By Gregory Daurer | Jul 07, 2019
CBD and hemp extracts
Mile High Labs recently secured a loan to purchase $65 million worth of CBD-rich hemp.
Mueller calls it "the largest cannabis purchase in the history of the world -- which, if you'd told me I was going to do that three years ago, I definitely wouldn't have believed you."
That's when Mueller started Mile High Labs. Before that, he worked as an electrical engineer in the test and measurement industry -- which involved assisting clients like Apple, Purdue University, and Raytheon to make accurate measurements in relation to their state-of-the-art technology projects like, respectively, a new iPhone, a wind tunnel, or a missile-guidance system. "[I got] to see a lot of real cool technology," says Mueller.
It follows that Mueller is responsible for shepherding Mile High Labs' new technology into reality: the Mile High Monster, a "modular extraction facility" that converts hemp into an ethanol-based CBD extract. Two Mile High Monsters have been assembled in the state: one in Eastern Colorado and the other at Shi Farms in Pueblo. It will be the Monsters' job to process the massive amount of hemp which Mile High Labs is procuring from Colorado, Oregon, and other states. Mueller says that each Mile High Monster can supply the CBD for 100 million finished products -- e.g., a bottle of gummies or tincture -- annually.
At its Loveland facility, the company distills and then crystallizes that CBD extract into an isolate. (Mile High Labs sells both CBD distillate and isolate.) It's also where it tests in-house its incoming hemp extractions and its outgoing products, making sure there are no pesticides or heavy metals in its products, and making sure there's accurate dose information for customers. It provides that testing information to its clients on its client portal.
Focusing on the wholesale side of the industry, Mueller says, "Our [isolate] product goes into hundreds of different brands out there." Mueller told Marijuana Venture that Mile High Labs "supplies about 25 percent of the wholesale CBD market" as of May 2019. Recently, it launched its ready-made, flavored Tinctures on Tap -- which can be purchased in sizes ranging from 1.9 liters to 200-liter barrels, so that outside companies can "tap it and pack it," according to the company's press release.
Mile High Labs has one of the few GMP-certified facilities operating in the industrial CBD space, having undergone an audit on its procedures by the licensed third party, Merieux NutrisSciences; and it's scheduled another upcoming audit with inspection company Intertek.
"The issue is the FDA isn't regulating or enforcing those [GMP] guidelines to this industry [yet]," says Mueller. "So, it's sort of up to the companies themselves to self-police. We take that seriously, because we want to make sure we're delivering a safe product to the customer."
Mueller recently had the chance to address the FDA during its hearings on regulating hemp-based CBD products. His messaging: The FDA needs to provide the industry with firm regulatory guidance and standards.
While there's certainly an ethical, quality-assurance mission guiding Mueller's request, there's also a business opportunity for Mile High Labs if the FDA adopts stricter regulations, since the company has recently begun offering white label manufacturing services to outside companies. Mueller says, "As we do get more regulation and oversight, some of the facilities that are manufacturing the finished product will not be really up to spec. And we think a lot of the brands out there are going to want to outsource the end-to-end manufacturing, and essentially get a turnkey product from Mile High Labs that's made with our ingredient, and also our formulation, and packaged and bottled and labeled by us with the brand's label on there."
Mueller also envisions major companies, say, Coca-Cola or Bayer, getting into the CBD space in the near future. He says, "We have a number of partnerships with some big companies of that kind of caliber, where we're actually doing some of the R&D and product development in our labs here in Loveland. Because they kind of want to keep their distance from [the CBD market], right now -- but, of course, when they want to pull the trigger [on releasing products], they want to be as far down the path as they can. So that's something we're actively involved in now."
So how much hemp does $65 million get someone? "A mountain!" answers the company's PR and Communications Manager Christopher J. Lackner. To be more precise, with high-quality CBD hemp going for $25 to $30 a pound, the total buy was in excess of 825 tons.
Clearly, Mile High Labs has positioned itself for the big time.
Mueller says he was drawn to the CBD space because, "I wanted to be in a field that was growing quickly, that was new, that was exciting. There were a lot of new innovations and discoveries to be made. And it seemed like a really technically interesting place to be as an engineer -- where we could work on a whole new industry that no one had looked at before."
Challenges: "I think, right now, our biggest challenge is this lack of regulation and oversight," says Mueller. "It's a challenge because we sort of have to take our best guess at how the FDA's going to regulate this, and set up all our systems around that. But also we have a lack of education in the marketplace about what good quality systems should look like. And there are companies out there that are able to compete with us, to some extent, that are kind of cutting some corners and not kind of following the same quality program as we are."
Opportunities: White labeling, says Mueller. "I think the biggest opportunity for us now is to have this core business established [and] move into and expand our manufacturing capabilities into the finished products. So I think that's the logical move for us. We're already positioned for it and it's a huge opportunity.
Needs: Mueller refers back to his company's primary challenge: "We need more firm guidance and regulation on this space, so that it can become a fully legitimate industry."