The towns around Hardwick, Vermont, have become the center of a dynamic economy based on processed agricultural products. This fact has been noted in these pages before (Fall, 2012 issue). Enterprises like High Mowing Seeds, The Bee’s Knees Restaurant, Vermont Natural Coatings, Vermont Soy, Jasper Hill Cellars, and the Vermont Food Ventures Center all exemplify the vigorous small business activities that have grown here.
In the last few years a new addition to this activity has been that of a company developing products based on the medicinal properties of a certain crop, a plant recently exempted from a federal prohibition on growing if raised in specific ways consistent with the Farm Bill. That plant is hemp, and the company is Sunsoil.
In early 2016 Alejandro Bergad and Jacob Goldstein founded Green Mountain CBD (later to become Sunsoil) and bought a farm in Hardwick to grow hemp.
“Hemp was widely grown around here hundreds of years ago,” states Bergad. “It was so widely grown that the Fairbanks Scale Company here in 1830 was the one which developed the platform scale, a way to weigh the hemp crop without unhitching the cart. I think the heyday of hemp in this country was from the 1880s to the 1920s or 30s, until the federal law banned it (as a narcotic). It was primarily used for its fiber qualities, and paper was the industry that lost the most from the hemp ban.”
Both Goldstein and Bergad grew up in Skyview Acres, a “cooperative community” about 20 miles north of New York City in Pomona, established in 1947. The two knew each other growing up, and credit Skyview for their “shared set of values,” which could be defined as progressive.
The younger, Goldstein, went to Vermont for the mountains and ended up studying geography at the University of Vermont. Alejandro farmed out in Colorado in the hemp industry. While there he saw opportunities to make a lot of efficiencies that current farmers and manufacturers were not doing, both in growing and in processing the product.
Of course, as Jacob points out: “In Colorado you were not seeing traditional hemp agricultural practices being used. Those places came out of the marijuana industry, not hemp.”
Although hemp and marijuana are derived from the same plant, they are bred for different kinds of oil production. Hemp’s medicinal qualities come from CBD oil (Cannabidiol), not the psychoactive THC (Tetrahydrocannabinol )which marijuana provides. There is hemp that is bred for fiber as well, but mostly the goal is oil.
A strict requirement of hemp is that it contain less than 0.3 % of THC so it has no psychoactive qualities. Cannabidiol, which is the true name of CBD oil, is one of more than 100 naturally occurring cannabinoids produced by the cannabis plant.
When it became legal 20 years or more ago for American companies to import hemp as an ingredient, American farmers felt discriminated against and they recently got it into the Farm Bill that states could authorize the growing and sales of fiber hemp. Now the state has to approve it and the feds will sanction it.
According to Bergad, “It is a federal law which opened up state programs and allowed them to do what they want. New Hampshire, for instance, decided to let anyone grow hemp like any other crop. But something raised in New Hampshire would not be legal to sell nationally because it was not grown under the federal seal. Here in Vermont we are functioning under a federally sanctioned program, so we can sell nationally. Besides, the soil here is awesome. It really is amazing. I have nothing against Colorado, but it’s like farming in a dessert out there. Here you have lots of clean water and a well versed farming community with generations of experience.
“The USDA is still refining its rules,” he continues, “it is still an industry defining itself, at a young stage. There should be a market for artisanal products in this industry, just like any one. But people have to find and develop it, similar to maple syrup and how that developed. Mostly it is a commodity but there is room for quality small producers. Until then it is backyard farmers selling at farmers markets and there is still a good profit margin there. I would just encourage growers to know how they are going to sell it before they start to grow it, test it, harvest and dry it.
“It all needs to be sorted out.” He concludes. “We have both a grower’s permit and a processing registration here in Vermont. This year we paid Vermont $25 for the license. Next year it will be $3000. It is based on acreage and their costs for inspection. I think it is $100 for the first half acre, and $300 for the next. We want to keep it possible for the small farmer to raise it.“
Bergad and Goldstein are among the early leaders in an industry that has grown from sales of $108 million in 2014 to $813 million in 2019, just five years. Statista, a provider of market and consumer data estimates that the CBD market will grow to $1.8 billion by 2022. Bergad feels that number is way too low and the figure is likely to be closer to $6 to $8 billion by then.
