How To Start An Ethical, Sustainable & Profitable Hemp Business

Transcription

1 HowToStartAn Ethical, Sustainable& ProfitableHemp Business Bonus Transcript InterviewWith HempreneurDon Wirtshafter 2011PaulBenhaimandDionnePayn Page1of10

2 TRANSCRIPT Dionne Payn: Hi everybody and welcome to the How to Start a Hemp Business Course. I m Dionne Payn and in this interview I ll be talking with Don Wirtshafter who sbeeninvolvedinthehempindustryforanumberofyears.nowdonhelpedto creategwpharmaceuticalsacompanythat sleadinginthefieldofthedevelopment of cannabis based pharmaceuticals. Don is also a board member of the Hemp Oil CanadaandalsotheHempIndustriesAssociation.SowelcomeDon. Don Wirtshafter: Oh thank you. I guess my last 2 qualifications there are former qualifications. I am no longer a Director of Hemp Oil Canada though I remain a shareholder. And the Hemp Industries Association has new Directors as well. I am quitebusythoughwithmylawofficeandseveraldifferentventures. DionnePayn:NowDonwhatmotivatedyouinitiallytobecomeinvolvedinhemp? Don Wirtshafter:WellIwasasmalltownattorneyfeelingthatIwasgettingsome temporaryvictoriesbutpermanentdefeatsintheenvironmentaljusticeandcriminal justice cases that I had come through my office. Felt like with the minimum mandatorysentencescomingonandriddingjudgesofdiscretionsandsentenceina casethattherewasnoevidenceleftfortheattorneytofightcriminallawthatway. SoinmydiscouragementIcameupwiththeideaoftheOhioHemperywhichwas oneofthepioneerhempbusinesseshereintheunitedstates.westartedin1990, started selling hemp paper and twine and rope and things that we could find available from third world sources. We started importing hemp seeds, with Carol Millerwroteahempseedcookbook,thefirstofitskindandstartedpromotinghemp for foods. And got some investment and started promoting hemp in the natural foods industry, going to food shows, started promoting hemp in the cloth and clothingindustrybygoingtosomeoftheirshowsandgoingtoenvironmentalshows andpromotingindustrialhemp.itcaughtonafter3years,therewere2or3years whereitwasverylonely,weweretheonlyhempstersthereandthenallofasudden there dbe5or6hempstersthere. Andwesurvivedwelluntilthegovernmentstartedonourcasein1998.Atthatpoint they outlawed the importation of hemp seeds into the country and they shut us down pretty quickly at that point. We moved the oil press up to Canada, became part of Hemp Oil Canada and that is now still the leading company producing industrialhempproductsintheworldrightnowintermsofvolume.soit sbeena crazylongroadfightingthegovernmentthewholeway. In1998theycutofftheimportofhempseeds,in2001theymadeanythingthathad todowithhempfoodsillegalintheunitedstates.andittooka3or4yearbattle withthehempstersunitingforustofightthedrugenforcementadministrationand 2011PaulBenhaimandDionnePayn Page2of10

