Australia’s listed hemp & cannabis space is set to get a new entrant, as Tasmania-based 13 Seeds (ASX:13S) prepares join the ASX boards in early December.
The hemp and nutraceutical company is planning to raise up to $6m via the issuance of 30 million shares at 20c.
13 Seeds sells hemp-based food and skincare products into the local market, and a material portion of the funds raised will be focused on sales and marketing as the company looks to expand distribution channels across grocers, health store and pharmacies.
It was initially founded in 2016, on the back of years of product development by husband and wife team Terry Memory and Gemma Lynch-Memory. The pair’s business idea was initially sparked by a search for treatment for their son’s psoriasis condition.
“We got cream from a skin specialist which did help a bit, so we started to isolate the elements it was comprised of,” Memory told Stockhead.
One of the elements was hemp oil, and after applying it directly on the affected areas, Memory said within two weeks the lesions had cleared and after a month they were “85 per cent gone”.
“This was back in the mid-2000’s, and that’s when our research into hemp products started in earnest.”
Not long after, Terry and Gemma bought a farm in Tasmania and commenced running trial hemp crops, testing different production processes and working together with government and industry.
Over the next few years they developed a range of hemp-based skin care products and built a following in the Tasmanian market.
“Then on November 12, 2017 the law changed on food, and on November 13 we launched 13 food products,” Memory said.
Gaining hemp momentum
And after a particularly successful run at a hemp expo in Melbourne, the pair realised they’d built a business with significant growth potential.
The company now sells 15 food products and 10 skincare products into the Australian market, and has built out its corporate advisory team with experienced executives from the consumer goods sector.
That advisor group included Brett Charlton, who wants to leverage his experience from a career at multinational food and healthcare companies to assist 13 Seeds execute on its distribution strategy.
“As a sector it’s a recent category — it only opened for business in November 2017. So there’s lots of players coming into it and we see that as a good thing — everybody’s advertising, everybody’s marketing and it’s a good time to get a first mover advantage,” he told Stockhead.
Within that framework, Charlton said the company was focused on two areas to stand out from the pack; premium quality Tasmanian produce, and an asset-light distribution model.
“I think one area where we offer a unique perspective is with our provenance. Tasmania’s really the jewel in the crown of the Australian food bowl and that’s a key aspect we’re really hanging our hat on,” he said.
“The other thing we’ve highlighted in the prospectus is a material allocation of funds towards sales and marketing. We’re not buying farms or building manufacturing assets, we’re an asset-light company that’s really focused on growing the 13 seeds brand. And that’ll be the most important part for us.”
To manage pinch-points around hemp supply, the company has invested in two silos at Launceston that can hold up to 50 tonnes worth of hemp seed.
That gives it a backstop to ramp up production where required, while running a leaner and more flexible operation sourcing hemp seed from Tasmanian growers.
“The model allows our farm site to become a really powerful centre for innovation. We can turn around a product in a week and get it out to the marketplace,” Charlton said.
He added that 13 Seeds would initially be more focused on the food side, with three broad product lines across cooking inputs (eg hemp-based flower), ready-made goods such as hemp porridge, and medicinal oils and capsules.
“We have all the relevant licences for food production. It’s really about the purity of that Tasmanian produce, with an asset-light food and skincare company offering the cleanest products possible for people who want to look after their health,” Charlton said.
“It’s about growing the brand through good marketing and strong partnerships. The industry has some tailwinds behind it and it’s an exciting time to be a part of it.”