As the legal U.S. hemp industry begins to take shape, consolidation is already a factor in the marketplace. With the 2018 Farm Bill at its back, the market is expected to consolidate more rapidly than even the warp-speed movement in the cannabis space; hemp farmers and business owners would do well to watch this trend carefully.
RE Botanicals and Palmetto Harmony have agreed to a merger, creating a vertically integrated, USDA certified-organic business right at the moment that hemp-derived CBD products are intersecting with mainstream (and cannabinoid-curious) consumers in America. For founders John Roulac (RE Botanicals) and Janel Ralph (Palmetto Harmony), the merger accelerates each business’s goals and further develops the supply chain.
Roulac and Ralph met at a Victory for Hemp party following the passage of the 2018 Farm Bill. They immediately bonded over their shared perspectives on organic cultivation and the emerging hemp market.
“We have the same views on everything in the industry—and where the industry needs to go,” Ralph says. “I think the two brands really align well together. It gives us the opportunity to bring two high-quality product brands to the market and bring it to the market with a much larger reach, too. … In any industry, if it’s this competitive and this new, the most important thing you can do is bring in a value-add partner.”
Ralph formed Palmetto Harmony in 2015. Her daughter, Harmony, had been diagnosed with lissencephaly. This brain disease causes intractable epilepsy. Ralph set out to find a solution. Her research led her to CBD, and she soon learned that a hemp marketplacewas forming separate from the burgeoning cannabis industry in the U.S. But, living in South Carolina, she found that it would be easier to make hemp-derived CBD products instead of trying to find them in any retail shop around her. “I didn’t come into this space looking to create a business,” she says. “I came into this space out of necessity.”
She first worked with Bill Polyniak’s Kentucky Cannabis Company to purchase legal hemp from his licensed pilot program business, and she set to work developing high standards for safe hemp-derived CBD products that would be fit for Harmony.
Eventually, South Carolina got around to passing hemp legislation (for which Ralph played a vocal advocacy role) and Palmetto Harmony began to grow. The brand is now found in 600 storefronts.
At the same time, in Colorado, Roulac had been taking what he’d learned as founder and Chief Visionary Officer of Nutiva and constructing a business founded on organic farming and soil regeneration techniques. “We believe health begins in the soil,” he says. “Healthy soil leads to healthy plants. Healthy plants lead to healthy people. Healthy people means you have a healthy heath care system, and, also, when you have healthy plants and healthy soil, you have a healthy climate. The challenge today is that 99 percent of our agriculture is based on unhealthy soil, on degenerative farming.”
Roulac set out on two decades of work in the hemp industry with that singular goal: to use hemp farming to regenerate soil and lift up the planet’s resources for all. It’s a variation on the same theme—conscious health standards—that led Ralph to build her company.
“My focus is the environment—natural systems and how that impacts people and the environment,” Roulac says. “Her focus is, as a mom, getting organic plant medicine to her family. That, of course, led her to why she wants to do things organically. We share that in common. We’re appalled by what we see out there in the CBD industry and how—do you really want to put something under your tongue that’s been grown in a process with Monsanto Roundup chemicals? We share that. We’re both driven.”
Under the terms of the stock merger, the combined business will use the name RE Botanicals. Ralph will serve as chief operating officers and oversee the company’s hemp cultivation and manufacturing facility in South Carolina.
Roulac’s work at RE Botanicals put the brand in 1,200 stores (a sharp increase from the four storefronts it was working with as recently as November 2018). With this deal inked, RE will be able to take advantage of the supply chain assets that Ralph built with Palmetto Harmony—the agility that’s allowed her to innovate in the product manufacturing segment of the business.
“If you want to be successful in this industry, don’t just take money from anybody that wants to give it to you,” Ralph says. “Make sure that you bring somebody to the table who’s going to advance your business in whatever arena it is.
“This industry is going to become more and more and more competitive,” she says. “I’m almost under the impression that if you’re getting in now, you’re probably getting in too late. I thought we’d have another year so, but I don’t know. It’s going to take some real heavy players to survive in this industry.”
The merger now places both entrepreneurs on the front lines of a fast-tracked market consolidation trend in the hemp industry. This deal checks the classic boxes on the M&A list: personnel, access to capital, technology and innovative intellectual property.
Executives at BIGR Ventures, which contributed seed funding to RE Botanicals, are watching this merger as part of that broader narrative in the hemp market. BIGR managing partner Carole Buyers said in a public statement, “This is truly a meeting of like-minded and purpose-driven companies. One of the reasons that we invested in RE Botanicals so early in their growth phase is that we believe in the work that founder John Roulac is doing in the agriculture space. Uniting with Palmetto Harmony increases their footprint as a brand and opens them up to exciting new opportunities as product manufacturers. We’re excited to see where their continued growth takes both brands.”