$80 million for a new hemp production facility? How one ingredient supplier is betting big on CBD: SupplySide West 2021 report

Photo credit: HempRise’s facility tour in Jeffersonville, IN, in September 2021. From left to right: Midwest Hemp Council President Justin Swanson, HempRise Production Manager Chris Smith, U.S. Congressman Trey Hollingsworth (R-IN), and HempRise’s General Manager and CEO Zheng Yang. Photo from HempRise.

This September, HempRise, a subsidiary of plant-ingredients supplier Layn Natural Ingredients (Newport Beach, CA), welcomed U.S. Representative Trey Hollingsworth (R-IN) to tour its soon-to-open hemp processing facility located in Jeffersonville, IN. Set to open later this year, the 100,000-sq-ft production facility required an $80 million investment from HempRise and, the company says, will at the end of the day be the largest hemp-processing facility in the U.S. At this October’s SupplySide West trade show, Nutritional Outlook interviewed Kyle Einhorn, HempRise’s vice president of sales, about why the company felt now is the right time to make this significant investment and about what its plans are as the U.S. dietary supplement and food industries wait to find out whether hemp cannabidiol (CBD) will be made a legal dietary ingredient in U.S. foods and supplements.

Of note, the new facility was designed to serve the hemp-processing needs of large multinational companies. Many anticipate that mass-market companies still waiting to enter the CBD market until CBD is legalized in U.S. foods and supplements will hit the green light, and fast, on CBD business once the ingredient is legal.

This is HempRise’s expectation, Einhorn said. “The HempRise facility was specifically built to scale with large tier-one multinational companies,” he said. “The facility was designed to supply the likes of the Nabiscos, the Kellogg’s, the Coca-Colas, PepsiCos, Bimbo Bakeries—large, tier-one accounts.”

The facility aims to serve these companies a steady supply of hemp material. “One of the missing components in the market right now is really consistent source of supply and a consistent quality,” said Einhorn. “And so, because of our scale, we’re not only able to have inventory and stocks; if companies need material within 24 or 48 hours, we can ship it—and they know it’s produced at a consistent quality all the time.”

The facility was also designed to comply with federal manufacturing requirements for dietary supplements. “We’re running the facility as if the FDA has approved CBD, meaning we’re operating the facility at 21 CFR Part 111 compliance,” he said. “We’re also setting up a standard system for testing where we look at the strictest states’ testing [requirements]. I’ll give you an example: Oregon has the highest standards for pesticides [testing], so we will test to Oregon standards for pesticides. And so, whatever states have the highest standards of testing, we will use those to test our material. That way, our end-use customers are not limited in what states they can sell into, and they’re confident that our material meets the requirements of all the states.” He added: “To our knowledge, nobody else is doing that.”

The facility was “purpose-built” to specialize in extraction, Einhorn explained. The facility also boasts a spray-dryer that enables the company to create powdered ingredients, such as the new spray-dried, water-soluble, broad-spectrum hemp powder the company now offers, called Hemp Aqua, as well as a nanoemulsion specifically for beverages and personal care products. The goal of these new formats is to “really help our customer separate their products on the shelves,” he said, by helping them improve bioavailability, mixability, and taste profile.

The beauty of the extraction facility is that it can be used to produce other ingredients should CBD food and supplements take a long time to become legal or if CBD is not legalized in those products at all.

“We’re using it for hemp extraction to make CBD, but the facility is capable of other extractions, too,” Einhorn said. “If, by chance, the hemp market doesn’t go in a positive direction, we can extract stevia, we can extract tea, because we’re owned by Layn, and Layn’s been in the botanical extract business for 25 years. The plant was built so we could alternate extractions if required.”

As of now, he said, “The plant’s primary focus is to process between 8 million and 10 million pounds of hemp annually,” including CBD isolates and broad-spectrum hemp extracts. The plant’s location in Jeffersonville, IN, means the company will be sourcing biomass largely from within the state as well as from surrounding areas such as Tennessee and Kentucky, and even from Wisconsin and Colorado—all the while trying to keep its carbon footprint low.

CBD getting the regulatory green light for food and supplements, such as via passage of a bill like HR 841, “will really help change the way this industry operates and the option for other companies to look at CBD as an ingredient,” Einhorn said. “Most large multinational companies aren’t looking at CBD across the board or in any products because it’s not federally approved. And so, as a result, it limits some of that growth.”

But HempRise is now ready should that growth come, he said. “Because the facility is so large, we’re able to scale up quite quickly to meet the demands of large tier-one companies, and look forward to supplying other people in the marketplace until such piece of legislation is passed,” he concluded.

Nutritional Outlook also asked Einhorn about the state of supply, or oversupply, in the current hemp market. “The supply, from our point of view, from raw material, [is that] biomass is still readily available,” he said. “It will be interesting to see. Right now, we’re harvesting, so it will be interesting to see, once those numbers are in, what type of effect that drought and the heat up in Oregon had…Now, for us, we still get access or have been approached for access to 2019, 2020, biomass. There’s still a lot of material out there from that point of view.”

“The supply of the market is definitely a little bit oversupplied at the moment,” he continued. “That’s where you’re still seeing some decline in the prices.” Two years ago, he said, isolates sold for between $4000 and $7000 per kilo; now they sell for $500 per kilo.

But with demand increasing—Einhorn said he’s seen growth especially in CBD sparkling waters, and in CBD protein and energy bars—“We believe that will turn around shortly because the demand is increasing enough.”

In terms of cannabinoids other than CBD, Einhorn said that for now, the HempRise facility’s primary focus will be “the CBD side of the business.” However, he said, as the company looks to Phase II of its plan for growth in the next 18-24 months, it could expand to ingredients like hemp fiber and other minor hemp cannabinoids like CBA, CBG, and CBN, as interest in those grows from consumers.

“It’s really an emerging market,” he said. “The industry’s been around for seven years. Some people say HempRise is a little late to the game, but we think we’re coming in at the right time because the industry is still metamorphosing into what it’s going to be when it grows up—and we’re confident that we can be a key, value-added supplier to tier-one, tier-two, and tier-three companies.”