Lilu’s Garden, a Kentucky-based CBD producer, is scaling to become a dominant force in the rapidly growing global market for hemp-derived products.
The company’s groundbreaking extraction technology gives it the ability to process roughly 300,000 pounds of hemp in a single day. Over the course of the 2019 harvest, Lilu’s Garden expects to process 50 million pounds of hemp and produce about 1 million kilograms of CBD isolate.
“Depending on potency, we can get out something in the neighborhood of 20,000 kilos per day if we were at full capacity,” Lilu’s Garden founder and CEO Tom Guel says.
Lilu’s Garden Thomas Guel (right) and Greg Capolino.
Unlike most hemp extractors that use alcohol as a solvent, Lilu’s Garden uses water. The proprietary extraction method allows the company to process wet material, eliminating the need for typical post-harvest methods that require processing facilities to dry and shuck the plants. It also increases efficiency because it doesn’t leave residual chemicals or require winterization and distillation, Guel says.
“There’s no reason to remove water from a plant that is going back into water,” he says. “We can go in basically three steps right to isolation of one molecule. It’s incredibly efficient. I think the main point of all of this is that we are scaled right now to handle the Fortune 500s that are looking at this for a real supply of consistent material.”
Guel says the company heavily invested in research and development, looking for new ways to increase its production practices to an industrial scale. Without water-based extraction, the company couldn’t scale to meet the ever-growing demand for CBD.
The company works with hemp farmers across the nation and Guel estimates 60% of its 2019 production is from toll processing.
“You can easily make $50,000 (per acre of hemp at 12% potency),” Guel says. “Farmers who are switching from corn or soy, or some other material can bring their crop to us and, pretty much within a one-stop-shop, turn it into a much more valuable derivative and sell that material without any extra effort on their part. No matter how you look at it, it’s a tremendously valuable crop and it’s exploding all over the place.”
Lilu’s Garden already has contracts in place to process roughly 60,000 acres of hemp in 2019.
With the passage of the 2018 Farm Bill, Guel expects more and more farmers to plant hemp as an alternative to less lucrative crops.
“We’re definitely pulling material from all over the country,” Guel says. “There are some benefits of having geographic separation. If we have bad weather in one state, hopefully we don’t have bad weather in all the different areas.”
That production is incredibly important as major beverage and cosmetics companies step into the realm of CBD-infused products.
“You can’t launch a global product without a solid supply; there aren’t that many big-scale processing operations that can supply that type of customer,” Guel says. “Those customers are going to pay for the luxury of being able to get the material in bulk at the scale they need.”
In December 2018, Lilu’s Garden moved its headquarters from Colorado to a 175,000-square-foot processing plant in Owenton, Kentucky — an ideal location for industrial-scale processing and distribution.
Kentucky was historically the epicenter of hemp production in the U.S. In 1889, Kentucky produced approximately 90% of the nation’s hemp, but hemp production declined steadily in the 20th century as the industry became entangled in anti-marijuana propaganda and eventually outlawed in the 1930s.
“Kentucky does have a long history of hemp farming,” Guel says. “Some of the farmers we’re working with still have equipment from their grandparents for hemp planting and harvesting from 80 years ago.”
As federal restrictions loosened, Kentucky farmers returned to their roots. In 2018, Kentucky was the fourth-largest hemp producer in the nation with farms growing roughly 6,700 acres of hemp, more double the previous year, according to Vote Hemp’s 2018 crop report.
Guel says Kentucky has once again become the central hub for hemp manufacturing in the U.S. with favorable regulations where hemp companies like Lilu’s Garden can grow alongside the storied farms of the industry’s past.
“The Midwest is where large-scale agriculture happens,” Guel says. “Kentucky is leading the charge and has led the charge for the legalization of hemp.”