Industry: Cannabis & Hemp
Products: Premium CBD products and extraction services
With a vertically integrated process and a host of certifications on the way, founder John Taylor says his CBD extraction company is ready to meet the needs of mainstream brands.
"I didn't expect to be in this business," Taylor begins when explaining the events that inspired him to start Kentucky's largest hemp extractor. "I started having epileptic seizures in 2007. They came on for no reason; I didn't have a family history. When they got much worse, I felt that I wanted to look for an alternative."
Taylor found that alternative in Oregon. "I started using a CBD product and stopped having seizures immediately," he continues. "Where I had been seizing every two or three weeks in the worst period, I've only had four events in the last 10 years."
When the Kentucky Department of Agriculture launched a hemp research program in 2014, Taylor was eager to get onboard. "We applied as a participant, putting together a reasonable amount of capital as a proof of concept model," he says. "We began operations in a 4,000-square-foot facility in the late summer of 2014."
Things didn't necessarily go smoothly at first. "In 2014, the hemp supply was so bad that we really couldn't make any economically viable products," Taylor recalls. "It was all certified European hemp varieties, and we had to go and acquire genetics to bring to Kentucky. Then we had to find farmers and work with them on the genetics that were viable for them to grow."
Today, Commonwealth Extracts supplies more than a half-dozen long-term Kentucky contract farmers with clones from the company's own genetically engineered proprietary hemp plants. These farmers follow proprietary production methods to supply Commonwealth Extracts with biomass for extraction.
Once received at Commonwealth Extract's 133,000-square-foot facility, the biomass is stored in a temperature and humidity-controlled environment until processing. The company uses a supercritical CO2 fluid extraction process to create raw cannabis extract for use in finished goods.
"We always felt like supercritical fluid was the only choice," Taylor explains. "When I got ill, I learned how to make extracts out West with ethanol. While ethanol extract is okay, we knew it wouldn't be scalable. We bought small lab-scale supercritical fluid extraction machines for our proof of concept and used them from the beginning. That made it easier to scale up because we already knew the methods. And it produces a better product in the end."
Early on, scaling up resulted in 400 percent year-over-year growth. Taylor says Commonwealth Extracts grew 20 percent in 2019, a slowdown he attributes to oversaturation in the market. He forecasts between 20 and 25 percent growth for the company in 2020 as they continue providing their customers with products ranging from raw extract to finished goods.
"We contract manufacture a full array of consumer-based CBD products," Taylor says. "This includes everything from ingestibles like tincture oils and gummies to base oils that are used in chocolates and confectionaries. We also make skin products, lotions, and balms. If it has CBD in it, we can typically whip something up to be the CBD part of that formulation."
Challenges: Taylor says that he has "significant concerns" about some aspects of the USDA's Domestic Hemp Production Program. "I think the determination of the total THC thresholds has been set arbitrarily low," he adds. "There's a big debate in our industry right now about how it should be tested and what the total THC content limit should be."
Opportunities: Taylor says his company is poised to meet the demands of mainstream brands entering the CBD market. "Our vertically integrated model and certifications put us in a good place," he notes. Commonwealth Extracts recently completed a Good Manufacturing Practice (GMP) audit through AIB International.
"I'm quite proud of that because we're one of the few companies in our space that has actually taken the initiative to complete that process," he continues. "That is the foundation for the rest of our certifications, which we'll be working through over the course of the next year. Those include SQF, NSF, and ISO certification eventually. For the types of clients that we're looking to market ourselves to, these are a minimum standard."
Needs: Taylor says that the CBD market is currently a "no man's land" in need of regulation and enforcement. "There are a lot of people who are making things that put consumers and the general public at risk," he adds. "The main stumbling block [to regulation] right now is whether the FDA is going to act upon calling CBD a dietary supplement, a vitamin, a food, or a drug. We need some certainty on that."
Taylor prefers a dietary supplement designation. "I consider CBD like a vitamin or a mineral," he explains. "If we can simply sell it like they do Vitamin C, we can associate it with some type of health claim. Drugs limit the market and pass an unnecessary cost burden on to the consumer. So, designating it a dietary supplement is better for consumers and the market."
Regardless of which designation the FDA chooses, Taylor says Commonwealth Extracts is ready to act. "We've built the business model around those very regulations," he continues. "Whether it's called a food compound, a dietary supplement, or eventually a drug, we can easily shift our model to meet those regulations. We know the standards we're supposed to have in place and are already meeting them."