Less than a year ago, industrial hemp was essentially an outlaw crop. Today it’s transformed into the wellspring of an emerging billion-dollar industry. The cannabis extract cannabidiol is a hemp byproduct, better known as CBD. Demand for CBD-infused products such as bath salts, balms and body bars is through the roof.
MTPR’s Edward O’Brien recently visited a Montana hemp processing facility that’s transforming the tough, fibrous plant into liquid gold.
Chemical engineers are huddled around stainless-steel lab equipment at the Socati Montana plant in Missoula. The team, clad in white lab coats, hairnets and safety glasses, is monitoring the early stages of its hemp refining process:
James Stephens is the facility’s general manager.
“So generally we’re removing things like chlorophyll, which is the green color, because that creates an off-taste or off-aroma, depending on what’s being used. What this also does is it concentrates the product.”
Stephens has had a whirlwind 2019. His year started as CEO of a small Missoula biotech firm called Blue Marble Biomaterials. The company produced natural compounds for the food, fragrance and cosmetic industries. Its work eventually caught the attention of CBD-manufacturer Socati, which produces what are called “broad spectrum” hemp extracts. The Austin, Texas-based company acquired Blue Marble this spring.
James Stephens says Socati’s more than $40 million in capital is bankrolling the company’s plant near the Missoula airport.
“We grew from 11 to 42 employees in the last three months. What we’re doing now is we’re in the process now of permitting and working with the local community on about a 10x scale-up of our capacity at this location. We’re probably looking at doubling or tripling staff by early next year, if not the end of this year. We could be looking at between 100 to 150 people needing to operate this facility at this location.”
Stephens says over 80% of his employees are Montanans who are now earning above-average wages and benefits.
“Everything from maintenance and facility and electrical work, all the way to scientists doing product formulation, product development and everything in between.”
He credits the Montana University System for producing top-notch graduates in the engineering, chemistry and agriculture fields.
Women make up half Socati Montana’s workforce.
Breana Pabst, a chemical engineer here at Socati is a Great Falls native who graduated from Montana State University. She describes her work as “energizing.”
“It’s an awesome facility to work in, just having that really strong female scientist group. It’s great to be a part of it. It’s a new industry, so there’s new things to figure out, so it’s really challenging every day which keeps it interesting.”
Socati is aggressively scaling-up operations, and officials are tight-lipped about the quantity of extracts and oils it’s producing, as well as details about clients.
Socati Chief Revenue Officer Mark Elfenbein says only that they’re working with national CBD brands.
“Where those brands are good at marketing and packaging and formulating but still need a CBD ingredient-partner, which is what we are. As an example, we’re currently in discussions with at least five of the top 10 CBD brands that are on store shelves today.”
Socati CEO Josh Epstein, a lawyer by training, is bullish on the emerging hemp economy.
“Because it touches so many different industries here in the United States — agriculture, engineering, chemistry — it has the ability to, ultimately from scratch, taking something that previously was a non-existent or a black market industry and make it a legitimate, credible industry people are proud to be a part of.”
And, according to Socati’s Mark Elfenbein, the CBD boom is just beginning.
“Industry projections show that by 2022 the U.S. industry is pegged to be in excess of a $20 billion per year annual industry. Two years ago, this was maybe a sub $100 million a year industry, to give you a sense of that growth. So we were at $100 million a few years ago, over $1 billion now, growing to $20 billion by 2022.”
CBD proponents claim the compound can effectively treat everything from anxiety and depression to certain forms of cancer. Experts, however, caution more research is needed to back those claims.
The Food and Drug Administration says CBD cannot be included in food and beverage products, but pressure is mounting on the agency to regulate CBD as a food additive and dietary supplement. Earlier this year Socati reps sat in on FDA meetings to discuss the issue.
CEO Josh Epstein says, “Our position is, we need to have an industry that’s built upon good manufacturing practices, that’s built upon consistent analytical capabilities of testing and that’s built upon clear labeling standards that consumers can digest and understand.”
Socati Montana’s General Manager James Stephens says hemp’s potential overall impact on local agriculture can not be understated.
“This definitely has the ability to really blunt the negative impact of overseas trade and allow farmers, especially smaller family farms – where if they focus on high quality crop that’s certified organic and doesn’t use pesticides and doesn’t use fertilizers – and kind of going for the high end niche component for this industry. I think it has the ability to add a strong small family farm presence to the industry and really kind of strengthen Montana farms in general.”
The nation’s opioid addiction crisis has sparked renewed interest in the pain-easing properties of cannabis. The federal government recently announced it will spend $3 million to determine if the plant can help dull chronic pain. None of that money will be used to study THC, the ingredient that gets us high. Instead, nine research grants are pegged for work on CBD and hundreds of other less familiar chemicals found in cannabis.