In this burgeoning industry, Sunsoil is the country’s third largest CBD manufacturer, growing 100,000 hemp plants in 2019. Those plants produced about 40,000 kilos of hemp. The company expects to increase their production and is looking for additional locations. Their fields and drying operation have been certified organic by Vermont Organic Farmers.
Another indication of Sunsoil’s intent to be a responsible industry leader is its commitment to employees. It provides health insurance, retirement benefits and an ownership stake to all 30 full-time employees, and offers a starting wage of $20 per hour for part-timers. The number of employees working for Sunsoil is not insignificant, either. The company employed over 200 different Vermont farmers during the crop season.
Besides its rapid growth and organic certification, Sunsoil is also distinguishing itself on efficient production methods. Given Bergad’s conviction that ultimately CBD will be a commodity grown on a wide scale, he feels that competition will ultimately be based on price. In such a market, the most efficient win the day.
One example of such efficiency is having total control over both growing and extraction operations. Many CBD manufacturers outsource either their agricultural operation and/or extraction process (with some leading, US-based CBD companies even sourcing their hemp from overseas).
But Sunsoil is vertically integrated, from seed to tincture bottle, unique among CBD companies, according to Bergad.
Many hemp growers will grow a crop from available seeds and then test grow plants for THC content, ever mindful of the 0.3% limit. While effective, this is obviously a laborious process and involves destruction of the part of the crop over the legal limit. Alejandro and Jacob, however, from their work in the industry, had an advantage.
“We knew from the seed how a plant would turn out, more or less,” says Alejandro. “The seeds can be analyzed on a gas chromatograph, allowing us to check the ratios of THC to CBD. Thus we were able to accelerate our breeding program by spotting those indicators within three weeks of the seed popping and not needing to wait for maturation.”
The pair bought a gas chromatograph that same winter they bought their land, going out to Los Angeles to the manufacturer and studying how to use it. They did their first seed crop downstairs in the Hardwick farmhouse they bought.
The methods of producing hemp are not obvious to many farmers. Instead of buying seed, Jacob and Alejandro breed their seeds in January,
“It is only when we grow for seed,” relates Bergad, “that we pollinate and thus get flowers with seeds. In the field we are not pollinating so there is no seed. They are all female plants. It is just flowers without seed. We just use male plants in our breeding operation. Being a dioecious plant, certain stressors can make a female plant produce male flowers. We use the pollen from those to make seed. Technically it is a female flower in that the genetics are all from the female plant. But it looks and acts like a male flower, just has no Y chromosomes. We are constantly selecting stock for breeding: refining, testing, etc.”
They then use the gas chromatograph to choose their stock going forward so it will be under the hemp limit of 0.3 percent THC.
“The gas chromatograph can measure the levels of cannabinoids and terpenes in the seed we are producing,” explains Alejandro. “We measure ratios and can spit out stuff we don’t want early in the process. A backyard operation can’t do this, and just has to buy seed. That is still somewhat sketchy, not many traditional seed companies sell hemp seed. But it is sorting itself out. There are a lot of new entrepreneurs in this industry. There are a lot of companies doing what we do in Vermont, but not on our scale.”
Growing hemp is not like raising many crops. First, it is a heavy feeder. Hemp pulls everything out of soils and uses up lots of nitrogen. Sunsoil goes through a lot of chicken manure which they purchase from chicken farms in New York.
Jacob and Alejandro plant their greenhouses with seed by April 15 or 20, and transplant those seedlings out in early June for a harvest in 100 to 130 days in September to late October. They plant about 1000 seedlings to the acre.
“Twenty-five plants within one foot of each other are going to grow up tall and thin,” Bergad points out. “But if you give one plant 25 feet, it will grow large and thrive. You want lateral branching in the plant, to provide air drainage and plenty of flowers for oil. They will take up the sun that they have.
“You can grow hemp for fiber or oil,” he continues, “just give it space to flower and make lateral development for oil, and make it grow tall for fiber. I think there is some money in growing hemp for fiber, but not a lot. For textiles you need to have big mills and process it, and those are very expensive.
