HEMP INNOVATION

2015

LONG-TERM INTERNATIONA

L STRATEGY (LTIS)Prepared by Russ Crawford and Markus

Schmulgen

It is the goal of the industry to grow 40,000 hectares (100,000 acres) of hemp in Canada by 2015. Given average yields and current prices, this represents over $35 million in farm gate receipts which translates into over $100 million for the Canadian economy. The various goals of the LTIS will support…

---Hemp 2015-$100 million---

Hemp 2015-$100 Million

1.Background2. SWOT3. Branding4. Strategy5. Strategy Formulation6. Strategy Implementation7. Measurement

REPORT OVERVIEW

National Industrial Hemp Strategy

Evolution of CHTA and BoardExecutive Director & Board

Membership – producers, companies, etc.Funding – Industry, governmentIndustry Standards - By-laws, Code of

Conduct

Support from AAFC & CAAPLTIS Review

BACKGROUND

Promotion and Communications

ResearchMarket Development

Administration

CHTA GOALS

Current state of the hemp industry in CanadaExpanding acres in CanadaControlled and monitored by Health CanadaRemains illegal to grow in USAInternational market focus on fibreMore hemp SKU’s in N. AmericaEconomics still show hemp is highly

profitableEnvironmentally friendly & non GMO

MARKET STATUS

HEMP PRODUCTION

Hemp Production in Canada

0

10,000

20,000

30,000

40,000

50,000

60,000

YEAR

Acr

es

Yukon

PEI

NS

NB

Quebec

Ontario

Man.

Sask.

Alberta

BC

HEMP EXPORTS

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

2006 2007 2008 2009 2010 Proj.

YEAR

Canadian Hemp Product Exports

Hemp Oilcake

Hemp Fiber

Hemp Oil

Hemp Seed

OILSEED COMPARISON

hemp canola soybeans -

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

Acres

acres

hem

p

cano

la

soyb

eans

$-

$20,000,000,000

$40,000,000,000

$60,000,000,000

$80,000,000,000

$100,000,000,000

$120,000,000,000

$140,000,000,000

$160,000,000,000

$180,000,000,000

$200,000,000,000

Economic Benefit

eco benefit

Ambitious Goals?...........Not Really…………..

Themes from ANUGA 2011LOHAS – lifestyles of health and sustainability.Convenient, gluten & allergen free.People spending more to regain health. People taking responsibility.Organic consumption growth rate is 20%/yr.Awareness of challenges with GMO. Animal products tainted – mad cow, radiation,

meds, hormones, poor land use, subsidies.Evolution to vegetarian and vegan diets.

GLOBAL OPPORTUNITY

WHAT100,000 acres$100 million

WHENBy 2015

HOWCommunicationResearchMarket DevelopmentAdministration

LTIS GOALS

Specific Action PlansCreate and execute a brand and

communications strategy.Research health benefits and feed

applications.Secure GRAS status for hemp powder

and oil.Operate a full time industry

association office.

LTIS GOALS

Promotion and Communications Develop and implement a two-year branding and communications strategy for hemp and hemp products targeted at export destinations.

LTIS GOALS (cont.)

Research - Conduct research on health benefits and feed applications for hemp products achieving results from at least one study each year for the next two years for a total cost of $1,000,000 over the full time period.

LTIS GOALS (cont.)

Market Development - Secure GRAS status for hemp protein powder and hemp oil over the next two years at an annual cost of $1,000,000 per year. ($2,000,000 in total).

LTIS GOALS (cont.)

Administration - Operate a full time CHTA executive office out of Winnipeg with an Executive Director and communications employee responsible for day-to-day operations and market development execution at a cost of $100,000 per year.

LTIS GOALS (cont.)

Objectives that will benefit the whole industry…1. To undertake the research necessary to

promote and obtain regulatory approval for hemp as a healthy ingredient.

2. To facilitate the effective use of generic market development and promotion programs by CHTA members that are targeted and geared towards developing new opportunities.

3. To expand/find new uses or dual usage for hemp (seed, for food and cosmetics, and fibre)

LTIS OBJECTIVES

Effects of Hemp in Poultry Rations. Effects of Hemp Protein and BioActive

Peptides on Hypertension and Kidney and Heart Health.

The Safetiness and Bio Availability of a Long Term Consumption of Hemp Oil in Vivo.

Hemp Decortication and Use of Decortication By-Products for Biofuel Production and Green Building.

TARGET RESEARCH

1. Background

2.SWOT3. Branding4. Strategy5. Strategy Formulation6. Strategy Implementation7. Measurement

REPORT OVERVIEW

SWOT ANALYSIS

• Producer of high quality hemp seed and fibre.

• Focused, capable dedicated group of members of CHTA.

• Development of a prioritization of projects based on industrydemand and growth signals.

• Body of knowledge with respect to breeding, processing andproduct development.

STRENGTHS…

• Name recognition – Hemp – Canada. (More for food than fibre).

• Established relationships with retailers and end user clients – product awareness.

• Many Canadian co-operative ventures assuring on-going participation from vested stakeholders along the supply chain.

