Shroom Boom Offers New Possibilities for Medicine and Functional Foods

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Mar 04, 2020, 08:30 ET

NEW YORK, March 4, 2020 /PRNewswire/ -- The widening legalization of products based on psychogenic mushrooms looks set to create a whole new strand of functional foods and medicines.

The widening legalization of psilocybin, an active ingredient in mushrooms, is allowing producers to create new foods, drinks and medicines.
Major research institutions and investors are throwing their weight behind this growing trend.
Psilocybin has potential as both a mental health medicine and an ingredient in wellness foods and drinks.

Canadian company Champignon Brands Inc. (CSE:SHRM) (Profile) is one of the first to provide such products and is securing listings in the United States and Germany as it sets out to expand its product line. Such products could soon be on shelves alongside the likes of Beyond Meat Inc. (NASDAQ:BYND), which provides healthy, plant-based alternatives to traditional foods and drinks. To do this, mushroom companies will need to reach retailers such as United Natural Foods Inc. (NYSE:UNFI) and Amazon.com Inc. (NASDAQ: AMZN) subsidiary Whole Foods Market, which cater to environment- and health-conscious customers. In addition, these companies will also be looking to get social eateries and cafes such as Starbucks Corporation (NASDAQ:SBUX) to add to their offerings.

To view an infographic of this editorial, click here.

Make Room for Mushrooms

With the legalization of medical cannabis in many jurisdictions, regulators and businesses are re-examining which natural drugs are legally available for consumers. Mushrooms, with their powerful ability to affect brain chemistry, look set to become the next major legalization drive in America.

Businesses and investors are moving to make the most of this space. Like the mushrooms themselves, new companies are springing up out of fertile ground. These companies aim to provide customers with the health benefits that mushrooms can bring, while providing investors with opportunities in this nascent market.

The 'Shroom Boom'

Among these companies is Champignon Brands Inc. (CSE:SHRM), one of the only public companies focused entirely on a mushroom-to-market strategy. Champignon offers consumer packaged goods (CPGs), currently in the form of a range of teas, that make use of functional mushrooms and, as such, provides an opportunity for entry-level exposure to the burgeoning boom in mushroom products.

Champignon is committed to cultivating and distributing artisanal medical mushrooms and the CPGs derived from those mushrooms. As a legal market, this is new territory, and Champignon is a young company. The company recently successfully completed its initial public offering of more than 18 million common shares at a price of $0.15 per share for total gross proceeds of more than $2.8 million. The company's common shares were listed on the Canadian Securities Exchange beginning February 27, 2020. After being halted pending completion of the IPO, the common shares resumed trading on the CSE on March 2, 2020, under the symbol SHRM. The company is also in the process of securing a listing in Germany as it seeks to establish an early presence in both North America and Europe.

This broad approach looks to be a savvy strategy for this emerging presence in the functional mushroom sector. While the legal cannabis market has become most firmly established in North America, it is now expanding into other parts of the world, and companies are rushing to broaden their presence to keep up. Laying the global groundwork now should position Champignon to make the most of the high-profile American market while also reaching other high-value, health-conscious consumers around the world.

Legalizing a Powerful New Medicine

Key to the work of Champignon and other functional mushroom companies is psilocybin. A naturally occurring chemical, psilocybin can be found in hundreds of types of mushrooms, providing 'shrooms with their psychedelic qualities. While the power of psilocybin has been well-recognized for decades, its medical potential is now being fully explored and unlocked.

This mushroom momentum is driven by growing acceptance from medical professionals and institutions. Thomas Insel, former director of the U.S. National Institute of Mental Health, and Paul Summergrad, former head of the American Psychiatric Association, are both on the board of advisers for Compass Pathways, a leading psilocybin company. Johns Hopkins, one of America's most prestigious research universities, has established a new psychedelic research center focused on examining the potential of such chemicals, largely funded through the efforts of angel investor Tim Ferriss.

Ferriss isn't the only high-profile investor to have taken an interest in the tasty fungi. Bruce Linton and Kevin O'Leary are seed investors in MindMed, while Peter Thiel has invested in Compass Pathways. Wild as it might seem to outsiders, Champignon is working in a field with growing scientific and financial credibility.

