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April 11, 2019

Where There’s Smoke There’s Fire – a CBD update

MHT Partners  | Consumer Investment Bank

I recently attended Global Pet Expo, and over the prior two and half months we also attended ICR, Fancy Food, OR and Expo West.  To say CBD has dominated the conversation would be an understatement.  In general, here’s a few seeds to chew on – I promise I’m not just blowing smoke:

  • While CBD is a non-psychoactive compound found in hemp and cannabis, truths, falsehoods, dreams and fears abound about its present and future states given the science around it is still evolving, and the space, in general, is in its infancy.
  • While the market is moving faster than a coffee stain (coffee is also a cannabinoid!) and is projected to reach $20B + by 2022 (up from an estimated and approximate $1B today), there’s a school of thought that it’s better to be “selling pick axes to the gold rushers” (services, co-packing, packaging, etc.).
  • Stroke-of-the-pen risk, while perhaps diminishing from a perception perspective, is still very real. The knowledge of its efficacy (good and bad) continues to evolve.
  • CBD in and of itself does not make a great product or company. Similar to commentary surrounding the internet 20 years ago (“is it a standalone business model?”), CBD product companies need to have more than just CBD in their value proposition – CBD is a differentiator, but not a model in its own right.
  • CBD products (consumable and beauty) are viewed as real opportunities, though products largely remain outside mainstream retailers and limited to the independent, all-natural channels.
  • No one has really “cracked the code” on a complete CBD product: user friendly forms (tinctures, pills, drops are lacking), product (different dosage and different products for different needs – energy, pain management, epilepsy, insomnia, anxiety/relaxation), messaging, packaging etc.  Ultimately what will determine the winners are points of sustainable differentiation from a consumer perspective.
  • Hemp CBD, because it results in THC levels < .3% holds an advantage over cannabis CBD (with higher THC levels) and because of this, enjoys a much larger potential retailer market at this point.

MHT Partners, a leading consumer investment bank, is actively exploring the CBD deal space and welcome speaking with interested parties operating or investing in this growing market.

 

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