As more CPG companies look to add cannabis to their foods and beverages, Nextleaf Solutions wants to fulfill the demand.
Nextleaf is the first publicly traded company to be issued a patent in the U.S. for industrial-scale extraction and purification of cannabinoids. Founder and CEO of Nextleaf Solutions Paul Pedersen told Food Dive the company is deploying a unique scientific process to create one of the most potent forms of cannabis available, which is also odorless, tasteless and standardized for potency.
"From day one the focus has never been on growing a plant, but working on developing disruptive extraction and purification technology that we felt would really change how edibles and infused products are made," Pederson said.
In total, Nextleaf has eight patents, including five in the U.S., one in Canada and two in Australia. The company also has more than 40 pending patents around the world in places including Mexico, Colombia, Jamaica, Israel and Europe. As bigger companies increasingly make investments in the cannabis space, protecting Nextleaf's process has become essential because more players will come in and want to use their method of extracting and purifying molecules, he said. With patents, those companies won't be able to do so without violating Nextleaf's intellectual property, Pederson said.
"From day one the focus has never been on growing a plant, but working on developing disruptive extraction and purification technology that we felt would really change how edibles and infused products are made."
CEO, Nextleaf Solutions
"Patents are going to become that much more important for smaller companies, no different than what we see in life sciences and biotech," Pederson said. "For us, we think the patents are significant because they cover the process that we believe is the most efficient method."
During the last three years, Pederson said Nextleaf has been an R&D focused company with 16 full-time employees — including four PhDs and three chemists on staff — focused on developing intellectual property around industrial scale extraction, purification and formulation processes. Now that the company has the process figured out, Nextleaf is starting to commercialize and form partnerships with food and beverage companies.
In September, Nextleaf granted an exclusive license to BevCanna Enterprises to be able to use its knowledge related to water-soluble cannabinoids for BevCanna’s infused cannabis beverages.
"We are very pleased to leverage Nextleaf's technology within our formulations, as they have a proven reputation for unique and differentiated IP," BevCanna Chief Commercialization Officer Emma Andrews said in a release. "We believe taste and reliability will be essential to growing this category."
Pederson said BevCanna came to Nextleaf a little more than a year ago wanting to work together to put CBD in beverages.
"For us, it is really a perfect partnership and kind of represents the vision that we have for our company," he said. "BevCanna has a bottling plant that now allows us to commercialize our technology on a mass market scale. We don't know anything about bottling. We don't know anything about CPG. We're not a company that aspires to build our own brand. We aspire to partner with companies that want to be in that consumer packaged goods space."
Both BevCanna and Nextleaf are based in Canada, and Pederson said BevCanna plans to have its beverages on shelves in 2020. Canada, one of the first major countries to legalize cannabis, will allow CBD-infused beverages and edibles on shelves in December. Pederson said that many will be watching how Canada's rollout goes.
“We think that 20 years from now we'll look back and say, ‘Wow, you know, Canada really had a great opportunity to market validate,’ ” Pederson said.
Although Nextleaf has patents in the U.S., the cannabis space here comes with risks because CBD is not currently federally regulated. Hemp and its derivatives have not been classified as controlled substances since the 2018 Farm Bill was signed, but the FDA's position has so far been that cannabis and CBD can't be sold in conventional foods or dietary supplements.
Pederson said his company is watching the U.S. "very closely," but it is still too early to make big moves there.
"We think that the U.S. sort of leads the world on innovation," he said. "We're very keen on the United States, but for us it is just a function of when the right time is."
He said the business model is built around supplying high purity distillate to companies that manufacture edibles and beverages — and that they have an advantage in the space since they have been working on development for years. Not only has the company done its own R&D, but also acquired technology in the space. In September, the company acquired water-soluble technology for cannabis beverages.
The competition is stiff. Other cannabis ingredient companies have been working to create cannabis ingredients in new food and drink products. Socati recently launched two new cannabis ingredients. Layn Corp made a big investment to expand in the space. And Sproutly has formulated a fast-acting water-soluble cannabis extract.
Despite the increasing competition, Pederson is optimistic about the future of his business.
"We feel very confident where we are," Pederson said. "We feel that we've got a jump start on a lot of bigger companies."