A look at some companies expanding their traditional market to meeting the challenges of a regulated market working on narrowing margins

I have added a verse to “Old McDonald Had a Farm.”[1]

Old McDonald had a farm,E-I-E-I-O

And on this farm, they grew some hemp, E-I-E-I-O

With a CBD here, and a CBG there

Here a C

There a B

And everywhere a D or G

Old MacDonald had a farm, E-I-E-I-O

The headlines on the internet about the dramatic increase in hemp farming across the country after Congress passed an upgraded version of the 2014 Farm Bill seem to be infinite. The bill legalized hemp in states with strict hemp programs. The ensuing hemp liberalization resulted in tremendous growth for farmers despite the recent slump in hemp prices. Not everyone has benefited from joining the rush to transfer from traditional crops to hemp. It is a crop that takes time to optimize for the chemovars and experience – just like any crop. There is a continuum of successes and failures to meet the expected profits.  However, little has been spoken of the impact in more industrial settings such as the manufacturers of equipment from harvesters to extractors to packaging equipment.

Many manufacturing companies worldwide support the Dietary and Nutritional Supplements for the concentrates and formulated products on our store shelves today. To provide solutions to equipment standards necessary for the market, it takes more than a container for the biomass and materials collection.  I visit many companies that strive to meet the standards of manufacturing equipment that meet the future today. One is the Thar Process company, an FDA registered cGMP, and USDA Organic Certified extractor of natural products from Pittsburgh, PA.

Before the 2018 Farm Bill, the company had spun off/sold parts of the company into entities such as Thar Energy, Thar Pharma, Thar Instruments, and more. What remained was a company without significant growth or profits for years. The Research and Development side of the business remained focused on the engineering and processing of natural products. It extracted the key concentrates from plants such as algae, rosemary, and soy. These products are essential concentrates; however, they are also low margin products.

The toll-processing market is only part of the story. When hemp farmers needed the next step in the process for the flowers and trim that was not suitable for smoking, the need for compliant hemp extraction resulted.  Those well versed in natural products for over 30 years were being contacted. Many fabrication companies (companies that manufacture individual components into a system with full control) have grown from the cannabis market. They only knew about cannabis from smaller pilot-scale technologies. With the increase in scale, many people were turning toward China, India, and Germany. The products can be engineered to meet the USA ASME, OSHA, and FDA standards, but that added to the equipment’s cost. And hemp experts in the natural products concentrated on one of the companies that had experience in natural products. Thar Process turned away customers due to capacity limits and began selling more equipment. Increasing the production of components that make up the systems became difficult to meet on time.

While there are challenges in producing compliant products, THAR Process was recognized as the 2020 Fastest Growing Company by The Pittsburgh Business Times.

The question is: will the hemp bust also bust the picks and shovels companies like Thar Process?

“I was interviewed at MJ Biz Con 2019, and unfortunately, I believe my prediction will come true and that a third of the companies present then will disappear in 2020.  Is this a bad thing for entrepreneurs?  Yes, it’s tough for them. However, I believe it’s a good thing for the industry because these larger winners will finally have the financing and the scale to innovate and refine their skills,” said Todd Palcic, President of the THAR Process company. “This does not mean that the smaller companies will not have a market, any more than the local microbreweries and coffee roasters will fail. Innovation is not about the size of the company.  Applying technology is as much an innovation as an accessory or new instrument design.”

How could this be that so many companies failing or merging could be good for the industry?  Companies that provide compliant products in a highly regulated Dietary Nutritional Market are needed to meet the FDA requirements.  Thar Process believes that this influx of capital and innovation will enable it and other companies to advance on new geographies and applications during the next five years.

“We have just built what we believe is the world’s largest system for remediating hemp extracts and isolating minor cannabinoids.  The system is based on Supercritical Fluid Chromatography (SFC) and UV directed collection based on the lift-off and touch-down on the interest components’ chromatogram. There is a very small market for this after the hemp boom. Now that we already designed, built, and operated this new technology – we can apply it to other natural products and pharmaceuticals. For example, preparative chromatography is currently used to help purify excipients used in some famous COVID drugs.  SFC technology, using CO2 as the primary solvent, might end up making these drugs more pure, safe, and profitable.” Mr. Palcic could not elaborate on the details due to confidentiality agreements with these companies.  “We are exploring further developing technologies to meet other process challenges, such as Counter Current SFC and SFE, Simulated Moving Bed Chromatography (SMB), Rapid Expansion of Supercritical Solutions (RESS) that will reduce the use of solvents being used today to purify and crystalize CBD and other minor cannabinoids needed in medical research as it expands.”

Finally, maybe we shouldn’t call the 2018 Farm Bill the harbinger of a boom and bust hemp industry but rather a catalyst for entrepreneurship and scientific innovation.

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[1]https://en.wikipedia.org/wiki/Old_MacDonald_Had_a_Farm