There are reports that the cannabidiol (CBD) market will grow by an estimate of 700 percent by 2020. One report by Hemp Business Journal, an industry market research publication, projects that the market will reach $2.1 billion by 2020. That's compared to just $202 million last year. This is great news for the cannabis industry in general and for hemp-based products in particular, with companies such as CV Sciences, Marijuana Company of America, and Aurora Cannabis poised to reap large dividends.
Hemp products are going mainstream, but that's really only a portion of the entire cannabis industry. Legal cannabis is projected to reach $57 billion by the year 2027. Two-thirds of that will be from recreational marijuana usage, while medical marijuana consumption will make up the final third.
Companies Capitalizing on Cannabis
To get a sense of why hemp is such a hot category, one needs look no further than CV Sciences, the leading supplier and manufacturer of hemp-based phytocannabinoids, which includes cannabidiol (CBD) oil. CV Sciences is also the developer of specialty pharmaceutical therapeutics. The publicly-traded company runs two separate business segments: a division that focuses on developing and commercializing therapeutics that incorporate synthetic CBD, and its consumer division, which focuses on creating plant-based CBD products that can be sold in a number of retail sectors.
At the end of its second fiscal quarter in 2018 ending on June 30, CV Sciences had $7.2 million cash on hand, increasing its total cash position by over $3.3 million in the last quarter alone. Stockholders' equity grew to $21.8 million by the end of Q2. Sales for that same quarter were $12.3 million, largely due to the company's growth across a few sectors (wholesale, retail, and direct-to-consumer) simultaneously. That $12.3 figure is a 53% quarterly increase from $8.1 million just three months prior. But it's not just revenues that are growing in the sector; profits are remaining strong, rising to $9.1 million in Q2, thanks to continued strong margins.
CV Sciences' PlusCBD Oil has done well since its dietary supplements were launched, and are now sold in 1300 health food retailers. "It's evident that hemp-derived CBD products are doing better and growing faster than almost every other category in the supplement industry, and it's been a long time since we've seen a supplement trend truly demonstrate demand in such an immense fashion," said Stuart Tomc, CV Sciences' VP of Human Nutrition. "There are no barriers to acceptance as the idea of hemp-derived CBD is finally ripe. Consumers are embracing hemp-derived CBD."
In addition to their popular CBD oil products, CV Sciences' current lead drug candidate, CVSI-007, "addresses the multibillion dollar smokeless tobacco use and addiction market," says Joseph Dowling, the company's CEO. CVSI-007 will be administered in conjunction with nicotine in the form of chewing gum; the goal is to provide a treatment for addiction to smokeless tobacco, a market estimated at $17.45 billion with no FDA-cleared drugs available.
A Category Ripe for Growth
Why is CBD such a hot category right now? While some of it is tied to legality, a major reason is simple: science. Studies have indicated that CBD has a number of therapeutic benefits and that it serves as an antioxidant and neuroprotective. Given that it is associated with the growing $3.72 trillion wellness industry, it makes sense that CBD would stand to benefit from the rising tide. As education about cannabis products grows, attitudes towards CBD has shifted, pushing it that much further mainstream. Plus, unlike the well-known compound tetrahydrocannabinol (more popularly known as THC), hemp and marijuana-derived CBD isn't psychoactive, so one can't get high on the compound.
I spoke to Aliza Sherman, the CEO of Ellementa, an international educational network that connects female consumers to CBD and cannabis brands in cities across the US and Canada, about what consumers should be on the lookout for when it comes to CBD products. First off, she says, make sure to check whether CBD is legal in your state, as there are still some states that criminalize all cannabis use. Secondly, according to Sherman, "not all CBD extracts are created equal", thanks to a lack of standardized requirements in the industry. Consequently, consumers need to make sure that they are only buying products from reputable companies that are transparent about their extraction processes, and forthcoming about third party test results.
A huge for the sector's growth is that innovation is rewarded by the bottom line. Companies like CV Sciences that are continually growing and profitable can pursue developing new consumer products and drugs without the need for any outside capital - and when innovation is cheaper to execute, you tend to see more of it.
As the legalization of cannabis and cannabis-derived products continues to gain momentum, expect to see companies like CV Sciences continue to come up with innovative solutions. And, as an entrepreneur and businessperson, it might pay to ask yourself if there's any way to get professionally involved in the cannabis industry; there's little evidence that its growth will be slowing down anytime soon.