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VOL. 42 | NO. 46 | Friday, November 16, 2018

Knoxville's Blühen Botanicals adds processing plant to R&D operations

By Linda Bryant

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Joe Fox, managing partner and co-founder of Blühen Botanicals

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Knoxville is now home to Blühen Botanicals, an industrial hemp processor that’s aiming to be one of the largest companies of its kind in the Southeast.

The new company, which formed this year, operates a 2,000-square-foot research and development facility at 1329 Chilhowee Ave., and is on the verge of opening an 18,000-square-foot processing plant at 2209 North Central St.

In the hemp industry, licensed processors are needed to take the hemp plant from farmers and convert it into crude oil that can be used as CBD oil, which can then be used to make CBD-based products such as CBD tinctures, creams and salves, soaps and edibles.

Blühen Botanicals is projected to employ two dozen people within two years. It also partners with 12-plus farmers in the state to grow high-yield industrial hemp crops. The company is serious about keeping up with the science developing behind the hemp industry and has a board of advisors that includes neurologists, biochemists, marketing experts and attorneys.

The Ledger spoke with Joe Fox, managing partner and co-founder of Blühen Botanicals, about the hemp industry, working with farmers and his future vision of the company.

How and why did you start Blühen Botanicals?

“I am a real estate developer by profession, but one of my good friends got me interested in the hemp industry. I originally saw it just as a project, but the more I got into it, the more reasons I found to stay invested in it. And the more layers we pulled back, the more opportunities we found in the industry.

The Blühen Botanicals leadership team: Erich Maelzer, left, director of horticulture, co-founder; Joe Fox, managing partner, co-founder; Cody Seals, farming operations director; Matthew DeBardelaben, farm advisor.

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“Here we are two years later with a brand that has been launched, one facility complete and another facility under construction. We have a 2,000-square-foot facility that is solely for research and development of hemp products and that facility houses multiple hemp strains of ours. All are legal under the .3 percent THC level.

“The reason we feel research and development is important to this industry is because the farming sector needs access to the best genetic tools. The higher value of the genetics that our farmers are receiving the more profitable the crops will be for them. In turn it creates a better-quality process. So, our farmers have access to the best research facility and the best genetics to make the best quality and most profitable crops.”

Sounds like you are on a fast learning curve in this. How are you experiencing being in this industry as it’s gaining major buzz?

“We sell in an industry that is already experiencing tremendous growth. Our initial vision for our business was just to be an indoor growing facility that focused heavily on genetic research and the process in house in small quantities. The more that we went through it and saw various states like Colorado and Washington, the more that we found that the processing was really a major difficulty in the industry. So that’s when we decided the processing focus on genetics was important.”

Are you then learning from the mistakes of prominent hemp-producing states such as Colorado and Washington?

Blühen Botanicals already has a 2,000-square-foot research and development facility and is adding this 18,000-square-foot processing plant, the previous home of the Habitat for Humanity Thrift Store.

-- Adam Taylor Gash | The Ledger

“Yes, in some ways we are learning a lot from other people’s mistakes. It’s really about learning from the pioneers of the hemp industry. A lot of the credit for us being able to get off the ground goes to the pioneers that have been doing this for a very long time. We’ve used over 20 consultants, and we continue to use them on a daily basis from all over the world.

“Just a couple of years ago when we tried to launch a brand, it was much more difficult. But leaning on these consultants and their expertise gave us the opportunity to go to the market a lot faster than we would have been able to without their services.”

It seems like the industrial hemp industry is really taking off, especially here in Tennessee? Is this correct?

“I would agree with you. There has been an explosion of growth in this industry. I think we will continue to see more growth in the hemp industry, and if the government structures it the right way, this could even have a major impact on our tax deficit.”

What will you be doing at the processing facility?

“The new 18,000-square-foot facility is focused on processing. It’s within a mile of downtown Knoxville, as well as our other facility. At the facility we will have front end extraction for crude oil, and we will also have very robust lab capabilities for post-processing, installation and isolation for the production of CBD oil and CBD isolate. [CBD isolate is CBD in its purest form].”

Is your fast growth hard to manage?

“I’ve never seen an industry move as fast as this one is moving now. We have moved at a very rapid pace thus far, and we continue to move even faster. But it’s definitely an asset. Our facility will have the capability of processing 4,000 pounds per day. Just this week we hired three new employees, and we will hire another dozen or so employees in the near future. We are dedicated to scaling very rapidly and becoming one of the premier players in the Southeast.”

You are obviously in the early stages of a startup. Where do you see this going in the next two or three years?

“It’s near impossible to accurately predict what’s going to happen. We are very diligent but one of our biggest challenges is that – because we are growing so rapidly – it’s very difficult to forecast. So, although we are focused on a long-term vision, our main focus right now is getting through our short-term goals. We have a healthy development plan over the next 18 months. I would caution [anyone in this industry] not to make too many capital Investments because this industry demands that you stay nimble. You have to be well-balanced in growth so that you’re able to deal with the difficulties and decisions ahead.”

Can you give an example of having to be nimble?

“Just this summer we were 95 percent complete with the design of a brand new building that was going to be 7,000 square feet. Then we decided 7,000 square feet wasn’t going to be enough to do what we wanted to. As we continued to talk with consultants and get additional partners, I realized we were going to grow out that space very quickly. So, we began to negotiate on the 18,000-square-foot building that we are constructing now.

“We had to change our ideas and go in a different direction. I had to go to our investment group and say, “Hey, I know we designed this building, but I think we’re going to need more space, and there is something else that’s better suited. It ended up being a really good decision for us. Our production in this facility will better meet our needs.”

Can you speak about working with tobacco farmer so they can have a new cash crop?

“The tobacco industry is in decline, and hemp has become a cash crop. There is no doubt that hemp will be a cash crop in the state of Tennessee. But I’m not sure how long it will stay the cash crop.

“I do think in the short term hemp is a huge opportunity for farmers. The ideal farmer for us is someone that already has the infrastructure and expertise. There are people who just have raw land and don’t have the proper equipment, infrastructure or proper experience. When they start farming, they are already equipped. I think people who were formerly tobacco producers will do really well [at hemp farming] because the process is similar.”

How do you find tobacco farmers to partner with?

“Right now, they are finding us. We are not short of people interested in growing hemp. Right now our major challenge is qualifying the farmers that reach out to us and partnering with people that are operating on a really high level.”

Have you received any backlash about being in the hemp industry? Do you feel there’s still a stigma?

“My investment group and I were prepared for backlash, but I was pleasantly surprised. More than anything people are curious. When you are educated about the hemp industry, there aren’t a lot of negative comments. When there is a negative reaction, it usually points to a lack of education.

“A lot of people don’t even know that hemp is legal. A lot of folks still don’t know what CBD is, or they don’t realize that CBD is not going to get you high. Most folks are very receptive. If they lack the knowledge, you explain to them that hemp is legal statewide, and it is approved by the Tennessee Department of Agriculture. Everything we receive, grow or process is 100 percent legal.

“The way the Farm Bill works is that hemp has to be operated under a pilot program, and it’s classified more than any other crop. The Farm Bill completely legalizes hemp and gives us the ability to grow it just like corn or soybeans.”

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