Editor’s note: Making it in Vermont is an ongoing series by VTDigger’s business reporter Anne Wallace Allen looking at companies and industries driving innovation in the state. If you have ideas about inspiring entrepreneurs or companies, send them to Anne at [email protected]
Carl Christianson and Noah Quist have a 10,000-square-foot hemp processing building, the equipment they need to extract CBD, and about 600 pounds of hemp per week delivered by Vermont farmers.
“The point is room to grow,” said Christianson, who obtained a mortgage from Brattleboro Savings and Loan to buy the former bread factory in Brattleboro. “We wanted to build something for the future and make sure we were good for expansion.”
Expectations for Vermont’s hemp and CBD business were giddy even before passage of the farm bill. New processing facilities, hemp growers, products and stores have sprung up quickly in Vermont in the last few years since individual states started legalizing marijuana and the hemp derivative CBD. Vermont legalized recreational use of marijuana last year, and is widely expected to take up the matter of commercial sales in the legislative session underway now. In anticipation, the number of hemp growers who registered with Vermont as required grew more than 400 percent from 2017 to 2018.
A Hardwick hemp company last year reported it received $7 million from investors.
Scott Waring, a biologist who works as a consultant to hemp and CBD businesses, estimated there are eight to 12 large-scale hemp processing operations in Vermont. Northeast Processing is one of the larger operations, he said.
“It’s kind of a grand experiment going on right now,” he said. “The cream will rise to the top. It’s a matter of getting that regulation in there.”
Christianson and Quist received the loans and investment they needed from friends, family and others to buy the equipment for their large-scale processing operation in Vermont’s southeastern corner. They moved into their building in June and by the time the sale on the building closed in August, farmers had started getting in touch, said Quist.
“When we began to announce the fact that we’d be opening a high-volume extraction facility in Vermont, a lot of the farmers found us,” said Quist, who also used the state’s registry and Facebook to advertise to other growers. They are now confident they will get the hemp they need to reach their production goals. Christianson said the facility now uses 500 pounds to 750 pounds of hemp per week. Christianson expects the plant will be able to process 2,000 pounds per week in February if he has the staff and equipment in place.
“When we first started, it was, ‘Man, I hope we can find biomass,’” Quist said. “And then all of a sudden, especially around the harvest, we had thousands of pounds available to us.”
While Vermont hemp is harvested in the fall, the supply is year-round, Quist said.
“A lot of the farmers still have it hung up in their barns,” he said. “In the cold it preserves well, provided they hung it in time. They know there is value in what they have and they’re just looking for an outlet. As we continue to scale up I plan on being able to call them and saying ‘we’re ready for yours.’”
Quist said the plant is producing 65 kilograms of whole plant extract oil per month from the hemp.
A lot has happened with hemp and CBD in the short time since Quist and Christianson started their business. The passage of the farm bill legalized the growing and processing of hemp under federal law and prompted the Food and Drug Administration to declare in December that it would have oversight over hemp and CBD products.
Meanwhile, a company called Southern Vermont Wellness opened Vermont’s first CBD dispensary drive-thru in Brattleboro, and the state Agency of Agriculture has drafted rules governing the hemp and CBD business. Cary Giguere of the agency said the state will start limited testing of hemp and CBD products at a new lab in Randolph in mid-February.
Most Vermont banks and credit unions have been steering clear of lending to hemp or CBD-related businesses, although a few stepped into the market last year. That’s about to change.
“Given actions taken by Congress in the farm bill, banks are going to consider providing access to capital and financial services for hemp related businesses,” said Chris D’Elia, the president of the Vermont Bankers Association. “It may take a little bit to make sure all of the players, regulators and banks are on the same page, but it will happen.”
In August, Quist and Christianson hired a director of analytics and formulations, Keith Griswold, who is a partner in the firm and operates the facility’s laboratory. Like Christianson, Griswold had a scientific background, most recently serving as the lead analytical manager for a Pepsico R&D facility in Westchester, N.Y. Christianson has a PhD in chemistry, and Quist has a background in sales.
Quist said the plant extraction work underway at the Northeast Processing lab is not itself groundbreaking. It’s similar to the botanical extraction process used with any essential oil, such as lavender, orange blossom, or rose hip.
“We’ve certainly established protocols that are very unique, but we’re not reinventing the wheel here,” Quist said.
Griswold’s arrival at Northeast Processing changed the company’s direction. Where originally Christianson and Quist had planned to merely produce CBD oil and sell it, they said the company now works and consults with existing brands and provides ideas for new product development and analytical support for consumer products.
“Now that’s an expectation in our field,” Quist said.
Griswold said Northeast Processing gave him an opportunity to get into an emerging field, where industry standards are only now being developed.
“Having the opportunity to be part of that was a little too exciting for me to pass up,” he said. Under his leadership, Northeast Processing serves as a third-party tester for other CBD producers, creating reports on potency, THC levels, moisture content, and other measures.
Under FDA rules, CBD products cannot contain more than .3 THC, or tetrahydrocannabinol — the psychoactive ingredient found in small amounts in the hemp plant. In its proposed rules, Vermont puts that number at .39 percent per dry weight.
Quist, whose title is chief development officer, said it’s his job to talk to people about an industry that many still don’t understand.
“There’s a lot of conjecture in our industry,” he said. “There are people who have the most compelling stories about success with CBD and how it’s helped them, and I talk to people who are like, ‘Does it really do anything? Is it possible it’s a placebo?’”
Like many other Vermont and national CBD producers, the trio hope that the federal or state governments will soon start regulating and testing products to create verified product standards for the industry. Griswold said he serves on the cannabis subcommittee for ASTM International, the organization that produces standards for many industries.
“In June, the first industry standard for cannabis was published, so we’re getting there,” he said.
But there’s a long way to go, he added.
“From a testing perspective, there’s an enormous shortage of laboratories to support the boom in the cannabis industry right now,” Griswold said. “There are over 9,000 dispensaries nationally and something like 75 laboratories that were established to support these dispensaries – an incredible disparity.”