Ascent Industries (ASNT.C) to enter U.S. hemp market, continues expansion

Ascent Industries (ASNT.C) is preparing to enter the hemp and CBD markets in the U.S.

“The hemp-derived CBD market is very broad,” said Reid Parr, Ascent’s COO. Parr said he thinks expanding into hemp immediately is vital as his company will have first-mover advantage.

Parr said Ascent plans to exploit this “next major opportunity” expected in the hemp markets to build up and expand its distribution of CBD products in the U.S. and beyond. “Major retailers have not gotten involved to this point,” he said.

Thirty Eight Hemp will be doing Ascent’s heavy-lifting stateside. The wholly-owned subsidiary will be working with Kentucky-based AgTech Scientific. Parr is also a director at AgTech.

Read: Ascent Industries (ASNT.C) uses science to enhance quality, boost production

AgTech is an ​​​industrial hemp farming, processing, and formulation company that bills itself as high-tech hemp.

Parr said the “high quality, cannabinoid rich” product will be harvested from outdoor operations which extend across more than 1,000 acres of farmland.

“The are many reasons for this strategic relationship,” Parr said. “But the main reason is that compared to their competitors, AgTech has true vertical integration.”

Parr said that AgTech has world-class genetics, large-scale outdoor farming, indoor high-tech greenhouses, and “large-scale, GMP compliant, state-of-the-art extraction and product manufacturing.”

Details, Details, Details

Here are some details about Ascent’s new relationship with AgTech, as provided by Ascent:

1. Ascent expects to have a 10 percent equity interest in AgTech in the near term as previously announced and AgTech is expected to have an equity interest in Ascent, thereby aligning the interests of the parties;
2. Under the previously announced supply agreement between Thirty-Eight Hemp and AgTech, Thirty Eight Hemp may obtain up to 25 percent of AgTech’s high quality hemp biomass production containing greater than 10 percent CBD, providing a source of high quality input material for its CBD-products;
3. AgTech holds both a Processor/Handler License and a Grower License from the Kentucky Department of Agriculture hemp program and intends to scale their partnership with Kentucky farmers for large-scale hemp production, allowing Ascent access to larger amounts of input material in the future as needed;
4. Ascent’s wholly owned operating subsidiaries in Oregon and Nevada are legally permitted to handle hemp and are presently selling CBD-based products in those jurisdictions; which Ascent can leverage in its expansion plans;
5. Ascent expects to produce a variety of CBD-based products and distribute them through various channels, including state to state commerce of its hemp derived CBD materials, placing products into mass market retailers and an online e-commerce portal for national distribution.

Rules, Rules, Rules

As the U.S. creeps towards full passage of the Hemp Farming Act of 2018 (HFA), Parr said he sees enormous opportunity. The HFA would remove hemp, cannabis with less than 0.3% THC content from the Schedule I Controlled Substances list.

He adds that when HFA passes—it’s on to the last stage now—hemp will become an ordinary agricultural commodity and will provide Thirty Eight Hemp with a big opportunity to bounce into the market at full speed.

Earlier this year, the Brightfield Group released a report on the U.S. hemp-derived CBD market. It notes the market is worth $591 million and that it is growing faster than cannabis. Because of the shifting political winds in the U.S., Brightfield predicts sales will be upwards of $22 billion by 2022.

Expansion

Beginning in 2018, Ascent’s production capacity was limited to 50,000 square feet. But over the course of the year, they’ve sauntered into the six-figure range. When expansion’s complete, Ascent’s cultivation and production capacity space will be up to 710,000 square feet.

The bulk of new cultivation space will be on 25 acres in Pitt Meadows, B.C., Canada.

Here’s a breakdown of Ascent’s footprint:

Maple Ridge, BC
Agrima Botanicals – 25,000 sq. ft.
Indoor Cultivation Facility

Pitt Meadows, BC
Agrima Labs – 40,000 sq. ft.
Production and processing facility

Pitt Meadows, BC
Agrima Meadows – 600,000 sq. ft.
Automated cultivation greenhouse

Portland, OR
Sweet Oregon – 7,000 sq. ft.
Production and processing facility

Las Vegas, NV
Sweet Nevada – 38,000 sq.ft.
Cultivation, production and processing facility

More

And there’s even more. Parr said Ascent is expanding to the Bay Area and hopes their new facility in Oakland will operational by the later summer of 2019.

Oakland will add another 70,000 square feet to Ascent’s production scope, bringing their total square footage up to 780,000.

That’s a production capacity space the size of 13.5 football fields.

— with files from Ethan Reyes.

Full disclosure: Ascent Industries is an Equity Guru marketing client.