By Gregory Daurer | Sep 27, 2020
Extraction services and CBD oil and isolate
"Zelios is a hemp-based extraction company," says Nassar. "We specialize in CBD extraction. I like to think of us as the biggest extraction company that no one's ever heard about."
But people within the CBD industry have certainly heard of the brands that Zelios Colorado supplies. Nassar says, at one time, the business provided extraction work for one of the largest companies in the CBD marketplace, Charlotte's Web. Presently, it services Colorado-based brands like Elixinol and Bluebird Botanicals. Numerous businesses incorporate Zelios Colorado's CBD oils -- whether crude or winterized or distillate -- or the company's isolate powder into their own products. Nassar says, "I like to equate Zelios to the Intel Inside model: We are the base, active-ingredient supplier for brands around the country."
"We probably service over a hundred different customers, both domestically and internationally," adds Nassar. "We can produce up to 500 kilograms a week of CBD isolate, which is our most popular product, right now."
Five hundred kilograms of isolate per week is a staggering amount -- especially considering the volume of products that a single kilogram of powdered CBD can be incorporated into. According to an informational chart prepared by Zelios, one kilogram of isolate can be used within 3,920 containers of gummies (at 10 mg per 25 count) or 49,000 beverages (at 20 mg per 12 ounce unit). "If you took our [isolate] product and calculated doses, it would be multi-millions of doses of CBD."
Nassar says Zelios Colorado's isolate is "distributed all over the world." The company has set its sights on expanding further into Asia and Latin America, places where "the regulations around CBD and other cannabinoids are starting to open up." Zelios has a presence in Hong Kong, where one of the company's founders, Peter Cummings, is based.
Cummings and Nassar met in Colorado, when Cummings moved his business, Zelios, into an industrial park that Nassar's family developed. Subsequently, the two merged the extraction companies they'd separately started (Nassar's being Gemini Extraction), giving them the ability to market both CO2 and ethanol extraction services to clients. Nassar says CO2 extraction is the preferred method for producing the specialized, "esoteric oils" used in topicals, E-liquids, tinctures, and gummies; ethanol is often the preferred starting point for extracting a hemp oil that will be further refined into powdered, CBD isolate, which some manufacturers prefer to use within those same types of products.
The company has increased capacity in Colorado from six CO2 supercritical extractors to 16, in addition to offering cryo-ethanol extraction. To house that increased production capacity, the company built its own 25,000-square-foot facility in Erie, a town that allows CBD extraction, but still has a moratorium on recreational cannabis. "They've been a great partner for us," says Nassar. A different ownership group under the Zelios banner operates an extraction facility in Lexington, Kentucky.
Zelios Colorado works with several independent farms to obtain the hemp biomass for its CBD; plus, Zelios Colorado's ownership group operates Z-Hemp Farm in Oregon, and an organic cultivation operation in Colorado. It's also preparing to release a line of products under the brand name Zeppelin.
Although the owners of Zelios Colorado operate in several different spaces, Nassar says becoming a truly vertically integrated brand is "hard to pull off, especially in an industry that's still in its infancy," complicated by "extreme price compression" in the CBD market. "When we started the company, the cost of CBD isolate was at $8,000 a kilogram; right now, CBD isolate is trading for $550 to $600 a kilogram," he notes.
When the cost of CBD went down, it provided a quandary for hemp farmers. Nassar says some let it rot in their fields, because they couldn't pay for the processing. Working together with the group Farmers Revival -- which pre-processes the biomass Zelios Colorado uses, by drying it out, separating out the stems, and breaking the hemp down, thereby making it easier to run through Zelios Colorado's extraction machines -- they offer farmers "free or discounted toll-processing extraction, in exchange for a revenue share, or split on back end when sold."
Before Zelios launched, Nassar's family purchased a winery in Napa County, California. "In the wine world," he observes, "the farmer who grows the grapes [occupies a highly regarded] position. They're the one bringing these grapes up [through] the soil and creating the base for a great product. And they have a very defined sales outlet for those grapes. It's a very mature industry."
He adds, "We feel a responsibility as an extractor -- just as a winery feels a responsibility of supporting their farming partners -- to find a viable way to turn CBD biomass into a product, and sold into the marketplace."
Certainly the business has its challenges. But Nassar says it has its rewards, too: "The amount of innovation in this industry is incredible. The technologies that people have been developing on the extraction side -- and post-refinement side -- are fascinating. Sometimes it feels like we're in a big science experiment here, and we do a lot of cool R&D stuff. I feel the entrepreneurial spirit of the industry is still the most exciting aspect."
Challenges: Nassar cites "lack of government regulation." He thinks demand will be greater when "the FDA steps in and starts to regulate this industry heavier." In order to assuage any concerns customers might have about its product safety, Nassar cites the company's cGMP status: "We took it upon ourselves to self-regulate," he says. After citing the names of several major manufacturers of consumer goods, Nassar says, "They never jumped into the [CBD product] space, because there was no great government framework of regulation to oversee the production of CBD."
Opportunities: The mainstreaming of CBD in products. "We're finally falling out of the THC and marijuana shadow. People are recognizing that CBD is not a psychoactive ingredient that'll get you high, but rather as a supplement that will improve your health."
Needs: "For a large non-CBD brand to jump heavy into the space," says Nassar. "We haven't really seen that yet. You hear of Charlotte's Web and you hear of Elixinol and Bluebird, CBDistillery. But those are brands that were built on CBD. You don't really have a large, household brand that has really adopted this as an ingredient, such as a Loreal or a Dove or a Unilever or Coca-Cola. I think once one or two of those big companies jump in, more will follow. And at that point the industry is just going to explode."