Exclusive Interview with Australian Primary Hemp CEO Charles Mann

Australian Primary Hemp may have only listed on the ASX in late 2019, but the company has already made considerable headway in the increasingly crowded retail hemp market.

Australian Primary Hemp (ASX:APH) is a vertically integrated Sydney-based grower, manufacturer and processor of hemp products. The company has been in operation since 2016 and began with "good mates, a passion for agriculture and an interest in developing a sustainable food source". 

Australian Primary Hemp's long-term goal is to become a market leader in the hemp wellness space by supplying consumers with sustainable, high quality hemp products.

For us, it's all about being Australian grown and made. We honestly think that we have a far superior product, and when our customers taste the seeds it's not long before they're adding them to everything – salads, muesli, smoothies, you name it. Australian Primary Hemp Executive Director and COO, James Hood

At the same time, APH also offers a complete end-to-end hemp processing service, which can handle everything from seed selection and farming to contract packaging and retail sales.

Additionally, the company's vertically integrated business model means that APH can control every aspect of the supply chain, ensuring that its products maintain a level of superior quality and freshness compared to the competition. 

And although the company only listed on the ASX in late 2019—following a successful $5.7 million capital raise—it already has a wide variety of hemp based products on the shelves, including hemp and honey nut bars, oils, seeds, protein powders and fibre supplements.  

Luckily for investors, the hemp market has never been hotter, and research suggest that it could swell to USD$26.6 billion by 2025, expanding at a CAGR of 34.0% over the next five years.

For these reasons we decided to sit down with the co-founder and CEO of Australian Primary Hemp, Charles Mann, to discuss his rapidly expanding company in an exclusive interview with The Green Fund.

Dynamic Duo

Although the management team behind Australian Primary Hemp comes from a diverse array of agricultural background, the company was originally founded four years ago by two men, Charles Mann and James Hood.

At the time they were looking for a new farmable alternative protein source that would fall within conventional agricultural practices.

Naturally, that side of the business has expanded as hemp food has become more popular. We've grown to supply more and more different companies and different shops, different supermarkets and whole foods stores, even as a back-of-house ingredient in a lot of other products. Australian Primary Hemp Co-Founder and CEO, Charles Mann

However, this turned out to be a complicated endeavour for the duo—as you need a "broad acre" if you want to grow enough product to feed the masses—which is where the idea to cultivate hemp entered the picture.  

"As you're probably aware, back when we started hemp was still illegal as a food in Australia. But we pushed ahead and sold it as a body scrub, and other things, knowing full well that one day it was going to be legalized. And then of course it was," Mann said.

"So, we went from being a very small agricultural business to basically operating as a plant-based protein food company, combining toll processing services with a retail line as well. And that's really the sort of story of Australian Primary Hemp today."

The company has continued to grow steadily during the intervening years, though this was recently kicked into overdrive following APH's capital raise in late 2019, which saw the company successfully generate $5.7 million in funding.

According to Mann this means that Australian Primary Hemp now has enough cash in the bank to "really grow", part of which was used to fund the development further hemp products. This was a crucial move for the company, as further expansions to its product line is a core element of its strategy for building market share.

"At the end of the day, one of our main jobs here really is to get our wellness products, or health products, to a broader range of people in Australia. To do that, we not only need more point of sale, we need more products.

"We're currently working on a lot of new products. We're working on a lot of collaborations. We hope to be releasing some of them soon. So timing is of the essence with them," Mann said.

Another area of the market that APH is considering targeting is the pharmaceutical sphere, as hemp-derived CBD has grown in value at a tremendous rate since the 2018 US Farm Bill supercharged the industry.

While no official plans are currently in place, Mann has confirmed that the company is exploring the possibility of developing high CBD products aimed at the pharmaceutical market, although at this point the discussion is still purely theoretical.

"We'll be looking into that really heavily. Remembering we are actually still technically a biotech company, so that's a space we're very interested in."

"But at the moment there's nothing on the horizon," he said.

Quality Control

One of Australian Primary Hemp's greatest strengths is its vertically integrated business model, which allows the company to tightly control every aspect of the hemp supply chain.

While some may treat the phrase as an industry buzzword, vertical integration has become increasingly important for companies operating in the hemp and cannabis space, as it allows them to guarantee the quality and purity of their product.

We need that control. I mean, if you're a supermarket or a whole food group and you're coming for a consistent product, you really want to know that that quality is going to be there, along with that reliable consistency over time. The most dangerous thing for us is for a retailer to run out of our product. That's disastrous, because all hard work sort of goes to waste if the consumer can't then go and get it again and again and again. So that's absolutely crucial. Australian Primary Hemp Co-Founder and CEO, Charles Mann

However, the decision to embrace a "paddock to plate" strategy was not made lightly, which led Australian Primary Hemp to carefully consider the ramifications of pursuing this route.

One of the chief concerns that APH considered was the overall cost of becoming vertically integrated, as "not all departments are going to pull revenue".

Although this means that some sections of the company will inevitably have to be carried by more profitable divisions, the benefits were too great for APH to ignore.

"Look, for us the real benefits are, we supply the seed to the farmer, we import the seed, we know its origin, we know its variety, we've got those relationships so we know what we're giving our farmers. And then of course, we buy back their grain. So, we have a nice offtake agreement, and then we sort of know what we're getting," Mann said.

