Cannabidiol as an international commodity Regulations establishing the guidelines on the cultivation, processing, use, and commercialization of cannabis has changed...Read more
Investment trends in the CBD industry
Different independent analyses of the CBD industry have unanimously confirmed that the industry is rapidly expanding with an impressive metric suggesting a continuous growth trend. Currently, the value projections for the industry are set to the tune of several billions of dollars. Expansion is expected to be driven by the enactment of advanced cannabis policies and increased demand for cannabis-derived products. Anecdotal evidence and scientifically verified reports on the benefits of these products keep increasing, driving demand for their production. Following the passage of the 2018 Farm Bill, the sale of CBD products experienced an unusual surge, with sales expected to grow from $591 million in 2018 to $22 billion by 2022.
Provisions of the 2018 Farm Bill Act allowed the large scale cultivation of hemp by licensed farmers under a strictly regulated cultivation program. This Act also improved the commodity status of cannabis products by allowing interstate commerce hemp-derived products. Taking advantage of the new regulations, stakeholders have increased their investment into cannabis products with companies introducing cannabis stock listings in different stock markets. Popular listed cannabis stocks generating impressive ROIs include Curaleaf Holdings (CSE: CURA), The Supreme Cannabis Company Inc. (TSX: FIRE), CBD Global Sciences (CSE: CBDN), Hexo Corporation (NYSE: HEXO), Tilray (NASDAQ: TLRY) and CV Science Inc. (OTCQB: CVSI).
Interestingly, the last couple of years have borne witness to cannabis companies increasing their valuation beyond mere cannabis cultivation. In 2018, Canopy Growth acquired a Colorado-based intellectual property company for the development of cannabis-infused derivatives. Tilray also acquired the necessary marketing framework that allowed the distribution of its products through over 16,000 retail stores in the United States. Additionally, Hexo Corporation has secured a license from Health Canada for the sale of cannabis edibles, topicals, and extracts in Canada. In all, cannabis investments are growing and are considered lucrative in the long run.
Barriers to investment in the CBD industry
The legality of cannabis with respect to growth, possession, use, and marketing is a hotly debated topic in different regions in the world. In the United States, different regulations favorable to cannabis investment have been enacted. However, the gray areas surrounding the legality of certain cannabis-derived products are considered major barriers to investment. On the federal level, cannabis remains illegal in the United States, prompting cannabis companies to seek cover under state-licensed programs. As a result, cannabis companies are subjected to the problems of ever-changing local cannabis legislation. Cannabis regulations can also be significantly different across different state lines and, as such, they create a marketing barrier with respect to sale, exporting, and importing.
Strict licensing requirements for inclusion into state cannabis programs are also considered major barriers for the investment in cannabis-derived products. Financial institutions are also only allowed limited financial dealings with cannabis companies. This has affected insurance companies and banking institutions and created a financial barrier for new players in the CBD industry. In developing countries, especially certain countries in Africa, the major barrier to cannabis investment is the prohibition of any form of cannabis-derived products.
Popular brands, investors, and sponsors in the CBD industry
- Dixie Brands
Dixie Brands is a widely recognized player in the global cannabis market. Located in Denver, Colorado, Dixie Brands is considered a trusted source for innovative, safe, effective, and delicious cannabis products. Taking advantage of the recent integration of cannabis into the midstream lifestyle, this company offers premium cannabis products designed as elixirs, edibles, gummies, topical, and mints. Cannabis-derived balms, bath soaks, tinctures, and truffles are also available. Founded in 2009 by Chuck Smith and Tripp Keber, the company is currently listed on the stock market with a total funding amount of over $37 million. As published in its Q3 2019 financial report, the third-quarter revenue of Dixie Brands was pegged at over $3 million—a healthy upgrade from the second quarter’s revenue valuation of $2.4 million. Also, at the close of the third quarter of 2019, Dixie Brands announced a collaboration with a new strategic funding partner providing $1.5 million in the form of an unsecured, non-dilutive loan. The company is expected to grow steadily through the next couple of years based on new investments and collaborations.
- GW Pharmaceuticals
GW Pharmaceuticals (NASDAQ: GWPH) is a global leader in the research and development of prescription cannabis-derived medicines. Based on the founding principle of developing and commercializing cost-effective pharmaceutical products made from plant-derived cannabinoids, the company has developed two different innovative drugs: Sativex, for the treatment of multiple sclerosis, and Epidolex, for treating rare forms of epilepsy. Founded by Geoffrey Guy and Brian Whittle, GW Pharmaceuticals now distributes cannabis-derived drugs across five continents. The company announced a $68.4 million net sale in a close of Q2, generating a net revenue valuation pegged at $72 million. GW Pharmaceuticals started researching cannabis therapeutic as early as 1998. Currently, revenue is expected to soar significantly in the coming years as the company boasts of different novel cannabinoid-derived drug candidates for the management of neurological conditions.
- Golden Leaf Holdings
Golden Leaf Holdings is a leading cannabis company headquartered on the West Coast of the United States. Founded in 2014 by Mike Genovese and William Simpson, Golden Leaf Holdings is regarded as one of the biggest cannabis companies in North America with a brand portfolio built on cannabis oil solutions. By extension, the company also operates a consumer-driven cannabis product service with a focus on production, processing, distribution, wholesale, and retail. In May 2020, Golden Leaf Holdings reported the financial results for the fiscal first quarter of 2020. Compared to the fourth quarter of 2019, the company recorded quarterly revenue of $4.7 million—a 21% increase compared to the last revenue report. The company also announced a gross profit of $1.7 million and lowered its operating expenses to $3.3 million. By leveraging on advanced research techniques and an expert management team, Golden Leaf Holdings is expected to grow its product portfolio and increase revenue quarterly.
- Canopy Growth Corporation
Canopy Growth Corp. is a publicly traded, licensed cannabis company focused on the regulated cultivation of cannabis in North America. This company is largely recognized as a leading producer of diversified medical cannabis with subsidiaries, including Tweed Marijuana Inc. and Bedrocan Cannabis Corp., largely funded by Constellation Brands Canada. The stocks of Canopy Growth Corp. are popular and regarded as one of the best to invest in. At the close of the first quarter of 2020, the company reported a revenue valuation pegged at $90.5 million. As the demand for medical cannabis increases steadily, Canopy Growth Corp. is expected to gain from the market share and launch new products.
With the introduction of favorable cannabis legislation across the world, cannabis investment is expected to increase significantly in the coming years.