3 get the Ninth Circuit Court of Appeals to say that the Drug Enforcement Administrationhadnojurisdictionoverhempforfood.Andwiththatvictoryinhand thehempfoodsindustryhastakenoffveryquicklyandisdoingverywell.mostof thisisacanadianresourcenowwe vegivenupthisoneintheunitedstates. Dionne Payn: So Don what are your thoughts about how the hemp industry is movingonaglobalscale?doyouhavehighhopesforit? Don Wirtshafter: Oh of course. Everywhere else in the world except the United States its seems that the handcuffs are off and that people are able to produce industrial hemp crops and create the final products from them and the world is doing quite well with industrial hemp. Canada has recently decided to invest large sums of money in industrial hemp agriculture because they see the growth of this industryisdoingnothingbuthelpingtheirlocalfarmersandhelpingindustriesacross Canada create employment. The United States still has its head in the sand is not catchinguponthisstuffatall.hempisbecomingmoreandmoreavailablearound theworldbutinthiscountryit sbecomingharderandhardertoget. ThebiggestriseinthehempindustryisinthebuildingproductsandthisiswhereI see the biggest growth over the next 5 or 10 years. As other building products fall intoshortagesthereisgoingtobeanincreaseddemandforitincludinghempinto concrete mixes and wood substitutes. And hemp leads itself very well to these applications, its easy and inexpensive to produce and actually works better in buildingmaterialsthanmanyofourconventionalmaterials.soyou regoingtoseea lot more hemp houses and hemp warehouses and hemp commercial buildings comingoninthecomingyears,it sreallyexcitingtosee. Hempfoodswillcontinuetogrowaspeople sawarenessofwhathempcandofor yournutrition,itrises.alreadyhealthfoodstorescarrymaybeadozenor2dozen differenthempproductsbutyou regoingtoseetheseproductshitthemainstream stores, your big box stores are going to have to carry hemp to keep up with consumerdemandherethatisexcitingtoo. Hemp clothes are limited in that there are only a few limited production facilities around the world, nobody has come up with the next generation machinery to effectivelyprocessindustrialhemp,it sagreatarea.somebodyisgoingtocreatethe next cotton gin out of whatever to harvest industrial hemp. I thought one of your colleaguesadrianfrancisclarkeisaheadofeverybodyintheworldonthis,creating methods of green decorticating so you re processing the plant directly in the field notallowingittodryandstickittogether.ifyouprocesstheplantimmediatelyyou canseparatethefibresveryquickly,ifyoucutitanddryitandletitsitthereinthe fieldyou regluingallthefibrestogetherandittakesalotofde gummingandalotof work to get these fibres apart. So that s a very exciting development that hasn t reachedcommercialscaleyet,you renotseeingitaffectanindustrybutwhenthat happenswe regoingtostartseeingyourt shirtsandyourfineclothingbeingmade outofindustrialhempfibre. 2011PaulBenhaimandDionnePayn Page3of10

4 Dionne Payn: Don what s your involvement in the industrial hemp industry at the momentorisitconfinedtoyourlawpractice? DonWirtshafter:YesasanattorneyIhavehelpedseveraldifferentindustrialhemp entrantsgetstarted.iactasaconsultanttocompaniesaroundtheworldwhowish tomarkethereintheunitedstatesorwishtocreatenewprocesses.ihaveawide varietyofissuesthatwefacehereatthislawofficeandindustrialhempinthelast couple of years has fallen in to second or third place category as I take on other clients that are needing my help. It s unfortunate and someday I probably will get back into it because it is my first love. But I would admit right now to be very distracted. DionnePayn:That sfairenough.anddonwhatareyourthoughtsonwhentheus willjointhepartyandlegalisethegrowingofindustrialhemp? DonWirtshafter:OhIthinkwehavetohitrockbottom,Ithinkthattherevolution that we ve been looking for here is going to have to hit pretty hard before these politicianstakealookatindustrialhemp,thiswillcomefromscarcityandfearrather thanapragmaticmovetotrytohelpourindustries.politiciansarejusttooafraidof thissubjecttohelpusatallitseemsandsousamericanentrepreneurswehaveto sitonourhandsandwatchtheworldgoby.itisn taveryfunpositiontobein. DionnePayn:NowtherewerehighhopesforPresidentObamamighttakethelead onthis.areyounotthatconfident? DonWirtshafter:No,IwasconfidentinournewPresident,Ithoughtthathewould have more of a backbone, I just don t see it happening, it feels like everybody in Washington already is running for cover and this administration is just 2 years old nowandnobodyisgoingtodoanythinginthenext2yearscausethey retooscared ofthiselectioncomingup2fullyearsfromnow.sonoidon tfeelveryoptimistic,i don tfeelwehaveachampioninwashingtonotherthanronpaulorbarneyfrank whoaremarginalisedinthecurrentpolitics.idon tseeithappeninginthenext3 4 5yearsandbythetimeitdoeshappenitfeelslikeitjustgoingtobetoolate.The restoftheworldwillcertainlyhavethejumponus. Dionne Payn: Would you recommend that somebody in the US start a hemp businessandifsowhy,ifnot,whatwouldyourecommendtheydoinstead? DonWirtshafter:OhwellifweweredirectingthistowardsUSentrepreneursthere aremanythingsthatstillcanbedone,justcausewecan tgrowtheplantherethere are many fashion companies coming on, there are some hemp building companies comingon,therearecertainlyalotofhempfoodcompaniescomingon.verylittle to nothing restricts the importation of industrial hemp products grown in other countriesintotheunitedstates.andpeopleareevenfindingiteconomicaltobring 2011PaulBenhaimandDionnePayn Page4of10

