“It has been impossible to get the big ecommerce platforms to understand that hemp food products are approved by the Food Safety and Standards Authority of India (FSSAI) and are different from hemp-based medicinal products that require a prescription from an ayurvedic doctor,” says an exasperated Jayanti.
Hemp gets a bad rap due to its infamous cousin marijuana. To make matters worse, they look somewhat alike. They both belong to the cannabis sativa family. While marijuana plants are short and bushy with broad leaves, hemp is taller with thinner leaves that are concentrated at the top of the plant. But the crucial difference is in the quantum of a psychoactive compound called tetrahydrocannabinol (THC), which gives a high to those who smoke hashish or ganja. Industrial hemp has a low THC, less than 0.3%, while marijuana has a high THC, from 3% to 30%. Hemp products shouldn’t give you a high.
In the past decade, a clutch of direct-to-consumer brands has emerged selling food, clothes and wellness products that are made from different parts of the hemp plant, but the industry is struggling due to an inconsistent regulatory landscape and supply chain issues.
In India, central and state laws regulate the cultivation of cannabis plants. The Narcotic Drugs and Psychotropic Substances (NDPS) Act prohibits the cultivation of cannabis plants for the production, consumption and sale of ganja, which is the flowering top, and charas or hashish, which is the separated resin. However, cultivation of cannabis plants for its seeds, leaves and fibres for medicinal, industrial, scientific and horticultural purposes is allowed and is regulated by state laws.
Delzaad Deolaliwala, cofounder of Bombay Hemp Company (Boheco) and chairman of Pan India Medical Cannabis & Hemp Association (PIMCHA), says there are about 50 companies in the medical hemp industry, which he values at Rs 80-100 crore.
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Boheco, founded in 2013, is possibly the oldest startup in the space. It sells over a dozen ayurvedic and wellness products derived from hemp seeds and leaves —from skin cream to pain relief roll-on. Boheco has raised Rs 27-30 crore so far from family offices and angel investors like Ratan Tata and Peak XV’s managing partner Rajan Anandan.
FARMING THE WEED
Deolaliwala claims that even though over two dozen farmers have secured licences to cultivate hemp, many have not ventured into it: “They lack viable seeds for cultivation. Achieving a 0.3% THC level is extremely challenging.” In the past six years, he says, Boheco’s demand for raw material has increased seven times to 60-70 tonnes. Meanwhile, prices have gone up, which makes hemp products less competitive in the market. “Many startups are heavily dependent on an unorganised market in hemp seeds. The price of seeds gets inflated because domestic supply is limited. This is a significant barrier for potential investors and newcomers eyeing the industry. Once we have more cultivation of hemp and a standardised market, things will change,” he says.
There are also concerns that unorganised suppliers could be selling the legal components of the plant to startups and illicit components (flowering top and resin) for drug trade.
Since it is a wild weed, the quality varies, which hikes production expenses. “The quality of cannabis leaves is not standard because wild cannabis is being collected from different districts. Once states allow medical cannabis cultivation, issues related to quality and price can be addressed,” says an entrepreneur.
Uttarakhand is the only state to grant licences for the cultivation of industrial hemp with THC levels below 0.3%. A few organisations, such as the National Botanical Research Institute, Lucknow, in partnership with Boheco, have been researching on developing low-THC seeds. However, the supply from these facilities has not been able to meet the growing needs of the industry, which is waiting for other states to allow the cultivation of hemp. Beauty brand Plum got a taste of the challenges when it launched a range of hemp cleansing oil, moisturiser and face oil last year. “Adding a premium and lesserknown ingredient like hemp just makes things trickier, given the changing regulation and variability in the quality of crop. To navigate supply chain obstacles, we have to maintain good relations with reliable raw material suppliers domestically and globally,” says Shankar Prasad, founder, Plum.
For companies like Haryana-based Ukhi, which manufactures and exports hemp textiles, clothing and even biodegradable “plastic” made from the stem, a big hurdle is the cost of production. Says Vishal Vivek, founder of Ukhi: “For most hemp clothes produced in India, yarn is imported from China and its cost is almost three times that of cotton. We also have to invest in fibre processing and machinery which is very expensive. This is hiking up the price of homegrown labels.” Its turnover in the last three years was Rs 7 crore.
“If the markets are not moving very fast, venture capital stays away. Hence, we haven’t seen much funding coming into this space,” says Arpit Agarwal, partner at early-stage venture fund Blume Ventures, who adds that the supply of and demand for hemp remain sluggish in India. “Since we have very few examples of businesses in this space, it also remains unclear if these are scalable or have a sound business model. This applies to usage of hemp as an apparel input and in wellness and food categories,” says Agarwal, adding that things could change if scaled-up businesses emerge in the next three-five years.
Nithin Kamath, founder of Zerodha, who was exploring investment in hemp startups through their investment arm Rainmatter, said earlier this year that he was convinced about allocating capital to hemp startups but was concerned about potential risks in the supply chain. He posted on the fund’s discussion forum in April: “… we are now trying to figure out any risks of investing in this sector, given regulatory greyness. We don’t want the government or any regulatory body to point the finger at us for supporting this sector. This risk, especially if any of the startups had a miss, for example, in their supply chain, if someone grew marijuana along with hemp and then the startup got into trouble (sic).” It is a real worry.
“When we started India Hemp and Co in November 2019, it was difficult to source hemp seeds of the right size. If they are harvested too early, hemp seeds are difficult to sell, which causes a lot of wastage,” says Bhattacharya, who adds that, over time, the company has been able to streamline the supply. “We work with two suppliers. We have tested the seeds we work with and they fall well within the parameters prescribed by FSSAI—0.2 mg THC per kilogram of beverages and 75 mg cannabidiol per kilogram of food. We are also trying to set up a direct supply chain with farmers in the hills.”
But money lies beyond food and drinks. Medicinal segment is the most lucrative in the hemp industry. According to Grand View Research, the global market size for cannabidiol (CBD), which is extracted from hemp leaves, was $6.4 billion in 2022 and is expected to grow at a compound annual growth rate of 16.2% to reach $205 billion by 2030.
In the past three years a few ayurvedic companies have emerged offering medicinal products made from cannabis leaf extracts that claim to manage pain, enhance digestion and even address sexual health concerns. The Ministry of Ayush gives licence for the sale of these medicinal products while the excise department allocates the cannabis leaves required. Only medical professionals can prescribe them.
Ananta Hemp Works is a threeyear-old startup, headquartered in Delhi, which sells medicinal products. Says cofounder Abhinav Bhaskar: “It’s not a product you can sell over the counter. Whenever there are restrictions, it is going to take a long time to establish a product and make it grow.” Despite the challenges, the company’s revenue, divided between ayurvedic and non-ayurvedic products in a 60:40 ratio, has doubled from FY2022 to FY2023.
Still, the hemp industry has not grown at a pace many young entrepreneurs expected it to.
Things are changing, though. In May, Biophore became the first company in India to receive approval from the Central Drugs Standard Control Organisation to manufacture a synthetic cannabidiol oral solution for neurological disorders. “It took the company five years to convince the regulators,” says CEO Jagadeesh Babu Rangisetty. Efforts are also underway at the Cannabis Research Project at CSIR-IIIM Jammu to produce export-quality medicine using cannabis plants.