Darren Christie is a Victorian licenced builder passionate about saving old growth forests. As a builder, he uses a variety of materials including chipboard and plantation timber for framing. Darren has wanted to develop a substitute for wood chips and timber used for framing. About a decade ago he created a company dedicated to using industrial hemp as a building product. The story of how Darren started the Australian Hemp Manufacturing Company is relevant to this case.

About 20 years ago Darren met Adrian Clarke a mechanical engineer who had developed a decorticating machine for processing industrial hemp. Traditionally hemp plants were cut much like sugar cane crops and then left to decompose (retting) on the ground until the fibres separated from the core of the stem. These fibres were used for a variety of products (rope, sales, clothing). In fact, it was said that the British Navy sailed on the hemp plant because the ropes and sales of the navy were critical to ship building before the 20th century. The core of the stem could be mixed with hydrated lime as a substitute for woodchip.

Darren ran community workshops on occasional weekends teaching interested people how to build with industrial hemp. One of Darren's hemp walls featured in a Victorian Home exhibition. Darren worked with farmers and seed producers and became an expert in planting and growing industrial hemp. He worked with an agronomist who had developed an industrial hemp seed known as "Frog 1" which is particularly suited to Australian conditions.

The Australian Hemp Manufacturing Company is a subsidiary of DSD (Developing Sustainable Directions) Pty Ltd, a research and development company based in Neerim South Gippsland. CEO Darren Christie understood Adrian Clarke's dedication. Both Adrian and Darren believed there was great value in the Australian economy for building products and processing of the raw material future adding to value chains, such as: bio fuel, paper, insulation batts and particle-boards. Darren knew that there were many other uses for industrial hemp in the clothing industry and the seeds could be used in the food industry. Importantly, Darren saw that it could be a replacement for fibreglass and a cement replacement in the building industry. Darren purchased a decorticating machine from Adrian Clarke 10 years ago and rented a factory in Morwell, Victoria. At the factory Darren began experimenting with the machine and acquired a detailed operating knowledge of the decorticating process. He ran information sessions with local farmers in the Gippsland region and became known as a go to person for industrial hemp as a building product. Darren's company, Australian Hemp Manufacturing Company has been working with the Infrastructure Engineering Department at the University of Melbourne with Master of Engineering capstone research projects on the development of wall panels. Over the past 5 years' students in the department have completed research projects testing the material properties of industrial hemp wall panels. The objective of the research is to replace Styrofoam and chipboard used in current wall panels for building construction. Darren has employed graduates from the university to work on various mixes for building panels.

AHMC is now moving its processing plant to Seymour this will ensure logistics and transport costs becomes paramount. Cost savings are inevitable for AHMC to make this process viable into markets ensuring the farmer gets more value for his fibre crop. Together with industry partners the aim is to scale up production with forecast projections into 2025 growing commercially 250 thousand hectares around Australia thus using rail and cost savings.

The 2030 program would allow us to quantify one million hectares around Australia giving every state opportunity for more upscale production. AHMC's philosophy and direction will make the hemp industry in Australia very lucrative and export markets become what Australia has been renowned for. Darren has said:

"We are the resource to the rest of the world; we are Australian grown we are Australian owned and Hemp is the new Australian economy driving it into the future"

Darren is also the current president of iHemp Victoria. iHemp Victoria is a non-profit organisation representing farmers and builders interested in growing and building with hemp products. Darren funds his research by building homes and factories in Victoria. He uses sub-contractors to work on various building projects to maintain cash flow.

Background to the Case Question: Examine the industrial hemp industry in Australia and Victoria. You can consider Darren's business to be in the start-up phase even though he has been working on this project for many years. He is currently funding this start-up from the profits of running a building business. As such, he is currently seeking venture capital funding to take the next step to building a manufacturing plant producing exterior wall panels for cladding in Seymour, Victoria.

As Darren's hemp business is currently at the start up stage, they have no customers for the hemp panel product. He has already won awards for internal hemp walls in houses and has an ongoing research partnership with the top research university in Australia, The University of Melbourne. He feels that he is ready to take the business to the next stage which is to incorporate the hemp panels into his existing building business. He is also open to selling his hemp wall panels to other builders and building retailers such as Bunnings. Although he has a ready product that is ready to be marketed he needs help bringing this product to the market.

The product is a hemp-based wall panel that can be used in place of conventional external cladding. The product has been prototyped and the AHMC is now at the stage of planning to scale up production in a new factory in Seymour. Darren hopes to sell hemp walls for cladding at a market price comparable to existing external cladding products. The advantage is that his product is sustainable, Australian made, locally available which enhances supply reliability in this difficult COVID time. It can be manufactured cost effectively in regional Victoria.

Darren has not decided on a price point. He understands he can command a premium price because it is an Australian made sustainable building product. He also understands the necessity of being price competitive and has a dilemma as to how to position his panel. He does not wish to present his product at the lower end of the building market. He does not want to be associated with a "cheap" product.

Hint: Go to the Bunning's website and look for standard off-the shelf external wall panels. Note the variety of sizes and prices that are available. Darren has a factory and he can manufacture to any size.

Question 1

Darren needs some advice on the competitive landscape of the industry that he is stepping into. Although he is a builder by trade he understands the difficulty of convincing the market to take up his product. He asks you for advice on how to analyse the industry for hemp based wall panels.

Question 2:

As he starts to grow this business he intends to build the brand as well. Darren understands the importance of having a good brand name associated with sustainable building materials and having his hemp products positively perceived by his potential customers. Darren has asked you to develop a brand strategy for the Australian Hemp Manufacturing Company's new external wall panel. In developing a brand strategy outline some of the things or tasks that you recommend Darren to undertake. Note that he first should build brand awareness before brand loyalty

Hint: Take into consideration the association with a brand name research university. How useful is his current position as President of iHemp Victoria and his current role as the CEO of a building business?

This case study is not only about the building industry. It is about the supply chain which begins with an Australian seed "Frog1" that farmers can use to grow the industrial hemp plant. It is about how research collaborations can be leveraged for business opportunities. It is about the innovation management process for a new product.