Marijuana Business Magazine April 2020

Marijuana Business Magazine | April 2020 88 N ecessity, they say, is the mother of invention. Just ask Carla Boyd, who first started cooking with hemp ingredients to manage food allergies and eventually launched a company built around her recipes. A lot has changed since Boyd founded Evergreen, Colorado-based Hemp Way Foods in 2014. For starters, the 2018 Farm Bill legalized the regulated production of hemp, which previously had been treated as a quasi-controlled substance. The new legal landscape, which has led to a surge in hemp production, and growing consumer demand for plant- based foods have given rise to a new crop of hemp-based food products ranging from gelato to protein bars. National grocer Whole Foods Market, for example, offers tea, protein powder, granola and milk made from hemp. To some extent, firms such as Hemp Way Foods also are riding a wave created by the Impossible Burger, the plant-based faux meat patty that caused a media frenzy with its popularity. “The Impossible Burger has definitely helped (my business) because it has brought more attention to plant-based foods,” said Boyd, who nonetheless shies away from tying her firm’s signature product, a handcrafted hemp burger, too closely to the Impossible Burger. “My product,” she noted, “is a meat alternative, but it’s not created to have meat flavors. So, it’s very different from the Impossible Burger.” For all the apparent potential of hemp-based foods, the market is still dominated by cottage-industry businesses, according to Boyd, who is among a group of entrepreneurs leading the way by breaking into new retail channels, forging relationships with suppliers and, in some cases, developing new business models. Marijuana Business Magazine spoke with leaders in the hemp-based food market about challenges they’ve faced and how they’ve overcome hurdles to expand their collective reach. THE BATTLE FOR SHELF SPACE Breaking into grocery stores isn’t easy, especially for upstart manufacturers. Retailers tend to be highly selective about which new products they’re willing to carry; in many cases, manufacturers must pay “slotting fees” to get their products on store shelves. Slotting fees, a form of pay to play, help retailers compensate for the fact that many new products fail before catching on with consumers. But the fees can be hefty—sometimes costing $25,000 per item per chain—and, of course, difficult for small businesses to absorb. “Shelf space has been a challenge,” Boyd conceded. “For a company like mine, (slotting fees) are next to impossible to afford.” She has managed to convince grocery stores to eliminate slotting fees for her products by appealing to their desire to buy local. The local-food movement has become big business, and supermarkets, including massive chains such as Walmart, are expanding and marketing their locally grown and produced offerings. The U.S. Department of Agriculture offers grants to promote local foods, and many states fund programs that market food and agricultural products grown, raised or processed locally. FLEXIBILITY IS KEY Getting your products on store shelves is only half the battle. To succeed in what’s likely to become a more crowded market, hemp-based food manufacturers must be nimble and willing to adjust when things don’t go according to plan, said Chad Oliphant, co-founder of the Hemp Food Co., whose signature product, Hempé, is sold in about 400 stores nationwide (including Wegmans, Fairway Market and Whole Foods locations) and online via Amazon and LuckyVitamin. Oliphant speaks from experience. He and his wife/business partner, Sarah Yancey, got their start in the food business producing tempeh, a traditional Indonesian product made The legalization of industrial hemp cultivation in the 2018 Farm Bill created a surge in hemp planting across the United States. The shift comes at an opportune time, as demand for plant-based food products such as the Impossible Burger have hit an all-time high. Entrepreneurs considering whether to join the hemp food craze should consider: • Hempseeds are cheaper to purchase than hemp hearts, protein and seed oil. But processing equipment adds another layer of cost. • Consider developing a farmers- market following before trying to get shelf space at brick-and- mortar stores. • Grocery stores are highly selective when deciding to carry new products, and many of the larger chains demand “slotting fees” of up to $25,000 per item per chain. Touting the local nature of your food item is one way to try to avoid slotting fees. • Be ready to pivot from your original offerings if consumers are not making repeat purchases. Chad Oliphant Courtesy Photo IMPOSSIBLE BEYOND