The Brightfield Group, a research firm you never heard of, was widely quoted in 2018 when they predicted the market for Cannabidiol (CBD) products would be $22 billion by 2022. Credible research organizations gave ranges in 2019 for the current user base of CBD products between 1 million and 15 million people, but the retail shelf space doesn’t appear filled with products so it is likely at the lower end of all these estimates. The FDA has started to issue letters to companies selling CBD products to cease and also to desist, so there is another impediment to all this crazy growth and most of this is speculation, so maybe wait until facts tell an actual story before you bet the farm on a single molecule.
Since Senator Mitch McConnell fought for the “Farm Bill” in late 2018, the ability of a farmer to grow industrial hemp with low levels (or non detectable levels) of THC was federally legal. Forty states had already allowed hemp prior to this, but finally this big government assist provided a new potential revenue source for maligned tobacco farmers in the Southeast.
As this industry has emerged it has been clear the tail has been wagging the dog. CBD doses are small, 15-25mg on average for pills, drinks and tinctures, which creates math that doesn’t require this gigantic industry to be gigantic. An acre of hemp biomass processed at a local lab with Ethanol or CO2 creates 400-500 kilograms of distillate or isolate which would provide 2-3 million doses of this maybe promising plant based product. If estimates provided by Forbes Magazine are correct, it would appear the United States grew over 511,000 acres of hemp this year which would provide about 1.5 trillion doses of tincture at 16mg per dose. In Whole Foods there are eighteen inches of products sold to consumers.
As is often the case with unregulated marketplaces, pricing starts high, quality and integrity are lacking and businesses fail at rates that can be ten times normal. The markets have given values that Softbank used to think were real back in the day. As markets have since informed us, it’s best to watch real trendlines for sales and reward companies that achieve interesting milestones with premium valuations and as Peter Lynch, a legendary investor who trusted me and my team with $6 million dollars of his family’s money, would have said take a trip by your local store.
Until you see products with CBD knocking robitussin off the shelves, take it with a grain of salt; I hear salt might raise your blood pressure a touch but maybe CBD might just be the answer.
Be mindful, be watchful and good luck!