It's a record of growth any company would envy.
Andy Rodosevich and Luke Pickering launched Colorado Springs-based Hemp Depot, a provider of hemp-derived, CBD oil-based products and hemp biomass, seeds and clones, in 2015. Revenue grew from a little over $202,000 in 2016 to nearly $15.4 million last year. It's farming operation has grown from 6 acres in the first year of production to more than 1,300 acres.
That phenomenal growth landed the company at No. 32 this year on the Inc. 5000 list of the nation's fastest-growing private companies; it was fourth among Colorado companies and the top among 11 Springs companies that made it onto the list. Hemp Depot was also recently named Cannabis Manufacturer of the Year at the fifth annual Colorado Manufacturing Awards.
As with many companies, the COVID-19 pandemic put the brakes on growth this year; Rodosevich, the CEO, expects revenue for 2020 to come in about the same as last year.
But he expects growth to once again soar next year.
"I don't think we've even seen the explosion of the CBD market yet," he says.
Becoming vertically integrated
Rodosevich and Pickering have been friends for about 20 years — since they were classmates at Air Academy High School — and business partners for more than 10.
Their first venture was starting Elevated Medical, one of Denver's first medical marijuana dispensaries, in 2009. "It seemed like an extremely exciting and bustling new industry," said Rodosevich, who had graduated the previous year from the University of Colorado at Colorado Springs with a degree in accounting and finance. After a couple of years, though, they sold Elevated Medical and moved into consulting for other marijuana businesses. Rodosevich also co-founded Social Life Network, a dotcom startup.
In 2015, he and Pickering made the decision to go "full bore into industrial hemp," Rodosevich said, and launched Hemp Depot.
There were struggles practically from day one. For example, the greenhouse where plants were getting started was not sufficiently anchored to the ground and, as a result, "a month before we were supposed to start planting, the greenhouse literally blew over and destroyed all of our plants," said Rodosevich. They scrambled to get plants started again in shipping containers, but other problems were still ahead.
"I would say we had just about all the struggles that you could imagine," said Rodosevich. Still, even with those struggles, Hemp Depot got a head start over most competitors. That's because Colorado voters legalized hemp production in 2012 as part of Amendment 64, which allowed for recreational marijuana sales.
Hemp and marijuana are close cousins; both are varieties of cannabis sativa, but hemp won’t get you high. To be classified as hemp, it must have no more than 0.3 percent of THC, the main psychoactive ingredient in pot.
Hemp has a long history in the U.S. for a variety of uses, including textiles; these days, the focus is on CBD oil, which proponents say has a multitude of health benefits. Hemp production was curtailed by a tax on cannabis in 1937 and it was banned in 1970 under the federal Controlled Substances Act.
Thanks to Amendment 64, Colorado hemp growers were ahead of the curve when a federal farm bill in 2014 allowed the cultivation of hemp for research purposes and within state agricultural pilot programs. But it was passage of another farm bill in late 2018, which took hemp from a Schedule 1 controlled substance to an agricultural commodity, that was seen as a true game-changer for the fledgling industry.
That action wasn't as transformative for Hemp Depot, Pickering said, since it had already been charging ahead.
"It didn't really change our operations," he said, "but it opened up the door to more customers feeling comfortable with it."
What truly was a game-changer for the company was the development of multiple revenue streams.
"We were just going to be a farm," Pickering said. But as the duo faced difficulties finding the right partners to extract the CBD oil or produce retail-ready products, Hemp Depot moved into those areas too. Now the company does everything from providing farmers with hemp seed to producing its own brands of CBD products for people and pets as well as white-label products for 2,400 brands across the U.S.
"We never planned to do it all," said Pickering, the chief operating officer. "But here we are today, 100 percent vertically integrated. From making our own seeds and clones to doing our own hemp growing and farming, to extraction and formulation, packaging and distribution, we do it all now."
A surprising switch
The COVID-19 pandemic closed, at least temporarily, a lot of the mom-and-pop natural health stores and other small retailers that carry CBD products. With that revenue stream diminished, Hemp Depot branched into another area this year that it would never have expected: hand sanitizer. That business got a big boost with an order from the Regional Transportation District for hand sanitizer for its thousands of employees.
"We're essentially a liquid filling company. ... We were able to pivot pretty quickly with the equipment that we have and start manufacturing and bottling hand sanitizer," Pickering said.
The shift helped Rodosevich and Pickering avoid any layoffs. Hemp Depot has just over 50 full-time employees and brings in more at certain times for the farming operation. While the company remains based in the Springs, Rodosevich lives and works in Denver; Pickering, who monitors the farming operations, is still in the Springs.
"One of the things we're proud of is that we are a completely debt-free, investor-free company," Rodosevich said. "Going into all of this, a lot of CBD companies took on massive debt loads. I think it's going to be a big challenge for those companies to get through those debt loads."
While the price for hemp and hemp seeds has fallen dramatically with so many more players in the industry, production costs have also fallen as the company has grown, Rodosevich said. That, he said, helps Hemp Depot in its goal of delivering CBD products at an affordable price.
"A good example of that is our most popular tincture, a 900 milligram tincture that we retail for $19.99 and wholesale for about half of that," Rodosevich said. "That same product from other companies can be $50 to $80."
Tinctures are the company's top-selling CBD products; it also makes soft gel pills, facial cleansers, salves and more. The hemp comes from the company's farms in Rush, Yoder and Cope; the products are made in Hemp Depot's 26,000-square-foot facility in the Springs. Hemp Depot was one of the first companies to receive the Good Manufacturing Practice and Current Good Manufacturing Practice certifications for manufacturing and storing of CBD and CBD products — an effort, Rodosevich says, to show Hemp Depot is adhering to top standards in an industry that's still a bit of the Wild West.
Hemp Depot also continues to develop new products, including some topical skin care products that Rodosevich said "are really going to be revolutionary in quality and effectiveness in the CBD space."
For the industry to keep growing, though, the Food and Drug Administration needs to provide guidance on the manufacturing and sale of CBD, he said. He's had talks with "huge national companies" that are interested in adding CBD products but are waiting on the FDA. For now, it is illegal to market CBD by adding it to a food or labeling it as a dietary supplement. CBD companies also have to avoid making health claims for their products.
"I think once the FDA gives some further clarification and really OKs CBD for consumption and allows it to get into the food and beverage industry, I think we're going to see an explosion in the CBD marketplace," Rodosevich said.
Even without that future "explosion," though, he and Pickering are amazed by their success so far.
“The business and the industry," Pickering said, "has swelled into something more than we ever anticipated.”