With 10,000 Licenses Issued, California Reflects the Growing Power of Hemp

DENVER, July 16, 2019 /PRNewswire/ -- As hemp production increases, Californian legislators have extended the duration of thousands of cannabis cultivation licenses to support the state's thriving industry.

Sugarmade Inc. (OTCQB:SGMD) (SGMD Profile) is supporting many of these companies that have cultivation licenses by providing cultivation and extraction equipment. Canopy Growth Corporation (NYSE:CGC) (TSX:WEED), one of the biggest companies in the sector, is increasing its growing capacity while helping educate about medicines. Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON) is leaning into new technology, with new facilities for R&D and processing. Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) (Profile) has tapped into the demand for organic produce and is now expanding into global CBD market. GW Pharmaceuticals Plc (NASDAQ:GWPH) (OTC:GWPRF) is developing powerful new medicines, in which hemp could help tackle previously uncurable illnesses.

• California is one of the largest regions for cannabis and hemp cultivation.
• Recent legislative moves show that the state's politicians are hemp friendly.
• Demand for hemp and cannabidiol (CBD) continues to soar.
• Companies are responding with increased production, acquisitions and new technology.

To view an infographic of this editorial, click here.

The Land of Mass Licensing

The past year has seen substantial growth in the Californian hemp industry, and with that growth came challenges for the state's governing bodies. The state is home to one of the largest legalized recreational cannabis markets in the world, and Californian authorities have reportedly issued over 10,000 licenses to producers, processors and retailers involved in the cannabis industry. This includes those working with hemp, a nonpsychotropic form of cannabis, and CBD, a chemical derived from hemp.

The swift growth of the state's industry almost triggered a crisis this spring, as thousands of temporary licenses were set to expire before authorities had time to process permanent licenses. The state senate stepped in to extend the duration of temporary licenses and protect law-abiding business owners from a bureaucracy struggling to keep up with demand.

The legal move to extend the licenses may indicate the state's political attitude toward the industry and holds promise for companies working in California.

A Friendly Place to Work

For companies working with hemp and related products, California is possibly the most business-friendly place in the world to be based. The state is headquarters for a wide range of companies working in the sector, from producers and retailers to companies providing support services, such as Sugarmade Inc. (OTCQB:SGMD).

Based in Monrovia, California, Sugarmade develops brands and products with disruptive potential. Over the past few years, this strategy has led the company to develop a growing focus on hemp and the surrounding sector, a space filled with innovation, fast-developing new practices and promising potential.

Rather than being cultivator or retailer, however, Sugarmade is a supplier of vital materials to the hemp industry. The company sells hydroponic equipment and supplies needed for growing consistent, high-quality crops in secure, climate-controlled indoor facilities. SGMD is moving deeper into the market by extending its catalog to include extraction equipment, essential in the process of acquiring valuable CBD from hemp plants.

California is home to so many of these companies for a number of reasons. The state is one of the largest markets in the world by population for hemp and related products, with only Canada matching it in scale. In addition, California is one of the first areas to become friendly to the industry, passing groundbreaking legislation in the 1990s allowing the space to progress.

This attitude has been both supported and encouraged by a political establishment that appears to look favorably on the industry. The Californian senate, having seen thousands of new businesses such as Sugarmade spring up, is eager to nurture these entities for the jobs and wealth they bring to the state's economy. This general support is reflected in the government's decision to extend temporary licenses to prevent new businesses from faltering just as they had been established.

Staggering growth has caused challenges for the Californian authorities in providing licenses. The federal legalization of hemp in December added to interest in the industry and pressure on the licensing system. The state's responsiveness to problems within the system has shown how serious it is about hemp and creating a friendly environment for the likes of Sugarmade and its customer base.

The Hemp Revolution

The situation in California appears to reflect a much wider pattern in the hemp industry, across the United States and beyond.