"Now, on the back of that we get to process it. It gives us a chance to really control the quality, which is really important for us. And then the retail. I think the retail really, to be honest, was a proof of concept. But it's actually done really well. A lot better than we would have hoped."

"Of course, we are still a toll processor. We sell a lot of bulk to retail. So, the vertical integrations have actually been key to get the whole wheel turning in this industry. Remembering that no one was doing this in the hemp space for years."

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And luckily for APH, the hype around consumer hemp products has never been greater. In fact, the number of hemp-based products available in the market has exploded over the last several years, as health and wellness influencers, medical authorities and mainstream customers have become increasingly aware of its health benefits.  

Another market trend driving the increased uptake of hemp products has also been the rise in environmentally responsible consumption, which has left many larger companies on the backfoot as they attempt to "greenwash" their business practices.

As a result of this shift, hemp has become increasingly popular in a number of industries due to its small environmental footprint—when compared with other crops—along with a significantly reduced cultivation cost. Evidence of this trend can already be seen in the US market, where the level of hemp farming increased by four-fold during 2019.  

"Yeah, look, we've certainly seen lots of spikes. We're seeing a real level out in the industry now. I mean, that's got to come down to a lot of education. People are now buying it consistently for the health benefits, they're seeing them firsthand by using it," Mann said.  

"And that's starting to feed through socially. We're seeing lots of people talk about hemp, saying 'you should add it to this. It's really good, I'm feeling better about this.'"

"So that's been a big one rather than that hype that was there in the last two years, which was, 'Hemp's a super food, everybody should get across it'. That hype's dropped off.  We're seeing a really sort of stronger underlying consistent consumer. And that's crucial for the industry to keep that sort of wheel turning and not be so volatile."

Dehulling and Distribution

While having a strong product line is important for any business, any equally crucial concern is ensuring that consumers can access them in a timely and reliable manner.

Luckily for APH, the company has already developed a robust distribution network of more than 600 retail outlets and chain stores.

Look, it's just getting bigger and bigger and distributors are coming more and more. But we hope to see more and more distributors come on board. We only supply 12 distributors at the moment in the whole foods space, and we should be supplying a lot more. So, a lot of resources have been put towards now building up those distributors. Australian Primary Hemp Co-Founder and CEO, Charles Mann

Mann explained the company originally made its products available exclusively through the whole foods space, however since then APH's customer base has broadened considerable and it has begun seeing significantly "broader distribution".

"As products are evolving and there's more people becoming aware of it and buying it, we're finding ourselves being approached by different retail outlets and distributors."

"And now we're seeing a lot broader distribution. We're seeing a lot more ingredient product, which is pushing us into larger retailers."

"So, remembering that we do a retail line of our own and bulk supply, we've got two sort of different businesses there, even though they're one. Where we're selling our retail line to a certain bunch of distributors and our bulk to another group of distributors," Mann said.

Another important asset is the company's top-of-the-line dehulling facility in Geelong, which is capable of processing up to three tonnes of hemp per hour.

Although the facility cost APH an investment of approximately $1 million, the company says it was well worth it, as it allowed them to begin manufacturing hemp seeds, Hemp Balance and Hemp Boost, which joined its existing range of hemp oil.

"It's a Swiss-German machine. It's very good quality that comes off it. And of course, the volumes are good. We're very pleased with the machine. At this stage it's probably the biggest processing plant, certainly in Victoria, I would expect. I don't know of many competitors that have a plant as big as ours," Mann said.

"We're looking for a consistent quality product. That's what this is all about. You don't want to go into the supermarket and buy something that's different every time from the same producer like us. So that machine is crucial to that."

Looking Ahead

While Australian Primary Hemp does still provide hemp toll processing services, at this point the lion's share of its revenue is being generated from sales of its commercial product line.

And now that APH has a range of different hemp product varieties that are rapidly establishing market share, Mann say the company is carefully considering how to provide the "best growth for our shareholders".

"Now of course, everybody knows that's a revenue-based growth so that's really where the focus has been. We've had a chance to really get some key people that have got great experience in all these spaces, and we've been able to afford to bring them on."

"So, without giving too much away, we're obviously expecting a hell of a lot of growth in the revenue side. And we've obviously got some really exciting products under development. We will be announcing them to the public, as soon as they're ready to go."

"We're becoming a significant player in the hemp food space. But look, we're young. Obviously, we've got some exciting things coming. And I think this space has got a lot of legs," Mann said.

However, before you go all in on Australian Primary Hemp it is also important to remember that as a comparitively new entrant to the ASX it is still relatively untested and may be prone to share price volatility spikes.

Additionally, the stock is currently trading at just 0.12 a share—down from its listing price of 0.28 in October—representing a 57% decrease. Although, this may partially be the result of an industry-wide downturn that began to plague the global cannabis market in late 2019.

To learn more about Australian Primary Hemp visit their Company HQ here.

Disclaimer: Past performance is not an indicator of future performance.

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Hugo Gray
Hugo Gray

Hugo Gray is a Melbourne-based journalist with a body of work that covers a diverse range of topics, including immigration law, sex technology, and now the rapidly expanding cannabis industry.

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