“We use cultivars here that have a little bit broader leaves than those in Colorado,” he concludes, “and they are meant for a little less sun. Colorado leaves are much thinner and designed for less exposure to the sun.”
To grow hemp the way Sunsoil does is a lot of handwork. They produced it on 100 acres last year with harvest crews as big as 120. Using machinery with the plants would be easier on manpower, but a lot rougher on the plants.
Although some producers shred their crop green and bale it, Jacob and Alejandro wait as long as they can for ripeness and maximum oil content.
“We know when it is ready to harvest,” says Bergad. “It’s like looking at a banana tree! The hairs start to turn color. In Vermont we only have so much time until winter comes. It has to get all the growth it needs, once planted out, in about 100 days. That is 1% growth per day. If it gets too cold it can set the plant back 5 to 7 days, which is hard to get back in yield. ”
“So much goes into raising these plants,” stresses Jacob. “It’s a labor of love. From the greenhouse to extraction of the oil to making the final product. We shoot for an efficiency of over 80%, which means capturing 80% or more of the oil in the plants we raise. We had about a 10% loss this year because of climate problems – flooding, and then when you think of extraction efficiencies it can fall to 80% or below. We’re always looking for ways to make it more scaleable, more efficient.”
One of the most trying aspects of raising hemp for Sunsoil is drying the crop.
“In year one we built our first drying building,” says Bergad. “In year two we built an exact replica of that building except we put in attic trusses to have more space. In year three we lifted the roof of the first building up to have room for our extraction equipment and built a third building around the side of it. Last year, our fourth season, we built yet another drying barn. Each building has been retrofitted and refurbished, already. There is a lot of construction necessary to dry and process the hemp.
“These are not like tobacco barns,” he insists, “with slats open to the outside air. These need preheated air, which makes it excellent for quickly drying the plants. We have huge fans in those buildings to move the air in for preheating and out to carry the moisture away. It has to be late enough in the season that the ambient air is cold and dry.
“We dry the hemp,” he concludes, “and keep the dried buds and leaves and some of the smaller branches for the extraction process.”
To extract the CBD oil from hemp Sunsoil uses a unique extraction method, called lipid extraction. Lipid extraction uses a lipid (fat or oil), along with heat, to extract the CBD. In the case of Sunsoil, that lipid is either MCT (medium-chain triglyceride) oil (for their tinctures) or organic coconut oil (for their capsules and salve).
Pure MCT oil is made in the lab by combining medium-chain triglycerides from coconut oil, palm or other oils. The lengths of medium- and long-chain triglycerides represent how many carbon molecules are attached. Medium is better than long because MCTs (6 to 8 carbon molecules) are digested more rapidly. Long chains (10 to 12 carbon molecules) take longer to metabolize and will get stored as fat in the process.
“We have 1500 gallon water tanks in the extraction room,” offers Alejandro. “They are part of the toasting process where we mix water and coconut oil, with the water providing a buffer for the process to prevent overheating. In these big tanks the product is being cooked and every drop of the oil is being squeezed out with hydraulic presses. (Photos were not allowed when I toured as some of the exact techniques were proprietary) The oil goes through filters to make sure it is pure.”
Bergad and Goldstein have developed their own process by adapting equipment available off-the-shelf in other industries, like brewing and fermentation, to their purposes. Some of the filters, for example, are manufactured for use with biodiesel and cooking oils.
“The extracted oil goes in barrels,” reveals Jacob. “Then it is tested for purity and CBD content. A barrel can contain oil from as many as 100 to 500 plants, but 300 to 400 is a common range.”
He notes the Sunsoil process fuses hemp with other oils in decarboxylation. They had to find the right temperatures and pressures to use in working with hemp.
Jacob says: “It looks high tech, but you move the material from one stainless tank to another with shovels!”
According to Alejandro there is oil from an average of 280 plants in each barrel. It takes 16 of those barrels to make a batch of product.
Being organic is one more thing they can to do improve quality, and it also goes along with the most efficient practices. If you think of feeding your soil, being holistic, even being cost effective, organic makes the most sense. It is a huge quality differentiator. In an industry which is unregulated, to show that you have gone through that process is a plus, too.
According to Bergad, the customers reaching out the most for CBD products are those dealing with anxiety, sleep issues and inflammation.