5 inyarnfromchinaanddotheweavinghere.t shirtsandfineclothingisagainbeing madeintheunitedstatesoutoftheimportedhempmaterials. The same goes for building materials, truckloads of hurd which is the pith of the hempstalk,truckloadsofthatarecomingoutofcanada,theyarebeingcombined intobuildingmaterialshereintheunitedstatesrightnow,that sgoingtoexpandfor sure. There s not a lot that can t be done, it s the farming and the sourcing of the rawmaterialsthatcan tbedoneintheunitedstates.andentrepreneurscangiveup forthispoint yearsfromnowwhenwefinallywakeupandrealisethatthisis a resource and not a problem and companies will be well geared up to take advantageofthisnewbountyofhempthatwe llhaveavailableinthiscountrywhen wefinallygetittogether. DionnePayn:Andwhatareyourthoughtsabout wellforexamplealotofpeople havethenegativeimageofhemp, ha,ha,snigger,sniggeritsrelatedtomarijuana, howdoyousuggestthatweovercomethat? Don Wirtshafter: Well we ve been working on that for 20 years and we ve been quitesuccessful.peopledounderstandthathempisquitedifferentfrommarijuana and few people use those words interchangeably any more. We realise that the word hemp hadn t had its image blown like marijuana and people now know, 20 years later, now know about industrial hemp and I think we have an 80 85% penetrationofthemarketthatpeopledogetitandpeopledogetthatwecangrow industrialhempincountrieslikecanadaandthattheirpoliceareveryeasilyableto distinguishindustrialhempfrommarijuanaandthatindeedin13yearsofgrowing industrialhempincanada,therehaven tbeenembarrassments,therehaven tbeen noted instances of kids raiding industrial hemp fields trying to get drugs or there haven t been exposures of people selling industrial hemp on the streets as a drug. This is not marijuana, it can t be used as marijuana and there s no reason for our lawstoconfuseitwithmarijuana. DionnePayn:Sowhatbenefitsexistforhempbusinessowners? Don Wirtshafter: Well listen first of all you ve got to be an entrepreneur like everybodyelse.sellinghempisonlyalittleeasierandinsomewayswayharderthan any other commodity, any other thing that an entrepreneur would do. So yes you havetheadvantageofhemphavingsomesexappeal,youhavesomeadvantageof hempbeingnewandindemandandfashionable.butotherthanthatyouhaveall therequirementstorunningabusinessandthisiswhaticontinuallyhavetostress tomyclientsis,boyiwouldmuchpreferthatpeoplewithsomebusinessexperience startthesehempbusinesses.i vewatchedatleast10,000businessesstartupinthe wake of my actions and I would feel worse about not being that successful in my ownbusinesswithallthegovernmentinterferenceifi dseensomeofthese10,000 peoplefollowingbehindmedoingverywell. 2011PaulBenhaimandDionnePayn Page5of10

