Corporate veterans establishing foothold in wholesale CBD business

The Minnesota hemp industry is growing.

From farmer associations to a North Loop store called Stigma Hemp, millions of dollars are being invested in a versatile crop that tends to be a low-cost, soil-enriching alternative to corn and soybeans. Hemp is grown for food, fiber and oils.

Jim Zimmerman and Dave Rye, two corporate veterans, formed C4Life last year after hearing the testimonials of people about the health benefits of cannabidiol — an ingredient in cannabis derived from hemp — and decided that the fragmented industry, loosened by the 2018 federal farm bill, was ripe for a farm-to-retailer distribution model.

C4Life operates an online store and is also a wholesaler buyer, soon-to-be hemp processor and distributor, working with Waseca-based growers Midwest Hemp Farms, an association of dozens of farmers. Zimmerman, 68, has 40 years in marketing and new business development at Pillsbury and General Foods, as well as his Zimmerman Group. Rye, 56, spent most of his 30 years career at Cargill. Zimmerman's responses were edited for clarity and length.

Q: Why did you decide to get into the CBD trade?

A: We became aware of cannabidiol (CBD) while working on a marijuana project in early 2018. We were intrigued and launched an effort to learn more about it through research and conversations and were immediately impressed by the testimonials of people using CBD for a wide range of health and medical conditions.

We saw CBD was a "cottage" industry and, with its confusion with marijuana, saw an opportunity to develop reliable, safe and premium products and education for mainstream distribution — a "consumer product group" approach for mass retail. The farm bill passed in December 2018, paving the way for the launch of C4Life.

A: The C4Life business launched online in January and we are aggressively pursuing our retail presence with the goal of becoming a preferred and trusted brand. Major retailers are still cautious to carry CBD products, so our current retail efforts are focused on specialty retail. We have developed programs and merchandising for a wide range of retail channels, including chiropractors, pet stores, veterinarians, fitness outlets, independent drug and grocery outlets, and co-ops. We have also developed product and merchandising programs for mass merchants and large retail chains. We expect them to accept CBD products by early fall.

Q: How is the industry regulated and how are major retailers proceeding?

A: The FDA is finally moving on rules and regulations. There's an [FDA staff and board] meeting late in May to discuss the issues. People representing different interests will give testimony.

Given the proliferation of CBD products and continued confusion around CBD's legal and regulatory status, we expect the marketplace to continue to unfold with caution. Some major retailers like CVS, Rite Aid and Walgreens have adopted CBD products. We see an opportunity for education at retail. We recommend a focused approach on CBD tinctures. That's concentrated CBD oil drops taken under the tongue and providing the best absorption effectiveness.

Q: Have you signed up any major clients?

Q: How much money have you raised to finance yourself so far and what do you think you will need over the next two or three years?

A: We have raised over $1 million to date. That has funded product development and our online and specialty retail launches. We've hired Teton Partners to raise a Series A investment round of $5 million by late summer in order to fund our expansion into major retail. If needed, we would pursue a series B to raise $5 million to $10 million in late 2019 and early 2020.

Q: Where do you envision the company in three to five years?

A: We look forward to the day when the dust settles and CBD's health and wellness claims are proven. In the meantime, we are concerned about the number of inferior products that are on the market. Products that are untested, impure, not traceable, do not contain effective concentrations of CBD oil, and are making unsubstantiated claims.

In five years we believe CBD products will be mainstream, carried by all major retailers. The CBD category is projected to go from $500 million to $22 billion market by 2022. We've never seen anything like this.