If the hemp-based cannabidiol (CBD) industry is the new "big wave," Erik Lundgren and Gerard Jacobs are looking to surf that wave's barrel.
Lundgren, founder and CEO of cannabidiol products manufacturer CBD Lion LLC in Mundelein, recently received a huge capital boost from Jacobs' investment firm, Acquired Sales Corp. The Lake Forest-based firm agreed last month to acquire CDB Lion in a $2 million cash and stock deal, turning the private, family-owned business into a public venture.
For Lundgren, the partnership will provide funding he needs to meet the demands of his rapidly-growing business. Since he started the company in 2017, sales of his CBD-infused vapes, gummies, lotions and other products "has been exponential," Lundgren said, growing from $4,000 in January 2018 to about $160,000 per month now.
"This will be a great move for us because it'll allow us to do the things we need to do (to grow)," he said.
CBD is a chemical found in cannabis and hemp plants. While there has been little clinical research on the medical effects of CBD, there is a growing belief it can treat certain conditions without providing the mind-altering "high" connected with another cannabis-related chemical, tetrahydrocannabinol, or THC.
Since Congress approved the Farm Bill in 2018 legalizing hemp farming, a gold rush has ensued as entrepreneurs and investors have begun cultivating CBD and selling infused products. A study recently published in Forbes magazine estimates 2018 CBD product sales between $600 million and $2 billion nationally, and it could become a $16 billion industry by 2025.
But unlike the highly-regulated medical marijuana industry, the Food and Drug Administration is only now beginning to look into hemp-based CBD's health claims and it could be years before any standards, regulations or guidelines are in place.
Lundgren acknowledges the "wild West" environment of the business, which is why he has worked to develop a standard of credibility for CBD Lion products. Lundgren's previous experience is in the medical marijuana industry, and he decided to use that industry's lab-test standards to set the quality mark for his products. As a result, all CBD Lion products are tested and evaluated by a third-party laboratory, and each product has a QR code the customer can use to see the results of that specific product's test.
"Everybody knows that CBD is a very hot industry now," he said. "What we focus on is creating a brand that people can trust.
"We create products that are third-party lab tested and with packaging that is transparent to the consumer ... what they're getting is what they pay for."
And it was those self-set standards that got the attention of Acquired Sales, according to Jacobs.
"A lot of good people are getting into the business, but also a lot of scam artists are getting into it," said Jacobs, who is CEO of Acquired Sales. "We do not want to be involved in this business except with very reputable honest people that are willing to deliver products that, through third party tests, is what it says it is."
"The people of the Lundgren family that started CBD Lion are extremely reputable, honest people," he added.
Under the partnership, CBD Lion will continue to operate under Lundgren's leadership and vision, while Acquired Sales will provide the capital to help the company meet its demands and market itself.
"Our philosophy is the public company needs to be the servant of the operating businesses," Jacobs said. "The public company is just overhead. We need to look at them and say how can we help you."
For Lundgren, that means taking a more aggressive role with CBD Lion's growth. Products are already sold nationwide and online, but he added he's looking to increase the brand's presence in certain regions, and increase global availability.
For Jacobs, it means continuing to search out similar businesses and entrepreneurs in order to build up a line of CBD products that can be trusted by consumers. Earlier this year, Acquired Sales invested in a private CBD-infused distillery in Bend, Oregon, and Jacobs said they plan to look at investing in other CBD-related ventures that share the same vision of integrity as CBD Lion.
"We want to build the biggest CBD company in the United States," he said. "We are trying to build a partnership of entrepreneurs that can help each other."
Lundgren adds that, as the industry grows and consumers become more informed, the companies that have established quality standards and provide detailed information on its products will survive the gold rush.
"We didn't set the bar, but we helped make that bar apparent for those companies to strive for and create trust with its customers," he said.