Ten years ago, hemp was barely even mentioned in conversations about business. As a source of useful materials, its use had fallen out of fashion with the end of the age of sail, during which it had provided fibers for ropes and canvas. But then a shift came, as companies in the cannabis space looked for other options they could market. As a nonpsychoactive ingredient, CBD could be sold in markets where cannabis itself couldn't. And hemp offered a rich source of CBD without many of the complications surrounding the rest of cannabis.

Since then, demand for CBD has rocketed. The component is used in a wide range of products including cosmetics, health foods, and vaping liquids. Companies have emerged specifically to cater to the hemp market, and those companies have turned to the likes of Sugarmade for the equipment they need.

The popularity of CBD among consumers has also rocketed, leading to shortfalls in supply. The 2018 Farm Bill, which legalized the hemp trade at the federal level in the United States, will help with meeting this demand in the long term. But the bill is no magic bullet, and companies need time to gear up in the new commercial environment that has been created.

This gearing up has led to increased demand for cultivation equipment, creating shortages in that area. Cultivators have bought everything that Sugarmade can provide, as hydroponics companies see a boom in sales alongside the hemp companies they serve.

Dealing with Demand

Sugarmade has made a variety of moves — in California and beyond — to meet this growing demand.

Expansion is obviously critical to making the most of this opportunity, and the company has entered a period of serious growth in its sales, product lines and bottom line. As a critical link in the hemp supply chain, Sugarmade is not just in a position to grow, the company must grow in order to meet customer needs.

One of the key tactics in this expansion has been SGMD's use of acquisitions and agreements. The company acquired Sky Unlimited LLC and, through it, the AthenaUnited.com online sales operation, increasing its sales capacity. Sugarmade has also struck deals with companies such as Hempistry, BizRight Hydroponics and Plantation Corp, ensuring smooth supply chains and greater capacity to meet surging demand.

Adding new technology to its catalog has allowed Sugarmade to make better use of this moment. The company is moving to supply next-generation extraction machinery and develop artificial intelligence systems to monitor hemp crops. By providing its customers with the latest technology, Sugarmade may be better able to distinguish itself from its competitors and ensure the profitability of its customers, for its own long-term good.

Space for Growth

With customer demand firmly outstripping supply, the hemp sector is creating a space in which a wide range of businesses can flourish.

One of the most important is Canadian company Canopy Growth Corporation (NYSE:CGC) (TSX:WEED), which was the largest cannabis company in the world by market capitalization as of April this year. Like Sugarmade, Canopy Growth Corporation has taken big steps to continue expanding and claim a larger share of the hemp and related markets. The company has increased its production capacity through a mixture of acquisitions and ongoing work to increase its existing licensed production facilities. Acquisitions have also featured in its work further down the supply chain, such as acquiring hemp skin care company This Works.

Like Sugarmade, Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON) is looking to new technology to support its expansion. The company recently announced the creation of an R&D facility, which has the potential to provide new products for a curious and often experimental customer base. To support such innovations, the company is also acquiring a state-of-the-art fermentation and manufacturing facility, which will allow Cronos to produce cultured cannabinoids.

Green Organic Dutchman (OTCQX:TGODF)(TSX:TGOD) has focused on a specific sector of the customer base, setting itself up as a source of organic and sustainably grown products. The creation of two new production facilities will allow the company to tap into rising demand, increasing its growing capacity from 156,000kg to 202,500kg. And with the growing popularity of hemp-CBD products, the company is setting up a global strategic hemp division to give it greater global  reach in an important part of the sector.

GW Pharmaceuticals Plc (NASDAQ:GWPH) (OTC:GWPRF) is applying the power of cannabidiol to tackle otherwise untreatable diseases. The company's 20 years of experience in the sector is currently being applied to seizures associated with tubular sclerosis complex, for which one of its drugs recently underwent successful clinical trials. GW has become a world leader in cannabinoid medicines, whose value is increasingly widely recognized.

With hemp and related sectors growing so fast, California's senators appear to have made a wise decision to smooth the way for local cultivators. Both customers and businesses in the state and beyond may see the benefits.

For more information about Sugarmade, please visit Sugarmade Inc. (OTCQB:SGMD).

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