“We’re not allowed to make medical claims,” he reminds, “but we have done surveys of our users. Nationwide the three biggest groups who are buying CBDs are those dealing with anxiety, needing help for sleep, and for inflammation. Those are the things that most folks buy it for. Many also feel it relieves arthritic pain.”
Sunsoil is now sold in over 1000 stores nationwide, including 572 Vitamin Shoppe locations. For a company that started the year at 250 stores, that is rapid growth indeed!
Of course that kind of rapid growth takes significant money. As Alejandro puts it: “This is what happens when a small artisanal farm does it right at the right time. Now we are becoming a big farm. But we didn’t start with big money, at all. And we were profitable as a small operation, so we didn’t need capital investment. Investors came to us and we turned down some that weren’t right. The ones who we went with we met through a mutual friend.
The investment he is speaking of is one made in November 2018. Sunsoil received a $7 million infusion of capital from Raleigh, North Carolina-based One Better Ventures, a venture capital firm led by John Replogle, who had executive management history with Unilever, Burt’s Bees, and Seventh Generation. They made the investment to fuel scalability and the kind of growth that is happening now. Bergad says the duo accepted the money because they realized they would need such capital to get to the point where they could bring the cost of CBD down to a reasonable amount.
Currently, Sunsoil sells its CBD oil at a retail price of 5 cents per milligram. This compares favorably to an industry average of 8 to 14 cents.
“We raised capital,” Alejandro points out, “for the purpose of driving down the price of CBD, our own product, to increase accessibility. We’re trying to find increased efficiencies in the farming, processing, manufacturing, and distribution of the product. We don’t want to spend unnecessary marketing dollars for the company to be successful. We’d rather make a great product at a great price point and let folks come to us!”
“So we are building efficiencies into our profit margin now,” he continues, “so we can sustain it when the price drops. We really did find a better way to make CBD. We took an age old process that has been done on stovetops using butter to pull cannabinoids out of marijuana and we scaled that process. We took it to a level where we realized great efficiencies. Now we can come right out of the gate at a very low price point, more so than any of our competitors. And we’re offering a very unique product that we think is of a higher quality. It is a whole plant extract.”
He is talking about Sunsoil’s process to coat the whole plant with cocoanut oil and extract the cannabinoids that way. They had to figure out how to scale it, though, as they are in a different league from the folks who were doing in on the stovetop.
“Drying the crop is also critical for us,” Bergad adds. “It takes so much space to do it, and the space is expensive to build, we have to move the crop through the drying stage very quickly. We have over a hundred people on hand to break the plants down, once dry, into food grade bags and bring a new batch in. We fill the drying rooms with new plants every other day! We do 100 acres in two buildings. Those are 7-day weeks for us. It is incredibly labor and resource intensive.
“We have industrial fans,” he continues. “use lots of propane, design our air flow carefully. That is all critical to our success. A lot of this we have figured out on-site. There are not a lot of knowledgeable resources on this yet.
“We’re going to continue to work to find a way to make CBD more affordable,” he concludes. “We just did a 2¢ per milligram refill program. You bring your bottle and we refill it. That represents the lowest price anywhere in the country for a full spectrum hemp extract, manufactured right here in Vermont. We’re going to scale that out so other folks in the US can benefit from that, you won’t have to be local to get your refill.”
Sunsoil’s goal, according to the partners, is to see CBD on the shelf next to aspirin, for the same price. That won’t happen until they are more efficient than they are now, but they see paths to do that. They feel that the efficiencies are already pretty much there in the plant and extraction. But there is more to be gained scaling the work force and in production. “Tightening all the screws and bolts,” as Alejandro says. “We would rather make half as much money and serve twice as many people.”
No matter how efficient the operation is, however, CBD production in Vermont is costly.
“It is a labor intensive, and a resource intensive crop to grow well,” Bergad stresses, “as in high output per acre. For instance we heat our greenhouses to 72˚ in April. We need to grow our plants there in 4 inch pots and get them a good head start before they go in the ground. Another resource-intensive part is our drying process. We built brand new facilities for that from the ground up with no pressure-treated wood, no galvanized nails, everything is very clean. Those cost a lot of money. And we have to dry very fast because the crop has an expiration, we have a window when it is ready, when it is at its peak to when it starts to degrade.
