Consumer CBD brand Kadenwood has aquired EcoGen Laboratories, a manufacturer specializing in hemp-derived CBD.
The deal, Kadenwood said, grants the Newport Beach, California-based startup ownership of all stages of product development, from the genetic makeup of seeds to the potency of the final product on store shelves.
The price tag of the deal was not disclosed.
EcoGen generated over $63 million in revenue last year through sales of its CBD materials to white label brands.
Kadenwood closed on $15 million in capital earlier this year and is raising a Series B funding round at a $180-million valuation. The company expects to reach $30 million in revenue by the end of 2020.
Kadenwood CEO Erick Dickens spoke with Benzinga about the transaction, what made EcoGen a valuable target, the company’s advertising goals and whether there will be more M&A on the horizon.
BZ: What makes the EcoGen acquisition crucial at this time?
Dickens: Kadenwood is determined to be the industry’s leading vertically integrated consumer goods company, and the EcoGen acquisition completes our genetics-to-shelf capability.
There were plenty of potential targets for Kadenwood. The EcoGen brand is known globally for providing exceptionally high quality isolate at competitive pricing. EcoGen is recognized as one of the early leaders of CBD processing and is the only major processing company not to experience a bankruptcy filing this year.
Was the deal impacted by the COVID-19 pandemic?
No. The deal was negotiated privately by both companies and nothing related to the pandemic impacted the transaction. Kadenwood was introduced to the EcoGen leadership after withdrawing a bid on another company with a similar capability. The Kadenwood and EcoGen principals negotiated and closed the deal directly.
How is the CBD industry rebounding from the effects of coronavirus?
The industry is experiencing a resurgence of growth both on the consumer goods and ingredient sales sides of the business as economic stability returns. There is a great deal of consolidation starting, as some early movers in the industry faced a cash crunch as a result of the economic turmoil caused by the pandemic.
The companies with strong leadership, solid business models and access to cash are able to lead the industry forward.
In what ways is Kadenwood elevating the CBD space?
In addition to leading the industry in quality and ingredient source transparency, Kadenwood is providing much-needed consumer product advertising and education. Already the industry’s largest national advertiser, Kadenwood is set to increase advertising spending to help educate consumers by over $10 million annually.
How does the EcoGen deal illustrate its efforts?
EcoGen is the quality and cost leader in CBD ingredients. The EcoGen deal makes Kadenwood the largest vertically integrated consumer products company with full control over genetics, seeds, farming and processing of the CBD ingredients.
What’s next for Kadenwood?
Kadenwood will continue to grow consumer awareness and household penetration of its Level Select and other consumer products. Kadenwood is committed to creating and building the leading consumer brand in the industry. Kadenwood is [also] currently exploring additional brand and biosciences acquisitions to improve our capabilities and portfolio consumer product offerings.
There are several quality companies in the industry that may be unable to survive without scale. This will lead to more M&A as industry consolidation continues.