Growing categories can be ripe for merges and acquisitions. Case in point: hemp food, whose sales are up double-digits.
On Wednesday, Manitoba Harvest, a Winnipeg-based maker of hemp seeds and hemp snacks, purchased Hemp Oil Canada, a bulk wholesale producer, private-label packager and processor of hemp foods and ingredients.
It was the second deal for Manitoba Harvest this year. In July, the company was bought by Compass Diversified Holdings, a Westport, Conn.-based firm billing itself as “an owner of leading middle market businesses” in industries such as circuit boards, environmental services, food and the manufacture of home and gun safes.
Manitoba Harvest paid $42 million for Hemp Oil.
The combined company will have “greater capacity to educate people on hemp foods, intensify innovation and expand accessibility to hemp food products,” Mike Fata, CEO of Manitoba Harvest, said in a release.
A slightly more cheeky assessment of the deal came from Hemp Oil president Shaun Crew. “This is a match made in hemp-heaven,” he said.
Manitoba Harvest and Hemp Oil do not compete with each other, according to a spokesperson. Manitoba Harvest makes branded hemp products such as its Hemp Hearts, hemp protein and Hemp Heart bars under its company name. It says it is the world’s largest hemp food manufacturer to grow, make and sell its own brand of hemp foods.
Hemp Oil supplies bulk ingredients and private label to approximately 400 customers in 13 countries. It has a 65% market share in hemp ingredients. For the 12 months to Oct. 31, Hemp Oil had sales of about $18 million and EBITDA of around $5 million.
The company recently opened a 35,000-sq.-ft., allergen-free production facility in its hometown of Ste. Agathe, Man., about 40 kilometres outside of Winnipeg.
Both Hemp Oil and Manitoba Harvest got going in 1998, the year that Health Canada legalized the cultivation of industrial hemp. (Though hemp comes from the same plant as marijuana it’s derived from a different strain.)
Hemp foods such as hemp hearts, which are the edible portion of hemp seeds, have been catching on in recent years with consumers.
Hemp seed sales in the American natural, specialty gourmet and conventional market rose 20% for the 52 weeks to July 7, according to SPINS. Manitoba Harvest represents 53% of total hemp seed sales.
SPINS data also shows that hemp seed as a primary ingredient in food is up 12% in sales in the U.S.
Similar Canadian market data was not available. But Kelly Saunderson, manager of corporate and public affairs for Manitoba Harvest, told Canadian Grocer that market penetration of hemp foods in this country is 3%, compared to 1% in the U.S.
That hemp food is more popular in Canada “speaks to the growth potential of both branded hemp food products and hemp ingredients,” she said.