The market available to companies such as Champignon has long been limited by laws restricting the use and sale of psilocybin mushrooms and their derivatives. Now those laws are starting to change.

Denver, Oakland, and most recently Santa Cruz are among the places that have already decriminalized psilocybin. Some of the same people who championed those changes are now involved in wider efforts, with campaigns for decriminalization in areas such as Oregon and Iowa. In November 2019, Decriminalize California teamed up with the Beckley Foundation to replicate the success of decriminalization in Oakland throughout the state of California. Vermont, Michigan and Washington have also commenced movements toward legalization.

The case for legalizing shrooms isn't the same as for cannabis. While some of the same arguments about health benefits and personal choice are fielded, psilocybin legalization doesn't involve the huge potential tax benefits or the massive implications for the criminal justice system. Companies such as Champignon aren't looking to tap into the same huge painkilling market as THC and CBD products. Instead, these companies occupy a smaller but still significant niche focusing on supporting mental health, where it is believed that psilocybin could create new treatments and potentially radically improve the lives of sufferers.

Support for legalization isn't clearly divided along party lines. Peter Thiel is a Trump ally while a recent attempt to make research easier was pushed by radical Democrat Alexandria Ocasio-Cortez. Like hemp farming, this is an industry with potential to reach across the political divide.

Building a Strategy Around Medicine

As psilocybin legalization grows, so has R&D, with studies into how to refine and synthesize the chemical taking place alongside product development. This research element is a critical part of Champignon's strategy.

Any company developing products within the health and wellness sector needs a medicinal IP strategy in order to provide the unique products and medical advances that make a medical company stand out — both to customers and investors. Champignon's plan is to use laboratory experiments to develop a way of biosynthesizing psilocybin, with the aim of reaching this milestone marker within the first three months of experiments. This would allow optimized and scaled production of pharmaceutical grade psilocybin.

With efficient, large-scale production, the company will be able to deploy its products in clinical settings, thus staking a serious claim in the medical market.

Like cannabis, psilocybin products have value not just in the clinical space but also in the retail one. Functional foods and beverages are growing in popularity thanks to cannabis and CBD, and psilocybin provides an opportunity to diversify this $200 billion sector with new and distinctive products.

Functional drinks such as Champignon's Vitality Superteas and its upcoming mushroom-infused cold brew coffee are a natural entry point for psilocybin into this sector. Both of these one-of-a-kind product offerings will reach a broader market and raise awareness of mushrooms' emerging potential. Champignon plans to use a mix of national brick-and-mortar distribution, e-commerce and online influencer marketing to raise the profile of its products and build a strong, loyal customer base.

Developing New Plant Products

Many companies are working on innovative ways to use plants for greater health, among them Beyond Meat Inc. (NASDAQ:BYND). The company's meat substitutes are designed not just to reduce CO2 emissions, thereby protecting the planet, but also to provide consumers with healthier food options. As with functional beverages, the company's innovation has taken a lot of R&D work to produce, creating products that are strikingly similar to meat but made entirely out of plant materials.

To reach the large audiences they seek, companies such as Beyond Meat and Champignon need to get onto the shelves of retailers such as United Natural Foods Inc. (NYSE:UNFI). As a food wholesaler with a focus on health and sustainability, United Natural Foods has repeatedly been recognized as a top green provider. This distinction draws the sort of consumer base that is interested in plant-based wellness and food products.

Amazon.com Inc. (NASDAQ: AMZN) has an important place in this sector, not just because of its status as the world's default online retailer but because of its purchase of Whole Foods Market. Functional foods fit naturally with the organic and whole foods market, and are often found on the same shelves. Whole Foods Market stocks functional foods, and its growing network of shops means that the demand for healthier foods is growing

Functional foods and beverages also have a place in cafes, and the likes of Starbucks Corporation (NASDAQ:SBUX) may soon be serving functional beverages alongside the global staple that is coffee. Starbucks is constantly innovating, developing new drinks to provide variety for its customers. Champignon's collaboration with Drip Coffee on a mushroom-infused cold brew coffee is just one example of how these products can be combined.

With legalization spreading and investors providing fresh funding, the 'shroom boom is set to add another strand to the rich whole-foods and wellness sector.

For more information about Champignon Brands Inc., please visit Champignon Brands Inc. (CSE: SHRM).

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