CBD isolate and distilate
A group of investors with experience in the food business -- including Steve Ells and Monty Moran, founder and former CEO of Chipotle Mexican Grill -- established NectarTek in the wake of the 2018 U.S. Farm Bill to supply the wholesale market with CBD isolates and distillates. Pelton joined in 2019, and CEO Joe Falls came on board in 2020.
After operating two CBD extraction facilities in Las Vegas and Pahrump, NectarTek consolidated operations on a three-acre property in Pahrump with a 10,000-square-foot processing facility in late 2020. "It wasn't cost-effective to have two complete facilities," explains Pelton.
With about 80 percent of the staff working on the production side, three NectarTek divisions handle extraction, distillation, and isolation. "Each division has its own capabilities and its own requirements for infrastructure," says Pelton.
Pelton's background in food-processing equipment with Wolf-tec and JBT has helped with the modification of off-the-shelf extraction systems for NectarTek's proprietary manufacturing processes. "We do cold ethanol wash extraction," says Pelton. "We modified [extraction equipment] extensively for food-grade processing, tracking of different systems, and monitoring of the systems throughout to give us a consistent, quality product."
ISO-certified and adherent to Good Manufacturing Processes (GMP), NectarTek is focused exclusively on the wholesale market. "We specifically supply other brands," says Pelton. "We process the ingredient -- CBD isolate -- and everybody else takes the isolate and turns it into consumer products or whichever direction they wish to go with it."
The key NectarTek selling point? "It's the purity and the consistency of the product," says Pelton. "When people receive our product, they know what they're getting, and they're able to set up their standards to our level so they get consistent yields out of their products. . . . People have come to us, then they've tried some cheaper options out there, and then they've come back to us."
The majority of the hemp that goes into NectarTek's extracts comes from two farms in California. "We did extensive inspections of their product before we started our agreements," says Pelton. "We visit them every three months or so."
Food manufacturers are not yet the primary customers, and Pelton says they won't be until the FDA starts to regulate CBD products. "We're geared up for that, and that's the direction we're ready to go, but right now it's mostly cosmetics, lotions, tinctures, and things along those lines," he explains. "We built this place to reach that marker [food manufacturers] based on our experience."
Most customers are domestic, but about 10 percent of output goes to foreign accounts in Europe, South America, and Asia.
The defining trend has been the ever-shrinking price of CBD extracts. In January 2019, a kilogram of CBD isolate cost $6,000. A year later, it was $2,000. As of January 2021, a kilo of CBD isolate ran just $600. "It went down rapidly last year," says Pelton. "We are seeing it start to trickle back up."
The nosedive precipitated the consolidation in Pahrump, as NectarTek let go about half of its peak staff of 75 employees.
"We're working at a skeletal crew level, slowly manufacturing what we can to maintain our business with the anticipation it will continue to increase and the price point will get back up to be a little bit more profitable product, then we can begin investing the profits back into the company for growth."
Challenges: Righting the ship after a tough year. "The whole key to our growth is obviously sales," says Pelton. "I can build a huge facility and make a tremendous amount of product, but if we don't have a channel to get that out into the world -- that's our biggest challenge."
Opportunities: Filling demand as CBD becomes increasingly mainstream. Pelton says the cosmetics industry is a target market.
NectarTek also has an opportunity to boost exports, he adds. "It seems like every month, different countries are coming on board and authorizing CBD," says Pelton.
Needs: "Consistent partners," says Pelton. "I've found that if you build a high-quality, consistent product, people are going to partner up with us and allow us to be their supply chain."