The team of passionate pain relievers at Apothecanna — the first cannabis topical brand to expand nationally in the U.S. — is about to spread their “move more, feel better” ethos even further. HempFusion, a leading CBD supplement company, recently agreed to acquire Apothecanna for $15 million in a stock-and-cash deal.
Founded in 2009 in a warehouse in Denver’s River North Art District, where it still maintains its headquarters, Apothecanna pioneered the cannabis topical category with plant-based body care products.
“This sale marks the end of a 12-year journey,” said Apothecanna founder and CEO James Kennedy. “We could have never imagined the widespread consumer acceptance and scientific validation that has occurred [in the industry] over the past decade. Apothecanna joining forces with HempFusion and a visionary like Jason Mitchell makes me tremendously proud and excited for the future of the brand.”
Mitchell, who co-founded HempFusion with cannabis extraction innovator Ian Dequeiroz, is a board-certified naturopathic doctor and board member of the U.S. Hemp Roundtable. Also based in Denver, the publicly-traded (TSX:CBD.U; US:CBDHF) company distributes a portfolio of ingestible, USDA Organic-certified products to approximately 4,000 retail locations across all 50 states and select international locations. It’s Mitchell’s second external investment: HempFusion merged with his probiotics venture Probulin when it launched in 2015.
HempFusion will pay $15 million in a stock-and-cash combination to be determined later. The deal also calls for HempFusion to pay another $10 million if certain revenue targets for Apothecanna are met within 12 months. Apothecanna’s revenue in 2020 totaled over $4 million, double the dollar amount of HempFusion’s historical revenue. Prior to the sale, Apothecanna raised $3 million in seed round funding from private investors.
“Some companies just go out to simply acquire revenue. But for me, it was more about a strategic alliance — a creative acquisition with a widely-distributed, long-standing company that was built on a strong ethical backbone,” explained Mitchell, also HempFusion’s CEO. “Finding companies that need to be fixed [is] different than finding companies that are already amazing in their own right. Sometimes when you fix it, you break it. We [intend] to simply add value.”
It was Apothecanna’s distribution deal with CVS, which carries the line in 1,800 locations nationwide, that initially caught Mitchell’s attention. Later that year, Apothecanna became one of the first cannabis topical companies to enter the Canadian market through an exclusive licensing agreement with 48North.
“My mentor, Aveda founder Horst Rechelbacher, taught me the power of plant-based formulations and trusting the ingredients,” added Kennedy, who worked as senior designer for Aveda in product development and retail design and for Rechelbacher’s offshoot Intelligent Nutrients (I-N) as creative director. “Using the cannabis plant as our guide, we were able to embrace uncertainty and focus on delivering the best possible experience for our customers. Apothecanna products opened the door for tens of thousands of new customers, many of which had never previously had experience with CBD.”
The Apothecanna product range includes a bath soak, bug spray, deodorant, salve and intimacy oil along with a body lotion, body spray and body oil in four targeted botanical blends: Extra Strength, Calming, Everyday and Circulating. A CBD-infused base is complemented by active ingredients ranging from arnica, argan and frankincense to tea tree, capsaicin and eucalyptus. Apothecanna has also begun phasing out its original THC-infused combination formulas to focus on CBD-only products — and is prominently sold in dispensaries in Colorado, New York, Oklahoma and Montana with plans to expand to additional adult-use markets.
In addition to a broad retail footprint, Mitchell credited Apothecanna’s strong e-commerce strategy and established regulatory compliance as another draw. The Apothecanna website drives over 17,000 average monthly sessions, and nearly $2 million in gross sales per year with a 76% gross margin.
“When you see a company that has about 50% of their business coming from a direct to consumer perspective, we know that their business is in the proper threshold,” praised Mitchell, who promised that the Apothecanna acquisition won’t be HempFusion’s last. “Now we just need to fuel it. We are excited to help them become the company they’ve always wanted [to be].”
The timing for growth was fortuitously timed following the hire of Jeff Henretig, who Apothecanna appointed as president in July 2020. Henretig was tapped from fellow CBD wellness leader Lord Jones, where he served as CFO and guided the $300 million sale of the firm to The Cronos Group (NASDAQ:CRON), a global cannabinoid corporation based in Toronto.
“What I went through at Lord Jones — I learned so much during that stage and I learned that Apothecanna was readying for a similar path, I felt like I could apply my experience here in a more strategic role,” said Henretig. “Quality, customer centricity, and innovation have always been core pillars of Apothecanna’s strategy. In HempFusion, we found a partner that has a similar and complimentary focus, with the capabilities to bring Apothecanna into more doors and homes across both the US and abroad. We look forward to empowering even more people to live healthier lives.”