Mile High Labs scales up CBD extraction with its ‘monsters’

BOULDER — Mile High Labs, a CBD company for the wholesale market, is scaling up its production with state-of-the-art industrial extraction machinery.

The company has created the Mile High Monster, a set of machinery that gets placed at hemp farms to extract industrial loads of CBD and other hemp extracts on-site.

The decision to make extraction equipment of this scale — the first of its kind — stems from market research predicting the size of the CBD industry.

“We had heard about market research that had come out talking about the CBD industry potentially growing to $22 billion by 2022,” said Stephen Mueller, founder and chief technology officer of Mile High Labs. “Those are large estimates, and no one was talking about where all that CBD would come from to make those products to allow the market to grow that large.”

Hemp farms have grown from 25,000 acres in 2017 to 75,000 acres in 2019 to a projected 150,000 acres in 2019.

Mile High is a company that extracts the CBD and other cannabinoids from the hemp flower and turns it into a consumer product, which it then sells to retailers and brands.

But to do that at large scale, the company built it first two Mile High Monsters to do remote extraction. The monster is a modular system shipped to a farm on six flatbed trucks. When constructed, it looks like two large buildings with augers between them. One building will be used for storing and staging the hemp to be milled down into a powder. The second building will have two stories of piping and tanks. Mueller said it looks like a sophisticated chemical plant. That’s because inside that building, large scale extraction will be done with a solvent to mix the hemp with alcohol. Spent hemp will be recycled and the filtered mixture will have the alcohol evaporated from it, leaving the desired crude oil behind. That crude oil will be shipped to Mile High’s Loveland refinery, where it will be purified into isolated CBD. When it is purified to the desired amount, it can be sold to consumer-facing brands.

The Mile High Monsters will be able to process 50 acres of hemp a day, which will output six 55 gallon drums of crude hemp oil.

To start, Mile High sent a Mile High Monster to two of its partner hemp farms. But Mueller acknowledged that launching the extraction machinery — new technology that the company created — is a bit of a gamble for the three-year old business.

“To me, it was obvious hemp CBD could get really big,” he said. “Farms can plant as much acreage as they want. It’s a global market. It was obvious to me if it was going to be successful, we needed to build an actual commercial plant. Not something lab scale, but an actual commercial, industrial scale plant. At the time, that tech did not exist, so we invented the tech to do that.”

That included three years of work developing and optimizing the process and equipment for the Mile High Monster. R&D included Mueller, whose background is in physical and electrical engineering, teaching himself chemical engineering. It also meant building out and testing miniatures of the Mile High Monster and testing them out for a year before building out the full-scale version. While all the pieces and equipment have been around in other industries, Mueller said no one had put them together the way Mile High did for the purpose of hemp extraction. To support the construction, Mile High raised a record-breaking $35 million Series A.

Even with all that R&D, there was a chance Mile High could have overestimated the desire for CBD of this scale.

“It was a leap,” he said. “We thought it would be big, but there was a chance we built something too big. But we’ve been lucky on timing and the industry has exploded in the last year-and-a-half.”

Mueller said that the company doesn’t have plans to build a third monster right now in order to not create an oversupply of product. However, he said the company could easily build another if the market calls for it.

Looking ahead, Mueller said to expect more mainstream brands getting into the CBD industry as well as more R&D from companies like Mile High looking at what different cannabinoids can be produced from hemp. And of course, Mueller said to expect the industry to continue its growth.

“We don’t know how much CBD the world really needs,” he said. “In 2018, we produced 500 million doses. That seems enormous, but we plan to do five to 10 times that this year. It’s a lot; it’s incredible. If you look at a container of isolate and how many people that reaches, it’s enormous.”

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