A 145-year-old tobacco company gets into the CBD oil business in North Carolina

In a former tobacco warehouse in a city that once touted itself as the “world’s greatest tobacco market,” a company called Criticality has begun extracting CBD oil from hemp — a cannabis plant and variant of marijuana that until recently the federal government considered an illegal drug.

Criticality can process about a half-ton of dried hemp a day here, but says it will eventually handle up to 6 tons and employ 88 people within a few years. Following a ribbon-cutting ceremony this week, CEO Brian Moyer said his company now runs the largest facility for extracting and refining cannabidiol or CBD from hemp in North Carolina.

That same day, Morrisville-based Root Bioscience announced that it had teamed up with a group of farmers based in Bertie County to launch what it called North Carolina’s largest hemp processing facility, in the town of Windsor.

Regardless of who is right, these new factories to produce CBD oil from hemp are part of the sudden expansion of an industry that did not exist a few years ago. Though the U.S. Food and Drug Administration has not approved its use in food, drinks or dietary supplements, CBD has become popular with consumers who believe it relieves a host of ailments, including insomnia, anxiety, chronic pain and post-traumatic stress disorder.

That has made a lot of people bullish on CBD. The market research firm Brightfield Group once predicted CBD could become a $1 billion industry by 2021; last September, it revised its prediction to say sales in the U.S. alone could reach $22 billion by 2022.

Two months later, Congress and President Donald Trump gave hemp and CBD a boost with a farm bill that legalized the growing of cannabis plants that contain 0.3 percent or less of THC, the compound in marijuana that gives you a high.

Branching out from tobacco

Now the industry is attracting some bigger players. Criticality, a two-year-old company formed by veterans of the extraction industry, has partnered with Pyxus International, another Morrisville-based firm that has been buying and processing tobacco around the world for more than a century. The company, which until last fall was known as Alliance One International, is listed on the New York Stock Exchange and generated $1.85 billion in revenue last year.

With smoking in decline, Pyxus has branched out, into e-cigarettes, marijuana in Canada where it’s legal, and now hemp in North Carolina.

“We’ve been in the leaf business for 145 years, and we want to be here for another 145 years, so we were looking for what else can we do,” the company’s president and CEO, J. Pieter Sikkel, said at the Criticality plant opening this week. “What are the consumers looking for? What can our farmers do? What do we bring to the table that adds value?”

Hemp’s close relationship with marijuana has created a stigma that the industry has worked to shake. The plants are almost indistinguishable, except for the presence of THC, and farmers have been encouraged to let their local law enforcement agencies know that they’re growing hemp and where. Criticality met with both city police and the sheriff’s department to show them what it planned to do in Wilson.

Still, CBD and hemp have seduced a lot of farmers eager to compensate for falling demand for tobacco and uncertain prices for commodities like corn and soybeans. The federal farm bill of 2014 allowed states to create programs to let farmers experiment with hemp for research purposes, and this time last year 124 had become licensed growers under North Carolina’s Industrial Hemp Pilot Program, according to the state Department of Agriculture.

Now, as of March 7, there were 634 growers licensed to raise hemp on 7,922 acres and in nearly 3.5 million square feet of greenhouse space. Agriculture Secretary Steve Troxler says his department will seek some changes in state law to help boost the industry even more, including allowing the state Board of Agriculture to regulate CBD production in North Carolina.

“We want to position North Carolina to be a leader in the nation when it comes to hemp production,” Troxler, a Republican, said at a Council of State meeting this month.

Criticality had contracts with about 50 farmers last year to produce the hemp the company is processing now. Sikkel said that number will grow “into the hundreds” this year.

“The farmer base is struggling at the moment in America, not just from tobacco but from all kinds of agricultural products,” he said. “When you can come in and offer the farmer an alternative crop in a rapidly growing new industry that allows them to have productive land and really be able to work their family farms, which they want to do, that’s a fantastic thing.”

A fine line

The number of individuals and companies registered with the state as hemp processors has grown, too, from 44 this time last year to 393 as of the end of February, according to the agriculture department. They include tea shops, breweries, fiber companies and makers of botanicals, pharmaceuticals and body care products.

Criticality produces bulk oil that others can use in their products, but it also makes some of its own under the brand name Korent: CBD drops taken orally and liquids that people inhale.

Even though hemp is no longer considered an illegal drug, companies like Criticality that make products with CBD walk a fine line with state and federal regulators. The FDA has approved a drug called Epidiolex derived from CBD oil to treat seizures caused by two rare forms of epilepsy, but that’s the only CBD medicine to get government approval so far.

Last month, the state agriculture department sent a letter to about 400 processors and retailers in North Carolina warning them not to sell food or animal feed containing CBD and not to make health claims about CBD. The state said it could seize products that violate the law.

“We are taking an educate-before-regulate stance with industry,” Joe Reardon, the assistant commissioner for consumer protection, said at the time. “We know they may not be aware of the state laws regarding the addition of a drug to a food product. However, we reserve the right to be more assertive, as other states have been, if we need to be in the future.”

Criticality’s claims for its Korent products are vague. CBD helps “regulate mood, appetite, sleep, hormone production, and even nervous and immune system responses,” the company says on its website.

“CBD is a natural alternative to wellness products that promote balance and well-being,” the website says.

Moyer, the CEO, says most of the company’s sales are online or in locally owned specialty shops; chain drug stores and most other big retailers aren’t selling CBD products yet. But as demand for CBD grows, and the stigma lessens with the removal of hemp from the list of illegal drugs, Moyer expects national retailers will be carrying CBD soon.

“I would say that they are all evaluating it, especially with the signing of the 2018 farm bill,” he said. “There’s a lot of significant movement in that direction.”

Moyer said the emergence of companies like Criticality represent a maturing of an industry that’s becoming more professional. He and Sikkel believe the FDA will eventually confirm many of the health claims made for CBD and approve its use as a dietary supplement, subjecting it to the kind of regulations that many smaller producers may have trouble meeting.

“We built this facility to be in compliance with dietary supplement guidelines. That is not a necessity today. That doesn’t exist,” Moyer said. “But given our commitment to quality and our belief that those regulations will ultimately be there, it just made good sense.”

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Richard Stradling covers transportation for The News & Observer. Planes, trains and automobiles, plus ferries, bicycles, scooters and just plain walking. Also, #census2020. He’s been a reporter or editor for 32 years, including the last 20 at The N&O. 919-829-4739,