- U.S. hemp industry set for CAGR of 14 percent through 2022
- Interest in 23,000-acre ultra-high cannabidiol (CBD) hemp project in Kentucky
- Raises revenue guidance for 2019 to $70 million after announcing acquisition of hydroponics retailer
Despite the abstrusity that still surrounds the legal status of hemp, cultivation of the plant in the U.S. is undergoing a renaissance. During the Republic’s early years, citizens were legally obliged to grow the crop, and both Presidents Washington and Jefferson are reported to have done so. But legislative changes turned the thing on its head. Since hemp was a strain of cannabis sativa, as was marijuana, it became tainted with the same brush of illegality. Now, further changes in the legal framework are allowing the industry to emerge from its long winter, giving California-based Sugarmade, Inc. (OTCQB: SGMD) the opportunity to execute its ambitious plans to support cannabis cultivation. The company is one of the largest publicly traded hydroponics supply companies, with brands that include Zen Hydro, Carry Out Supplies, BudLife Cannabis Storage Solutions and Cali Grown Supplies.
Cultivation was perfectly legal in nineteenth century America. However, with the twentieth century a period of moral rectitude dawned, resulting in the Eighteenth Amendment that ushered in Prohibition in 1920 and the Marihuana Tax Act in 1937. The act effectively curtailed cultivation of hemp, but the final nail in the coffin came with the passage of the Controlled Substances Act (CSA) of 1970, which removed any substantive distinction between hemp and marijuana. Thereafter, for law enforcement agencies like the Drug Enforcement Administration (DEA), since both hemp and marijuana were strains of cannabis sativa, hemp was marijuana and marijuana was hemp.
Nevertheless, the legislative canopy keeps evolving. The Farm Bill of 2014 allowed states to set up pilot programs to investigate hemp and its commercial potential, making industrial hemp legal so long as its cultivation was in compliance with state regulations. In addition, case law confirmed that the Farm Bill would supersede the CSA in the event that there was conflict between the two. As a result, the DEA has bowed to the inevitable, removing CBD from Schedule 1. In September 2018, the agency issued an order placing “certain drug products that have been approved by the Food and Drug Administration (FDA) and which contain cannabidiol… derived from cannabis and no more than 0.1 percent tetrahydrocannabinols in schedule V.” This opens the way for further expansion of hemp cultivation. The total hemp market hit $820 million in 2017, according to the Hemp Business Journal, with hemp-derived CBD products accounting for $190 million of that. A CAGR of 14 percent is projected through 2022.
To serve this burgeoning market, Sugarmade has launched two divisions. ZenHydro is its online hydroponics store, which offers grow tents, lighting, nutrients and additives, instruments and tools and nearly everything else needed to grow cannabis. Then there’s BudLife Cannabis Storage Solutions, which offers a novel way to preserve the quality of cannabis flowers over long periods. Introduced in late December, the BudLife system has been able to preserve the integrity of cannabis flowers for up to six months.
Sugarmade is already a successful supplier of generic and custom printed products to the quick service sub-sector of the restaurant industry. Through its CarryOutSupplies subsidiary, the company provides the quick-serve restaurant sector with essential supplies such as cups, spoons and bottles. CarryOutSupplies allows smaller establishments to gain the marketing and advertising benefits of custom printed products without tying up large amounts of working capital.
Sugarmade recently announced a new corporate initiative in the hemp market. The company is to invest in Hempistry, Inc. a privately held Nevada corporation, which has begun planting an ultra-high cannabidiol (CBD) industrial hemp strain in Kentucky. Additionally, Sugarmade expects to sign an agreement with Hempistry for hemp cultivation supplies. Hempistry has already begun planting and has signed an agreement reserving up to 23,000 acres of prime Kentucky farmland for its exclusive use for hemp cultivation.
Sugarmade is also in the process of acquiring Sky Unlimited, LLC, which, through its AthenaUnited.com operations and website, offers multiple popular hydroponic brands to several growing agricultural cultivation sectors. This planned acquisition has prompted Sugarmade to raise its revenue guidance for calendar 2019 from $30 million to $70 million.
For more information, visit the company’s website at www.Sugarmade.com
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