6 But this is such a brand new industry and so many people have entered into it without any experience in business that there have been a lot of failures and very few successes to this point. Although that s changing and this seems to be a good timetojumpin.ihopeiansweredyourquestionthere. Dionne Payn: Yeah. Now it s often quoted that there s 25,000 different products thatyoucanmakefromhemp.ifsomebodyisnewtothehempindustryhowwould theychoosefromjustsuchawidevarietyofoptions? DonWirtshafter:WellIwouldsaycreativelyyouhavetocomeupwithsomething new, something different than others. Hopefully you can come up with an entrepreneurialwayofkeeping1600imitatorsfromfollowingyourfootstepswithin 3weekswhichseemstobethecaseformanybusinessstartups.Theimitationrate nowadays is ferocious. The 25,000 number came from a popular science article in 1938 and since then consumerism has taken off exponentially. And so I would say thesedaysthere satleast125,000productsthatcanbemadefromhemp.there s somuchmoreavailableinthestores. Peopleneedtocomeupwithuniquenamesanduniquebrandingandyou repushing yourbrandasmuchasyouareyourproductandit sahardroughworldoutthere andyouhavetobecreativeinthewaythatyoupromoteyourselves.andadvertising is very expensive but guerrilla marketing can make it very inexpensive. And some people are doing great at getting their names out there and becoming national brandsusinghemp.ithinknutivaisagreatexample. DionnePayn:Anybodywho sgoingtobelisteningtothisinterviewandwhodoesn t knowaboutthestoryofnutivacouldyougivethatinbrief? Don Wirtshafter: Nutiva was John W. Roulac starting off in 1993 or 1994 and he smartlycreatedgoodbranding,nutivaandstartedsellinghempproteinpowderand toastedhempseedsandeventuallyoilandibelievethathe sgota12milliondollara yearbusinessatthispointandrisingquickly.thisiswhereyouwanttobe5 10years afteryoustartup.thereareothers,manyotherexamplesicouldgiveyouofhemp brandsthatarehittingmainstreamatthispointandatthatpointtheybecomevery valuable, more valuable than their sales numbers would show because its very difficult to get the recognition that some of these companies are achieving at this point. Dionne Payn: And Don if you had to start from the beginning, where would you start? DonWirtshafter:WherewouldIgothesedays?IthinkIwouldcomeupwithahemp buildingmaterialsomethingthatcouldbeputtogetherveryquickly.ihaveideasin thisdirection,justnotimetocarrythemout.idon tthinkthatiwouldstartbytrying todowhatidid20yearsago.20yearsagoitwasimportanttoshowtheversatility ofhemp. 2011PaulBenhaimandDionnePayn Page6of10

7 SowhenwestartedoutIcreatedhemppaper,twine,ropeproductsandwegotinto clothing and books and body care products and it left me spread out over 7 or 8 differentindustriesandicouldn tconcentrateonanyoneofthem.sooveraperiod ofyearsiwatchedpeoplepickoffeachoneoftheseproductareasandconcentrate onitanddoverywellwithit. SoIthinkoneofthelessonsisnottryingtodotoomuchthatin whenour cataloguewasgettinggoingprettywellaheadtocreatecompetitorstohavestuffin the catalogue I couldn t do everything myself, it was already way too spread out. And it really helped launch the industry, the fact that there was this national cataloguewherealltheseproductscouldbesold.idon tthinki ddothatagain.ifi weregoingtostartfromscratchitwouldbebeingveryspecificabouttheproducts that we were going for and very focussed on getting those products going to the exclusionofeverythingelse. DionnePayn:Focusthat sagreatthing. DonWirtshafter:YeahthefirsttimeIdidit,itfeltveryscattered.OnedayIwouldbe doingafoodshowandthenthenextweekthenwewouldbedoingafashionfabric showandnotonlydiditnotgetyouanytimetodogoodfollowupsbutitreallykept usscattered,weweren tabletoreallybetheleaderatanyonemarketbecausewe weretryingtobetheleaderin10atonce. Dionne Payn: Yeah that s good advice, just stick to one thing and be very good at that. And then maybe from there you can branch out and try something else but definitelybeingthekingofonehillinthefirstplaceisthebestwaytostartithink. DonWirtshafter:YupIdon tknowanyotherwaytodoit.nowifeellikeeverybody who s tried to bite off too much has failed and now we re down to hemp clothing companies and hemp food companies and hemp building material companies but nobodyreallyouttheresuccessfullytryingtomergethemalltogetherintoahemp company. DionnePayn:Nowonthatsubject,IspokewithBrucePerlowintheotherdayofthe HempNetworkandthatsoundsverymuchlikethemodelthatthey retryingtodo. They re trying to bring everything to make it more like a one stop shop, but not tryingtodoitallthemselves,they rebringinginpeoplethathavethosecapabilities aswellandthat sgoingthroughthewholenetworkmarketingmodel. Don Wirtshafter: You know my problem with the network marketing model for hempisthatatthispoint, causewearedealingwithcommoditiesonlyavailablehalf wayroundtheworld,thepricesarehigh.andnetworkmarketingdependsonvery high margins. And so while I love the one on one salesmanship that you get from network marketing I worry about the ability to pay all these different levels of commissions that network marketing imposes and wonder how expensive that 2011PaulBenhaimandDionnePayn Page7of10

