Last year was hard to beat for Hemp Depot, which won a No. 1 spot in the 2019 Fast 50 with 9,621% revenue growth between 2016 and 2018. Heading into Covid-stricken 2020, that three-year growth rate has dropped for the Greenwood Village-based company. But when a “drop” means 861% growth and increased revenue, Hemp Depot still moves up to a bigger category: from Small to Medium.
And the company is staying ahead of its competition in the hemp and CBD space through innovation and big pivots. This year, early in the pandemic, it began manufacturing hand sanitizer through a partnership with Regional Transportation District, and now it’s picking off talent from competitors and making big moves in the cosmetics space.
Co-founder and CEO Andy Rodosevich talked shop with Denver Business Journal.
This Q&A was edited for style and clarity.
It’s been a wild year for you as you’ve made some serious pivots. Tell our audience about the moves you’re making. One of the big things that we’ve done over the year was to really plan for the future and plan for 2021. We’ve done just a ton of expansion. We’ve completely brought in all of our extraction processes so we’re able to make all of our crude oils, distillates and isolates in house now.
We teamed up with this really incredible cosmetic development group — one of their chief science officers worked for Procter & Gamble (NYSE: PG) for 15 years and the other chief science officer worked for Clinique for eight years. The goal was to release a cosmetic line into the industry that, even without CBD, could be a No. 1 seller at Sephora. It has an incredible list of active ingredients, a lot of science behind it, a lot of research and testing, and we want to produce that completely in house which means mixing equipment and high-speed bottling equipment. We’ve gone through all of that process and we’re in the final stages of stability testing right now — and we plan on rolling that out in Q1.
We also made a big investment (about $1 million) into greenhouse infrastructure, so our first harvest of smokable hemp is going to happen at the end of November. That’s a new and exciting product line for us.
You grew 10,000% in the three-year period between 2016 and 2018, and now nearly 1,000% through 2019. An impressive feat for any company. What can you tell us about your strategy? A big thing that we really wanted to work on was taking a step back and deciding what was the best use of time for our company right now, and we decided it’s to stay profitable, stay focused, keep sales growing.
We really went through and took all of our existing products to the next level so they’re all going in individual boxes, which required a $100,000 investment. We worked with a compliance team to really make sure that our products are compliant both domestically and international, especially into the UK markets and so we had this whole refresh of our labeling and our label compliance.
It’s been a great year in the realm where we were able to do a lot of expansion and investment into our company and really just hyperfocus on setting ourselves up to be a differentiated, unique company in the marketplace moving forward. And while we were moving that, we had a lot of opportunity to bring in some really phenomenal talent from some of our competitors that were doing layoffs. We still haven’t actually done any layoffs internally, and we were able to find an incredible director of extraction who worked for one of the biggest extraction manufacturing companies, we were able to really staff our sales and marketing departments with director-level folks from some of the biggest names in the industry. Not only were we stacking our own products, but we were really stacking the bench from an employee standpoint.
Now we have even more revenue streams: more products, more vertical integration, better margins, better pricing. Folks are going to see products that are as much as 50% cheaper, and that’s important because CBD products can be expensive and the average U.S. consumer has only a $50 monthly budget for supplements.
The legal hemp market is obviously a new market, so rapid growth probably makes sense to our readers now. What is it about the industry that makes you think it has long-term potential? A big piece of that is realizing that right now we’re just working with small retailers, we’re working with online stores. All of the big companies — the big food companies, the Coca-Colas of the world — they’re having discussions in the CBD space and they’re looking at introducing CBD products and where they’re going to source their CBD from, but they’re waiting on FDA regulations to actually give them direction of what they need to do.
They’re obviously a lot more risk-averse than a lot of the smaller companies that are making up the market right now. If you look at what the market would be with those big industries involved, what we’re currently doing is maybe 10% of what the market is going to be. We wanted to put a big focus on our licensing and regulations so that we had what these larger companies were actually looking for.
We also wanted to bring in the extraction piece and some of those things so if they’re not looking for a contract manufacturer but they’re looking for a vertically integrated supplier of CBD, we can also be scaled up and be able to provide those products for those large organizations at all. We’re also having conversations with major retailers.
What’s your CBD routine? I take one of our 30 mg softgels with my multivitamins — I just think that’s a good dose. And I also use the CBN tincture — it’s really great if you’re looking for a product that will help you get to sleep. Those are really my two go-tos.
No. 1 pandemic pivot: All of it. But looking at this overall, bringing in the vertical integration of the extraction process was important. Not only does it allow us to use our products and get them to market at a lower price and be disruptive in the market from a pricing structure, it also sets us up to be a raw ingredient provider when mainstream companies make their moves.
No. 1 lesson learned along the way: I went to college for a degree in finance, and one of the things we learned was creating these very structured business plans, you have to be fluid. When we first started our company, we were planning on being strictly a farm, and I think that we would probably be bankrupt today if we didn’t stay fluid and change.
Top advice for startups: While business plans are great, you can’t take them so literal that you’re not willing to throw it all away and rewrite it every month. Everything that we’ve done was not in the plans five years ago. Cash is king in a business. Don’t overspend, don’t overgrow, don’t take on debt deals that don’t make sense.
Pandemic bright spot: Our team. They’re working long hours and doing jobs that aren’t in their job description. That’s really what I’ve been so impressed with in our company is seeing how much the team has just stepped up and been so excited about seeing our company grow.
2017 revenue: $1,598,645
2019 revenue: $15,368,182
Percentage growth: 861%
Location: Greenwood Village
Top local exec: Andy Rodosevich, co-founder and CEO