Sometimes lost in the fray of the legalization of adult-recreational and medicinal marijuana in various markets around the world, is the opening up of potential for CBD products to the mainstream public. The non-intoxicating cannabinoid cousin of THC, cannabidiol (CBD) is seeing a surge in popularity, especially in the US and Europe.
According to a new report from New Frontier Data, the CBD industry is set to grow to $2 billion by 2022—after witnessing that in the US alone, the CBD industry grew by nearly 40% in 2017.
This potential isn't lost by several of the major cannabis companies that are jockeying for position with new products on deck. The companies include Canopy Growth Inc. (TSX: WEED) (NYSE: CGC), Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), CV Sciences Inc. (OTC: CVSI), Tilray Inc. (NASDAQ: TLRY), and The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF).
CBD's versatility in forms of intake presents manufacturers with several options and markets to serve.
Canopy Growth has managed to continuously steal headlines with CBD. From its massive deal with Constellation Brands, which warranted a $4 billion injection from its partner to develop new cannabis-infused beverages, to funding research that proposes the possibility of CBD products even for pets.
And the market isn't just restricted to North America, as The Green Organic Dutchman recently just proved—making a big splash into the European Market through the acquisition of premium EU CBD brand Cannabigold, which has access to over 750 million customers across 13 countries.
Whether they're derived from hemp or from marijuana, CBD oils will have a big role to play in the coming cannabinoid boom, as new markets open up around the world. The non-psychoactive cannabinoid will likely be found on more and more grocery shelves and in more products in the years to come—and several of today's leading companies are already priming themselves and their products.
CBD MARKET DEVELOPER MILESTONES
Canopy Growth Inc. (TSX: WEED) (NYSE: CGC)
Expectations on Canopy Growth couldn't be any higher, in the wake of the recent announcement that its partner Constellation Brands will be injecting $4 billion into development of new cannabinoid-infused products. Among those products most obviously will be a series of beverages, including those with THC and with CBD. However, it was another recent announcement that Canopy is researching the potential of CBD products for pets that has caused some heads to turn, and some tails to wag.
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON)
Cronos recently struck a deal with Cura Select Canada Ltd., through a supply agreement designed to boost Cura into a leading provider of premium cannabis oil and hemp oil to the legal US and international markets. Cura's claim to fame is its pioneering of a highly-refined system of extraction techniques that's scalable to a capacity of one million grams of oil per month at each of its facilities. Cronos sees the supply deal as a start towards sourcing extracts at a much higher rate than before, through Cura's technology.
CV Sciences Inc. (OTC: CVSI)
CV Sciences has made a name for itself through its 50+ SKUs under its Plus CBD branded line. By tapping into multiple channels, CV Sciences serves nearly 2,000 retail stores, 1,000 physicians' offices and consumers directly through its e-commerce operation. Currently, the company's products are disseminated through distribution channels that include retail, wholesale, and direct-to-consumer. CV Sciences is currently exploring a number of new possibilities for different products and distribution channels.
Tilray Inc. (NASDAQ: TLRY)
With very little THC, and high amounts of CBD, Tilray's 2:100 medical cannabis oil is showing signs of helping many patients, including children. A recent study featuring the product shows promising results for children with drug-resistant epilepsy (DRE) due to Dravet Syndrome. Findings from the Phase II trial, conducted by researchers at The Hospital for Sick Children in Toronto gave very encouraging results, further expanding the potential benefits of CBD on a much wider medicinal scale.
The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF)
Seeing major potential in the European market, TGOD recently acquired leading CBD oils manufacturer HemPoland. Now with a foothold into the EU, with access to 13 countries already being served by HemPoland, TGOD plans to rapidly expand its European footprint through a series of investments into the new acquisition, and utilizing its state-of-the-art hemp oil extraction technologies. The acquisition provides TGOD with a strategic pathway into the European market for its medical and recreational products and licensing deals.
EUROPE PROVIDES A CBD GATEWAY TO OVER 750 MILLION PEOPLE
The potential for European cannabinoid products are massive. When The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTC: TGODF) saw the opportunity for a significant gateway into the EU market, it seized it immediately.
Earlier this week, TGOD announced it had acquired leading European manufacturer of and marketer of premium organic CBD oils, HemPoland. Since becoming the first company in Poland to have obtained a state license to grow hemp and manufacture CBD oil products in 2014, HemPoland has developed out a vast distribution network, headlined by its premium brand Cannabigold.
Under founder and CEO Maciej Kowalski, HemPoland established a reputation as one of Europe's most widely recognized experts in the space. The company comes with state-of-the-art hemp oil extraction technologies—But most importantly to TGOD, it comes with a strategic pathway into the EU for TGOD's medical and recreational products and licensing deals.
"HemPoland is a key component to a number of strategic acquisitions and planned partnerships focused on expanding our global distribution network. This acquisition will significantly add to the Company's top and bottom line," said Brian Athaide, CEO of TGOD. "Gaining market share with CBD products now, in the EU, with over 700 locations allows TGOD to establish immediate brand awareness across all verticals including infused beverages. This is an accretive acquisition and gateway to Europe's 750 million people accelerating our plan of becoming the world's largest organic cannabis brand."
(WATCH: TGOD CEO gives interview with BNN)
Over the last four years since its founding, HemPoland established itself with access to over 750 million people, and sales across 13 countries. The company is vertically integrated, with over 1,250 acres of cultivation leveraging third parties, multiple commercial scale extraction units, local distributors in Poland, Austria, Germany, Switzerland, Netherlands, Czech Republic, Portugal, Slovenia, Ireland, Italy, Estonia, Lithuania and the UK, and product sales in over 700 locations.
In terms of its CBD oil production potential, HemPoland successfully produced over 32,000 kgs of organic dried flower and 310 kgs of organic CBD oils in 2017.
The expectations on HemPoland to rapidly expand are built into the details of the deal. TGOD acquired HemPoland for $7.75 million in cash, and just under 2 million shares for a combined worth of roughly CAD$20.4 million, with an additional US$10.3 cash investment allotted for the European expansion.
Highlighted among the numbers were additional performance-based incentives on delivery of US$32 million of EBITDA in fiscal 2021. Should HemPoland deliver and even exceed these performance incentive milestones, this deal will be seen as an absolute steal by TGOD for the price it paid.
To break it down further, one must look at CV Sciences Inc. (OTC: CVSI), which recently reported a record adjusted EBITDA of US$5,628,000 with record sales of $20,419,000 in the first six months of 2018. With those kinds of numbers, CV Sciences has achieved a market cap of just under US$650 million.
When applied back to TGOD, the HemPoland acquisition has the conservative potential to add an additional US$300+ million (CAD$400 million) in market cap value to TGOD's overall presence.
With the recent announcement of Constellation Brands' $4B USD investment into Canopy Growth all eyes are on the next acquisition, joint venture or partnership to emerge in the sector. Through the latest acquisition, TGOD has uniquely positioned itself to be an innovator in the CPG/CBD-infused beverage segment. Additional global beverage giants have been made aware of TGOD's intentions to enter the sector, after it announced its beverage specific division, beverage R&D facility, and dedicated production to these types of products.
The HemPoland acquisition is the second European deal for TGOD, having secured a 50/50 joint venture involving 1.3 million sq ft of state-of-the-art automated greenhouses in Denmark. Combined with its flagship operations in Canada and new ventures in Jamaica, TGOD stands to attain a net annual growing capacity of 195,000 kgs of organic cannabis, which would rank it as the 4th largest producer in the world. With HemPoland, TGOD now is looking to expand its footprint beyond organic cannabis, and into the lucrative field of hemp-derived CBD.
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