8 bottleofhempoilisgoingtobebythetimeitsmarkedupandupandupandupto thegreatestlevelsofthenetworkbeforeitgetstotheconsumer. Butnetworkmarketingisagreatwaytosellhempbecauseitiswordofmouththing, itdoestakeoneononesalesmanshipandthat showwe vegottenthisfarnobody hasspent10centsonreallyadvertisinghemptothenormalmedia,itsallbeenone onone.ialwayssaythebestwaytogetyourparentstobecomehempadvocatesis to buy your mother a hemp shirt and all of a sudden she s going to be the one walking around telling all her friends about how long and strong and durable the materialis.andthat showwe vegrowninindustrythusfar. Dionne Payn: So Don what would you say were the 3 most important traits that anybodywhowantstostartahempbusinessshouldhave? Don Wirtshafter: Well in retrospect I m realising that the people who do the best, forinstanceatretailinghemparethepeoplewhohavehadretailexperiencebefore. It snoteasytojustopenuparetailstore.itseemseasy,ohwejusthavetogetthe doors open and get everything on the shelves. But the systems of keeping employees, of keeping things stocked, of keeping the bills paid, of keeping the finances going and all this stuff is a skill and somebody who has run a retail store previouslyisgoingtohavealotbetterchanceofrunningahempbusinessstore.and the same goes for all levels of manufacturing, distribution and everything. Hemp makesituniqueabusinessbutitsstillabusinessandmostoftherulesofrunninga businessremainthesame. Let s see you wanted 3 different things. I think that a real love for the product of courseisnecessaryandthatisanotherbigfactorofwhywe vebeensosuccessfulin spreading the word around the world. People really do love this product and it makesyouagoodsalespersonforit. AndIthinkthethirdthingisadequatefinancing.Somanypeoplethinkwowwecan getourstoreopen,wecanstocktheseshelvesfor$20,000wecanputthisallonour credit card and they re not thinking ahead about what it really is going to take in termsofcashflowinyourfirst4years,5yearsofbusinesstoreallygetitupand growing and such. And so I think the biggest mistake made by most everyone entering into the hemp business or about any business is lack of capital. This is a particularlyhardbusinesstoraisecapitalfor,it snotlikeyourlocalbanksaregoing to embrace you and throw money at you like they ve thrown money at everybody elseoverthelast15years. Like the raising money in itself is extremely hard these days but raising money for hempisevenharder.soiwouldreallyurgeanybodylookinginthisdirectiontotake agoodhardlookatwhatthey rereallygoingtoneedincapitalandnotgetstarted unlesstheyreallyhaveawayofgettingtothecapitallevelsthey regoingtoneedto keepthesebusinessesexpanding. 2011PaulBenhaimandDionnePayn Page8of10

