In the Energy Corridor, a group of industry veterans moved from working in oil, gas and minerals to working with a different type of commodity: legal hemp.
Ben Meggs and Jeromy Sherman are the co-founders behind Bayou City Hemp Co., which creates hemp-derived products at its 14,000-square-foot production and extraction facility in west Houston. Established in 2019, Bayou City Hemp makes a variety of different products from legal hemp, including CBD and other derivatives.
Meggs has a background in oil and gas land management. Sherman has experience with family-run businesses in minerals and farming management. Friends for more than a decade, the two saw opportunity in the expansion of legal hemp under the 2018 Farm Bill, federal action that allowed for Texas businesses to sell hemp and CBD products with less than 0.3% Delta-9 tetrahydrocannabinol, or THC, the psychoactive chemical compound in marijuana that gets the user "high."
In 2018, Meggs and Sherman launched a side business called LeafLife Wellness, which offers a full range of CBD products such as tinctures, gummies and topicals like face creams. Operating LeafLife, the team noticed that there were a lot of hemp farmers and a lot of retail storefronts selling hemp-derived products, but there was a bottleneck when it came to processing — the midstream portion of the hemp sector, so to speak. The duo believed that what Texas hemp farmers needed was a high-quality processor with the capital infrastructure and talent necessary to create safe and quality hemp products.
"Let's be that processor we can't find," Meggs said. "Let's be transparent, let's have high quality, let's be innovative. It was a business opportunity."
Bayou City Hemp moved into the 14,000-square-foot facility in the Energy Corridor last spring and began production in the fall. The Lone Star State's hemp sector is still in its early stages. Bayou City Hemp received its license to begin processing hemp around the same time that Texas farmers received licenses to starting growing, so the company buys a large amount of hemp from Colorado. Texas farmer hemp acreage is a fraction of the acreage seen in states like Colorado and California, where recreational cannabis is legal. Regardless of the market dynamics, Bayou City Hemp works to source as much hemp as it can from Lone Star State growers.
"Last year, we worked with about 10 Texas farmers," Sherman said. "This was the first [hemp] crop that Texas has grown in 80 years, so it was really an R&D year for the Texas farmer last year."
The company employs a team of 20 at its multimillion-dollar west Houston facility, including a Ph.D. chemist, to produce regulation-grade hemp products made with CBD, Delta-8 or lesser known hemp derivatives, like Delta-10-THC and CBN. Bayou City Hemp uses supercritical carbon dioxide extraction technology to extract the CBD and other cannabinoids from the hemp. The firm plans to add more extractors in order to increase production in the future.
After extracting and isolating the desired compounds, chemists refine the products to test for potency. Bayou City Hemp uses nanoemulsion technology to improve the delivery of its products into the user's body. The compounds are then used to make edibles like gummies, water-soluble beverages, topicals and vape pens. Then, all finished products are tested by third parties at facilities certified by the U.S. Drug Enforcement Administration.
Bayou City Hemp execs said they wanted to raise the bar when it came to quality. They poured millions of dollars into the build-out of their production facility because they welcome increased regulation from the Federal Drug Administration. Bayou City Hemp is not alone in that desire: Colorado hemp farmers are looking to the federal government for assistance because CBD prices are falling and the sector has gotten a bad rap due to bad actors, the Denver Business Journal reported.
"[Regulation] would stabilize the industry because you would only have high-quality producers that truly take care with what they're giving to people," Meggs said.
Bayou City Hemp CFO Karen Trotter, who also has experience working in the oil and gas sector, said the Covid-19 pandemic served to accelerate the general public's education about CBD and other hemp products, like Delta-8-THC. Delta-8-THC is another natural, psychoactive chemical compound extracted from hemp, which generally gives users more mild intoxicating effects than its federally illegal relative, Delta-9-THC. The pandemic was stressful, and many people sought alternatives to prescription drugs or the liquor bottle to ease some of their anxieties, Trotter said.
Big names around Houston have started to take notice of Bayou City Hemp's products and technology. James Beard Award-winning chef Chris Shepherd worked with Bayou City Hemp's nano-emulsified water-soluble products to launch a series of signature CBD cocktails for his Underbelly Hospitality restaurants. Houston brewery 8th Wonder partnered with Bayou City Hemp in creating non-alcoholic seltzers infused with CBD and Delta-8-THC. Both of the Wonder Water seltzers are sold at the 8th Wonder Brewery taproom in East Downtown.
"As soon as we start working with folks like Underbelly and 8th Wonder, those are brands people trust," Trotter said. "It was hugely beneficial for us to partner with folks like that to bring it a little more mainstream — because cannabis, in general, has still got a stigma to it."