“We dry the crop down to about 5% humidity,” he continues, “and then store it in food grade plastic bags. In order to do that we use something like ten million BTUs of energy in a 10,000 to 20,000 square foot space. We fill that space multiple times. Vermont air is more humid than Colorado, so we have to use more energy to get humidity out of the crop. In Colorado you can get away with tobacco barns for drying. Not Vermont. Your crop will start to mold.
“We’re not using chemicals or solvents to pull CBD out of the plant,” he concludes, “so we’re really conscious of keeping everything clean. Both our product and our processing facility are certified organic. We might not have the answers. We are a small company that has found a way to scale a high quality product. But we use a lot of hand methods. Maybe there is a way to use mechanized equipment and still get adequate product quality. That may be an economy or efficiency that gives us an advantage.”
One of the areas where Sunsoil has done its homework is in meeting government marketing regulations for sales as a supplement under the Food and Drug Act.
“We are building out a CTMP compliant processing operation,” Bergad states. “CTMP is a high compliance standard for dietary supplements. It is what big retailers look for. It involves testing and meticulous record keeping to insure the highest standard, as well as building design and redundancy. We already have CTMP compliant manufacturing.
“When you get into commercial viability,” he continues, “there is quite a responsibility on the part of the producer. We are investing literally millions and millions of dollars to be compliant with the quality standards – we test for mycotoxins and heavy metals, and others folks don’t. We own every single step of the supply chain and take responsibility for the product all the way along it.”
Jacob stresses this point. “We do a lot to make our process traceable – every bag of hemp plants, every barrel of oil, we know where it came from, how it was used, what was made from it. What field it came from, what greenhouse, when it was harvested. That is important in today’s market.”
When asked what they foresee in the future of hemp oil production, Bergad returns to a single word.
“When you think about hemp and the future of it,” he insists, “we are moving toward commoditization, as we have done with corn. Hemp is not a hard crop to farm. It is going to take a few years for the industry to get caught up agriculturally, but it will do so.
“When I started in Colorado,” he continues, “I saw hemp go the first year for over $1000 a pound! What was common was $40. This year I hear of people selling it for as low as $8. That’s dried biomass. But agricultural oversupply is a common phenomenon for a lucrative crop. It can happen fast. It is just supply and demand. Those vacuums get filled pretty quick. I think the US grew 8 times the amount of CBD it needed this year. On that side of the supply chain I think it is going to get more and more commoditized and most manufacturers contract for their hemp, whereas we grow our own.
I asked what was the future for small farmers in such a business. Is there any way they can make a living competing against corporate operations the size of Sunsoil or others? Could the small farmer raise hemp and sell it to them for a decent price? Alejandro was skeptical, and cited the reasons.
“In order for us to maintain quality standards,” he says, “if we do contract with small farmers in the future, depending on what our total footprint is, we would have to institute a division of our company which would be dedicated almost full time to that. I love the idea of partnering with other folks instead of just employing them. But when we look at the actual business model we have to be in a situation where we have some legs under us and then those relationships would be a plus. It’s too soon for us to just get into it. We would have to invest in greenhouses and drying facilities if they weren’t able to. And for our standards we’d have to go from scratch. And it is really expensive.
“We’re constantly filling our drying houses,” he explains. “We farm about 100 acres but can only fit about 5 acres of crops in our drying facilities. They are 20,000 square foot buildings. We only have two of them. We need a drying facility for about every 50 acres or so. We know how many greenhouses we need, and know what it costs for the labor. It is quite an investment. For us to partner with somebody it would have to be the right scenario.”
Perhaps hoping not to sound so pessimistic, Jacob offers: “It has been on our radar, though.”
“It has,” Bergad replies. “But in relationships with other farmers they will have to grow our cultivars so we can have consistent product. Plus our products are certified organic. We’d need certified organic biomass. We see regulation coming and want to be ahead of the curve.
“I wish there was more I could suggest for the small farmer,” he concludes. “If I were to start over again maybe I’d start selling seed, because there is a demand there. If you do something unique and well, you are going to stand out.”