AS SEEN IN: FINANCIAL REVIEW

Getting the oil on hemp as a growth industry.

Cannabis has a long history in Australia, with hemp seeds imported into the country on the First Fleet. But by the 1920s and 1930s, growing moral panic and a political backlash led to the federal government outlawing the plant, with a prohibition strategy generally holding sway ever since.

That approach is now changing, driven in part by growing consumer demand and high-profile deregulation of overseas markets. In 2016, the cultivation of cannabis for medical or other research-related purposes was legalised in Australia, albeit in highly regulated forms. The following year, certain hemp-based foodstuffs were approved as fit for human consumption in Australia and New Zealand.

A key driver has been increasing recognition of the difference between marijuana and specially bred industrial hemp. Marijuana’s psychoactive properties stem from its relatively high levels of tetrahydrocannabinol (THC) – up to 25 per cent. Industrial hemp, meanwhile, has less than 1 per cent THC.

Venture capital investment in the sector is growing, with New Zealand’s Ministry of Primary Industries noting that visible venture capital funding of companies in the cannabis industry reached $US7 billion in 2018.

“There is significant investor confidence in the market, with each investor making on average two-to-three investments in cannabis firms and 33 per cent of firms receiving multiple rounds of investment,” the report states.

Despite a historical lack of attention, the evolving legal context means Australia could be on the precipice of seeing a major new industry take hold.. Tasmania leads the country in industrial hemp output, producing about 80 per cent of the nation’s crop on around 1570 hectares. In fact, the growing conditions in the state are so favourable that industry figures predict it could take a worldleading position in the industrial hemp and medicinal cannabis market.

“Tasmania is the best place in the world for high-quality products in agriculture, including cannabis,” notes Alex Keach, founder and managing director of ASX-listed ECS Botanics.

“You get this amazing depth and consistency of the metabolites, like you do with our wine, poppies and cherries. You can’t just recreate that. The climates, abundant water resources, diverse landscape and smart farmers all help.’’

Keach notes cannabis is no longer viewed as a “one-trick pony’’, with consumers increasingly valuing botanical extracts including cannabis for a wide variety of applications.

While medical marijuana and cannabidiol (CBD)-infused consumer products have generated their share of buzz overseas, the former remains tightly regulated in Australia, while it’s currently illegal here to sell the latter.

But industrial hemp has a wide array of other applications, from health and wellness to nutrition, clothing and bioplastics, and as a plantbased replacement for the animal fats and oils in materials including cosmetics and paints. Its status as a carbon-negative crop also lends it green credentials.

“Hemp requires less water, fertiliser and chemicals than many traditional food crops,’’ explains Keach. ‘‘Hemp also sequesters an enormous amount of carbon, so the benefits go well beyond the body.”

Given this diverse array of applications and an increasingly friendly regulation environment, Keach is optimistic about the ability for Australia to develop a sophisticated industrial cannabis industry.

“In five years’ time, we think Australia will have a much more diverse and integrated food, fibre, medicine and cannabinoids industry, predominantly being driven by a more cohesive and simplified regulatory model.”

Keach is passionate about the power of cannabis to act as a disruptor, and argues the plant has a vital role to play in standing up for freedom of choice, and against the status quo.

“Cannabis is a way to break down the framework we find ourselves in. It’s a vehicle for creating positive change, for the environment, for people and for health.”

Hemp can play a key role in helping solve some of the world’s biggest problems, he notes, from climate change to sourcing non-animal forms of protein. “The plant is under-utilised and has thousands of potential uses.”

Keach founded ECS Botanics after discovering the benefits of consuming hemp seed oil – a source of Omega 3 and Omega 6 – in the aftermath of a difficult relationship. “Having a background in financial markets, my role was to spot megatrends for investment opportunities,’’ he says. ‘‘In this case, the megatrend in cannabis was being driven by the relaxing global regulatory environment, and cannabis slowly losing its stereotype as a dangerous drug.”

Embracing the mantra “healthy not high”, the company is devoted to breaking stereotypes, making hemp mainstream and supporting Tasmania’s agriculture sector. The approach secured backing 18 months ago in the form of a $6 million IPO, with the company securing a further $4 million in its most recent funding round.

“Our job is to make a good return for everybody who’s backed the business,” Keach says.

“But the other part of it is, we have a social responsibility to ensure we grow this [industry], so the people who deserve it can access it. We all need to ensure it’s eventually at a price point where everybody benefits.”

About ECS Botanics

ECS Botanics is a medicinal cannabis and industrial hemp business, cultivating (own and contract growers) and processing hemp for the wholesale market and its own retail food brand. The company’s main operations are conducted in Tasmania, Australia. ECS has the necessary licences to cultivate, supply and manufacture industrial hemp in Tasmania as well as a grower licence in Queensland. ECS holds import and export licences with the Office of Drug Control (ODC) as well as having been granted licences for the cultivation and manufacture of medicinal cannabis. ECS owns a farm in Tasmania for commercial cultivation of hemp as well as being the site of its next generation approach to medicinal cannabis. ECS owns a strategic stake in TapAgrico for the logistics, drying and storage of hemp seed.

Authorised on behalf of ECS by Alex Keach, Managing Director