9 Often times that s what happens, somebody starts a successful business and they get really popular, really fast but they can t keep up with the cash flow it takes to keep the flow going. This is especially true on our business where you re ordering thingshavingtopayforthemweeksormonthsinadvancebecausetheycomefrom overseasandallofasuddenyouhaveahitandthenyou reoutofaproductbecause yoursupplieroverseasismakingitforyoubutitsgoingtotake3weekstogetitover totheoceantoyoutothestatesanditgetsthroughcustomsandalltheseproblems thatmanyentrepreneursneverhavetoface.socapitalisreallywhathasbeenthe limitating factor for the expansion of the whole industry and it s what ends up costingmostofthesebusinessestheirlives. Dionne Payn: Don, do you know of any venture capitalists that specialise in hemp businessesoratleastfriendlytoanyonethatwantstostartahempbusiness? DonWirtshafter:WellIhadaclientwhowastryingtodothatforseveralyearsand heputconsiderablemoneyintohempventuresduringthetimethathempwasreally down when the federal government was outlawing hemp importation and nobody wouldinvestinhemp.therewasoneventurecapitalistouttheredoingthat,ican t sayhedidthatwell,manyofthesecompaniessurvivedbecauseofthisinvestment butthenturnedaroundandtriedtostabtheinvestorsintheback.thereareothers, I know of a group out of Vancouver that is buying hemp businesses in Canada successfully. And there have been some notable venture capital investments in recent years. But none of that is very publicised at this point, there s nobody out therepubliclyatthispointofferingtobetheangelinvestorortheventurecapitalist forthesegrowinghempbusinessesandneeditverybadly. DionnePayn:NowDonisthereanyotheradvicethatyouthinkwouldberelevantto somebodywhowantstostartahempbusiness? DonWirtshafter:Welllet ssee,keepthedayjob,foralotofpeoplethat simportant ifthey retryingtostartaparttimehempbusinessorasmallhempbusiness,keep your day job for a while till you get that hemp business really running well. On a bigger scale I wish people were better at working with each other, its kind of my discouragement,20yearsofwatchingthisthingthati mnotsureweareequipped ashumansforworkingwelltogetheroverlongperiodsoftime.ihaveoftenwatched success being stolen by immature or premature victories. People think all of a suddenthey resittingontopoftheheapandtheygetgrittyorstupidandallofa suddenthey rebackontheirbutts. Andthat skindofbeenthestoryofalotoftheseentrepreneursthathaveentered intothisaheadofthelistenershere.soiwouldsaybecareful,bereallycarefulwho you re working with, get it down to contracts, use lawyers, don t depend on just handshakes, get things documented well because 4 5 years later its that documentationthat sgoingtodefinewhateverybodyagreedto,thingslikethat.be careful out there its really rough, greedy ugly world and there s some people out therewhoareonlyinittotakeyourmoney. 2011PaulBenhaimandDionnePayn Page9of10

10 DionnePayn:GoodadvicethereDon,thankyouverymuchforyourtime.Onelast question,ifpeoplewanttogetincontactwithyou,where sthebestplaceforthem todothat? Don Wirtshafter: By , my office is and I d be pleased to help anybody, especially if you re an investor looking to find some of theseentrepreneurswhohavebeentestedwhohavepassedthe5yeartestandare reallydeservingofagoodinvestment.icanbeveryhelpfulinthatbecauseikeepmy ear to the ground in this industry as well as anybody and there is a lot of good companiesouttherejustscreamingforsomebodytogivethemahandup. DionnePayn:Ohgreat.WellthanksDonforthat,thankyouverymuchforyourtime andthankyouforgivingusarealinsightintothehempindustriesasitstandsatthe moment. Don Wirtshafter: Good luck with this course and I wish everybody luck with their newbusinesses. 2011PaulBenhaimandDionnePayn Page10of10