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Kadenwood Buy Boosts Recognition

Erick Dickens, chief executive of Newport Beach-based hemp manufacturer and wellness-focused CBD product retailer Kadenwood LLC, has been closely monitoring the state of the in-flux cannabis industry since the beginning of the year, looking for acquisition opportunities to scale the business’ processing capabilities. 

Last month, opportunity came knocking.

Kadenwood acquired EcoGen Laboratories, a Grand Junction, Colo.-based manufacturer of hemp-derived cannabinoid products that had $63 million in annual revenue last year, but had seen a major downturn this year amid an oversupply of hemp, Food and Drug Administration issues and other financial issues related to the pandemic.

Terms of the deal were undisclosed; EcoGen officials said the deal allowed them to pay off all their debts.

The factors that made it possible for Kadenwood to acquire a large player had less to do with the global pandemic, and more to do with an overproduction of hemp seeds that forced producers to sell at a loss, coupled with an uncertain regulatory environment that has yet to loosen up, Dickens told the Business Journal last week.

With the acquisition, the company’s Kadenwood Biosciences division now has capabilities in genetics and seed production, farming and greenhouse operations, drying and preparation, extraction processing, storage and transportation, and distillation and formulation. 

“We not only completed our last puzzle piece of vertical integration,” said Dickens, “but did it with a company that has already become a top producer with global leadership and a brand that is respected throughout the industry.” 

It ultimately positions Kadenwood, which expects $30 million in revenue including EcoGen revenues from mid-August and on this year, as a leading player in the CBD industry, he said.

EcoGen Reputation 

EcoGen launched in 2016 and raised $40 million in venture capital earlier this year. Prior to the pandemic, it employed about 200, according to local reports.

“When we first started, we were on a mission to create a state-of-the-art process to produce exceptionally pure CBD that set the standard for the industry. We’re proud to say that goal was quickly achieved,” EcoGen co-founder Joseph Nunez said in a statement at the time of the fund raise.

The company, which maintains an 80,000-square-foot fabrication facility in Grand Junction, extracts CBD isolate in a highly controlled environment, processed to produce small crystal sizes to achieve the best absorption rate.

It claims to achieve potency levels greater than 99%.

This is important, according to Dickens, because often CBD products that do not live up to expectations or claims—such as reduction of inflammation—have low potency.

Cannabidiol, or CBD, is a naturally occurring compound found in hemp plants and its proponents say it has many potential therapeutic benefits. It is non-psychoactive—meaning it does not induce any feelings of being “high.”

EcoGen also has one of the lowest cost profiles in the industry because it has an in-house fabrication capability that allows it to manufacture its own equipment, said Dickens, noting he believes this is why EcoGen outlasted other struggling businesses in the industry.

Moving forward, Dickens said EcoGen will generate “the lion share of revenue” for Kadenwood Biosciences.

$180M Value

Kadenwood has quickly amassed a reputation of its own since its start in 2019.

The company publicly announced its launch last September with $10 million in funding, and unveiled its performance-based CBD sports cream brand, called Level Select. 

Todd Davis, co-founder and former chairman and chief executive of Tempe, Ariz.-based identity protection firm LifeLock Inc., personally invested about $3 million in Kadenwood and became chairman of the board.

The company has continued to grow its Level Select brand through national advertisements with its athlete ambassadors, which include PGA golfer Rickie Fowler, ex-Dodger Steve Garvey, former NFL and Santa Margarita Catholic High School quarterback Carson Palmer, and basketball hall of famer Ann Meyers Drysdale, an Olympic gold medalist and San Diego native.

It is now raising about $15 million for a bridge round of financing, which will convert into its Series B round. The Series B should value Kadenwood at $180 million, officials said.

Retail Moves

Kadenwood is expanding through direct-to-consumer channels and retail placements.

Level Select is available in all Food Lion stores and the company is running pilot programs for the line at some 200 locations of Giant Food and Hy-Vee.

Dickens said the company will double its retail footprint to about 3,000 stores by the end of the year, including retailers with a presence on the West Coast.

Announcements regarding its pet product and food and drink divisions, in partnership with San Francisco-based Purity Organic, will be made in the fall, he added.

Ultimately, Dickens said Kadenwood’s story hasn’t changed since its launch.

“We’re a team that started by developing our strengths with the talent of the organization—focusing on having the right people, the right leadership. We’re in a very fortunate position to be able to roll up some of the assets in the industry in order to build the dominant player in the space.”

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