Andy Cohen of Aaron Equipment Company discusses market values of cannabis and hemp processing equipment, and what he’s seeing during the COVID-19 pandemic and beyond.
About this segment of Blackbird TV
Recorded: October 13, 2020
Published: December 1, 2020
So I’m talking with Andy Cohen from Aaron Equipment in Chicago. I wanted to pick your brain a little bit about what you see going on right now in the world of the cannabis industry relative to values and the interest in the equipment. It seems that Covid might have changed some things, and we would like to talk about what you see happening. What do you see going on right now? I would more say so that more than Covid changed things, that it didn’t change things it was not there was no dip in business during Covid in either of these industries. They were deemed essential in the places where it’s legal, including chicago, so there was record sales for cannabis products, at least in my state, the state of illinois, during the Covid area, mostly what we’ve seen is a collapse of the hemp market, the hemp market there was a lot of build-up when it became legal about a few years ago federally to grow hemp a lot of people it was called this “green rush” a lot of people just rushed to get into this business. They borrowed money to buy a lot of equipment, and then the price of the raw product dropped, the bottom fell out of it, so they were spending and building companies based on projections of x amount of dollars per unit of product, it’s pretty much CBD oil but now are getting you know 5% of what they were so a lot of these companies, there’s a huge stakeout in that area of the industry. That industry mostly uses carbon co2 extraction because of the amount of product that needs to be ran through the extractor in order to achieve the same amount of oil as you would for THC, but there’s been a flooding in the market so much about it. So you’re getting a lot of inventory coming in, but it’s CBD-centric it’s not THC-centric, would that be an accurate statement? That’s not necessarily true, we’re getting both but there has been a lot of CBD-focused stuff, more so, i wouldn’t say it’s completely slanted but i’d say like 60 40. Interesting. Do you think that was a flash in the pan, that whole CBD? I mean, they were literally selling it everywhere. I mean you’ve got the problem with that industry is, so far there hasn’t been any FDA regulations against it, concerning potency, and other such checks and balances, so they were finding a lot that these products that promised you know x amount of milligrams of CBD per drink, they found out that you know this one had three, this one had seven, this one had ten, (this is just one company I’m thinking of). They found out—some companies found out—that the cans that they were storing their product—and they made like a CBD water—the lining of the can was actually neutralizing the effect of the CBD molecules. Nice! That’s something that they just see. Exactly yeah so uh yeah i i would say there’s that there’s a consolidation into the real players right now and it’s still happening and we’ll continue to, and that’s a real-time statement. I mean there’s there’s stuff I know our companies are working on a couple of different projects right now, that’s in that space and there’s a there’s a flurry of equipment that’s moving around and it’s moving—from your perception—it’s moving from the the under, maybe the under-capitalized or the smaller players into the big players hands? I would say it’s still in that transition there’s the smaller players that still have this equipment that want to recoup their investment and haven’t yet realized that they’re not going to get the number they’re asking for, that’s really where the market is right now for a lot of that stuff there are some realistic people but there are a lot of people who may have made unfortunate financial decisions to begin with. Buying during the green rush when they make…making investments and getting loans on the equipment during a time when they thought they’d be able to pay it off no problem based on the value of their raw product, but since that’s fallen off they’re already a little bit cagey to let go of anything for less than they think it’s worth because they’re already a little bit hamstrung financially. Yeah relative to a secured creditor’s perspective, if you have a crystal ball—mine’s broken—what do you see happening with with price stability that surrounds the hemp space right now. and in the equipment that’s being used there. what are you seeing? Well you know as I mentioned before there has been a lot of shakeouts, so there is a surplus of supply of this type of equipment in the market right now a lot of people looking to sell the same type of equipment so that has had a negative effect on the sales price in general across the board. I do think that it will come back similar to the way biofuels were. When there’s a democratic administration there’s usually tax incentives for alternate fuels but as soon as a republican administration comes in those tax incentives disappear there’s kind of like this wave of the equipment it gets bought it gets sold it gets bought and gets sold so I think that is going to be like that I don’t think people need to fire sale their stuff I think that they can hold on to it for longer if they can and that’s pretty much it. That’s a really interesting comparison the ethanol to to the hemp equipment, and and it’s one that I hadn’t thought of before, and that’s the reason I’ve got you here because you know more than I do! Andy, appreciate your time, thanks for being part of this segment. No problem.