cannabis consultancy, and also serves on the International Hemp Association. “Especially with CBD that you can’t patent, there will be very few investors unless you can get a return on the back end.”

Plant quality is very much an issue. One crossover company is Eurofins—a global agricultural product analytical testing lab based in Belgium with a new office in Colorado—and the goal is to not just vouchsafe the veracity of winter wheat crops either. “Hemp is like tomatoes or corn,” said John Mizicko, business development manager for Eurofins in Colorado. “It’s another crop we can help with quality testing of the seed.”

A Eurofins office in California is more focused on nutraceuticals—the lab can test vitamin products to ensure the supplement has the level of vitamins that are claimed on the label, or for contaminants.

“Eurofins prides itself on high-quality testing and good technology,” said Mizicko.

In Colorado, the Eurofins office is looking to replicate its Canadian office, which tests agricultural products, specifically the CBD and THC cannabinoid content of plant material. It can also test for pesticides—a big issue because consumers don’t like the idea of smoking marijuana that contains chemical pesticides.

In addition, some marijuana companies advertise themselves as being “organic” without understanding that it is a regulated term with very strict rules governing it. All post-modern hipsters know is that organic is a hip term, and ganjapreneurs are nothing if not hip. Just not an entirely educated kind of hip. Eurofins is the type of company that can quickly improve the expertise and quality of product on offer.

But the misuse of the sexy term “organic” has gotten the attention of even the governor and attorney general of Colorado. An investigation was conducted in 2015 and found many cannabis businesses that advertised their products as “organic” or “organically grown.” The problem is, the organic standards program is a federal one, and the feds do not recognize marijuana as a legitimate product because it remains on Schedule 1—no medical value with a high potential for abuse.

To fill the gap, a California company called Clean Green Certified has certified more than 100 cannabis grow operations, processors and collectives in the western U.S. as being organic in all but the name.

The Organic Cannabis Association in Colorado has established itself as a group that also works to help companies communicate that they are growing cannabis without the use of synthetic pesticides, just like the federal organic program, only without the USDA Organic logo.

Running afoul of federal regulations shows just how uninformed the cannabis industry is. In February of 2015 and again in 2016, the Food and Drug Administration sent warning letters to CBD marketers who were guilty of making drug claims for their supplement.

To be fair, even supplement companies that have been in business for years get in trouble with the FDA for making illegal health claims for their products. Supplements can only make claims that the product can help the structure or function of the body’s organs or systems. That’s why every supplement bottle has the warning label, “This product is not intended to diagnose, treat, cure or prevent any disease.” So you cannot say a product “cures the common cold,” only that it “helps support immune function.”

Everything old is new again

It’s probably no coincidence that one of the leading CBD suppliers and marketers is CV Sciences. Two company stalwarts who run the education and marketing divisions of the company, Stuart Tomc and Sarah Syed, both had years of experience working in the education department with fish oil supplement leader Nordic Naturals.

“We understand nutrition claims,” said Syed. “People don’t understand the difference between drugs and supplements. You have to tell your story without making a disease claim. We want to use our expertise to educate responsibly.”

Syed said the lack of clarity around CBD—the FDA says it is not a legal dietary supplement but has gone no further than send warning letters to gross scofflaws—will likely be resolved with a court case. “A court case will change the trajectory,” said Syed. “In the meantime, we need to communicate like supplements.”

“The FDA is putting warning signs without saying to close down because they don’t have substantial evidence,” asserted Mike Harinen, of Bluebird Botanicals, a Colorado CBD company. “They’re basically trying to chill the industry without burning it.”

The dietary supplements industry, for that matter, has a rather solid track record of lawsuits against the FDA. Many of the same lawyers who have been representing clients in the natural products industry are also engaged in the hemp world. With luck, pluck and attitude, the merry hempsters hope to emulate the success seen in battles between natural products interests and regulatory bodies.

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