• Engaged government supportive indeveloping the crop sector.

…STRENGTHS

• The need to achieve Generally Recognized As Safe (GRAS) status with the US Food & Drug Administration for hempseed and hemp products.

• Lack of approval from the Canadian Food Inspection Agency (CFIA) for the use of hemp and hemp products in animal feed.

• Lack of clinical research specifically onthe health benefits of hemp seed and oil.

WEAKNESSES…

• Absence of funds to proceed with critical clinical trials and hemp product efficacy.

• Government’s 50/50 matching strategy poses significant problems in qualifying for any funding programs.

• Small producer and processor baseunable to source adequatefunding to conduct necessaryresearch.

• Absence of hemp fibre processingfacilities in Canada.

…WEAKNESSES

• Consumer demand is trending more towards local, natural, organic, eco-friendly products playing right into the primary attributes of hemp food and fibre products. o Human foods o Pet foods o Body care products o Health industry o Building products

• Build on the positive environmental impact of hemp in the agricultural sector as a minimal user of chemicals producing a non-GMO product.

OPPORTUNITIES…

• Work with government financial support and people resources to develop new products and identify and capture new markets.

• Continue the work on clinical trials, feeding trials and varietal development building on our existing experiential knowledge and expertise.

• Work together as an industry for the strategic advantage of the Canadian hemp trade.

…OPPORTUNITIES

• Inability of the CHTA to sustain operations due to inadequate funding. This would result in the loss of a focal point and primary contact for programs and direction.

• Concentration of dedicated industry participants may exhaust the energy and commitment of those people.

THREATS…

• USA legislation approving the cultivation of hemp (this may be seen as an opportunity, as it potentially accelerates the development process and research requirements with new investors, but it has the potential to marginalize the Canadian hemp industry).

• Potential for either demand or supply to outpace the other creating a market failure.

• Shortage of available, affordable sample testing laboratories.

…THREATS

1. Background2. SWOT

3.Branding4. Strategy5. Strategy Formulation6. Strategy

Implementation7. Measurement

REPORT OVERVIEW

Brand Hemp as “Canadian” QualityLeverage our production experience

and ideal agronomic conditions. Establish and build on the idea that

Canadian hemp is superior to hemp grown elsewhere in the world.

Product recognition and brand identity.

BRANDING

1. Background2. SWOT3. Branding

4.Strategy5.Strategy Formulation6.Strategy Implementation7. Measurement

REPORT OVERVIEW

Positioning the industry relative to competition that is well established.

Developing a shared vision.Uniting stakeholders to work together.

The hemp industry is at a critical “Grow or Die” stage.

NEED FOR A STRATEGY

Know YourselfResearchClinical trials

Know Your CustomerNutritional benefitsEducation

STRATEGY

Discover factual attributes of the properties, characteristics and functional value of the hemp plant in order to make substantiated claims.

Seek out the needs and preferences consumers are looking for in food and fibre products.

Communicate, in an effective manner, how well hemp can satisfy these specified needs.

STRATEGY

Processed Canadian hemp products, in one form or another, have found their way to 30 different countries around the world over the past four years.

INTERNATIONAL DESTINATIONS

EXPORTS BY DESTINATION

1. Background2. SWOT3. Branding4. Strategy5. Strategy Formulation6. Strategy Implementation

7.Measurement

REPORT OVERVIEW

Promotion and CommunicationTwo year branding and

communicationResearch

Two year $2,000,000Market Development

GRAS - $2,000,000Administration

$100,000 Annually

ACTIVITY MEASURES

Completion of Marketing Materials Hemp 101 Overview Trade Show Booth Trade Show Banners Social Media Campaign

Important Events Hemp History Week Natural Products Expo East, USA Natural Products Expo West, USA American Dietetic Association, USA Green Festival-San Fran, NYC, LA EIHA-May 2011 Culinary Institute of America, USA Canadian Health Food Association Trade Show, Canada Natural and Organic Product Expo Europe 3, Great Britain BioFach, Germany ANUGA, Germany

SPECIFIC ACTIONS

Failure to maintain an industry association to lead the initiatives identified through:Inadequate funding.Lack of industry support and co-

operation.Reduction in the profitability of

growing and/or processing hemp for food and fibre applications vs. competing crops.

BARRIERS TO SUCCESS…

Public and governmental stigma towards hemp.

Cost of Productiondual purpose cropagronomic research

Product InnovationInfancy Industry stage…niche

market

…BARRIERS TO SUCCESS

Stigma of hemp/marijuana “Refer Madness” growing acceptance with education - 14 years in the making.

Illegal to grow in USA, DEA lost in court 2003-4, border is open, many states passed to grow.

Hemp milk & ice cream on Dr Oz April 2011.

Soy, corn & rice functional food competition.

OVERCOMING CHALLENGES

Execute LTIS Strategy.Secure funding to support research, communication strategies and on-going administrative support.

Embolden and entrench CHTA as unifying voice for the Canadian hemp industry.

NEXT STEPS…

BuildNorth American/EuropeanCollaborativeVentures.

Eradicate Stigma.

…NEXT STEPS

QUESTIONS