Waves of CBD Beauty Products Filling Shelves of Major Retailers Across the US

CannabisNewsWire Editorial Coverage: Mainstream retailers across the United States are embracing the growing popularity of the nonpsychoactive cannabinoid, cannabidiol (CBD), making room for CBD products on their prominent shelves.

With the rise of these cannabis beauty products, major stores from luxury retailers Barney’s and Neiman Marcus down to Walgreens, Rite Aid and now Kroger are stocking products from a range of CBD SKU producers, including Green Growth Brands (CSE: GGB) (OTCQB: GGBXF) (GGBXF Profile), Charlotte’s Web Holdings (TSX: CWEB) (OTCQX: CWBHF), CannTrust Holdings Inc. (TSX: TRST) (NYSE: CTST), Organigram Holdings Inc. (TSX.V: OGI) (NASDAQ: OGI) (OGI Profile) and HEXO Corp. (TSX: HEXO) (NYSE American: HEXO).

Bridge-building companies strengthening bonds between retailers and CBD producers.
GGB has solidified several influential deals with top companies.
Cannabis beauty products could make multibillion-dollar impact in the CBD sector.

To view an infographic of this editorial, click here.

Partnerships Key to CBD Growth

The bond between retailers and CBD producers seems to be growing stronger by the month, ushered forward by bridge builders such as Green Growth Brands (CSE: GGB) (OTCQB: GGBXF), whose management team’s CVs read like that of a mall directory, including executive-level experience with major brands such as American Eagle Outfitters, Abercrombie & Fitch, Bath & Body Works, Victoria’s Secret, DSW, Luxottica and Virgin Entertainment.

These relationships have already resulted in GGB inking a series of deals with major retailers, most recently with American Eagle Outfitters. Starting in October 2019, the clothing retailer will be carrying GGB’s hemp-derived, CBD-infused personal care products in almost 500 physical stores as well as on the company website. These products — which include lotions, muscle balms and aromatherapy items — were developed exclusively for American Eagle.

Two weeks prior to the American Eagle announcement, GGB expanded its partnership with Abercrombie & Fitch to offer its Seventh Sense Botanical Therapy CBD products through the iconic fashion brand. The growing popularity of CBD products such as Seventh Sense has led analysts to increase their targets on the cannabis industry as a whole.

Back in March, New York-based investment bank Cowen & Co. put out a study on the CBD market, citing a $16 billion target by 2025. BDS Analytics and Arcview Market Research gave a more optimistic assessment, projecting that the collective market for CBD sales in the US will exceed $20 billion by 2024.

Welcoming the CBD Retail Revolution

Perhaps the most impactful addition to the CBD sector is the rise of “cannabis beauty.” Analysts at Piper Jaffray believe the cannabis beauty wave could potentially boost the overall CBD market to between $50 billion to $100 billion.

In July, American Eagle agreed to stock the shelves of nearly 500 stores with Green Growth Brands’ tailor-made, CBD-infused personal care products. The new line of products will be available as early as October and will be available for purchase online as well.

In late June, fashionable brand Abercrombie & Fitch expanded its partnership with Green Growth Brands to sell Seventh Sense Botanical Therapy products in more than 160 A&F stores. After a retail trial in 10 stores, the increase in exposure is expected to be mutually beneficial as A&F carries Seventh Sense’s CBD-infused body lotions, muscle balms, lip balms and sugar scrubs.

The American Eagle and A&F placements supplemented the string of partnerships Green Growth Brands has secured so far in 2019, which began with a partnership with DSW Inc. to sell Seventh Sense in 96 U.S.-based DSW stores. GGB also signed a licensing agreement with Authentic Brands Group and the Greg Norman brand to develop CBD personal care products for active adult men and women.

With its management team’s impressive retail experience, much of which is centered around prominent space in malls, GGB has aggressively launched its own Seventh Sense stores and kiosks across the country. In just the first four months after launch, over 50 Seventh Sense stores had been opened by June.

GGB’s goal is to have approximately 70 stores opened by the end of 2019. Given the company’s seemingly advantageous deals with major mall chain owners such as Brookfield Properties, Simon Property Group, and a series of independent malls, it appears likely the company will hit this target.

In a recent interview with Jim Cramer, CNBC host of Mad Money, GGB CEO Peter Horvath confidently reiterated his company’s strategy that plays off its retail expertise, and in particular the potential of CBD, specifically topical products. Harvath noted that the partnerships in place mean that GGB stores are opening in prime locations in some of the country’s best malls.

Developments in the CBD Upswing

This potential isn’t being missed by other CBD innovators in the market.

Early pioneers in the CBD space, Charlotte’s Web Holdings (TSX: CWEB) (OTCQX: CWBHF) now manufactures and markets CBD wellness products, including capsules, topicals and gels in more than 3,000 retail locations across the country. Named after a little girl named Charlotte who suffered from up to 300 grand mal seizures per week, the company is focused on what ended up being a cure for her malady — CBD. The brothers who manufactured the strain that helped Charlotte went on to found Charlotte’s Web in 2013. As recently as December 2018, CWEB products were available in 3,680 retail locations. That number has since exploded to 6,000.

CannTrust Holdings Inc. (TSX: TRST) (NYSE: CTST) increased its portfolio by expanding its CBD product lines with the addition of three new products: high-dose CBD oil capsules and a low-dose and high-dose version of CBD drops. In addition, the company recently announced plans to enter the U.S. CBD market, starting with a hemp-production joint venture in California. As part of the deal, CannTrust plans to cultivate upwards of 3,000 acres of hemp for CBD in California. CannTrust continues to develop its lines of innovative products, including CBD beverages, pet-care products and confectionaries.

North of the border, East Coast Canadian company Organigram Holdings Inc. (TSX.V: OGI) (NASDAQ: OGI) is developing a nano-emulsion technique to help cannabinoids such as CBD to dissolve in water, which isn’t done naturally. Organigram has recently developed an emulsification system to turn cannabinoids into a dissolvable powder, making CBD more shelf stable, thermally stable, water compatible and palatable. Focusing outside of the United States and its home jurisdiction of Canada, Organigram Holdings Inc. is making a play to jump the pond into what’s being touted as a lucrative EU CBD market. Teaming with Alpha-cannabis, Organigram has its sights set on the German medical cannabis market, while also partnering with Eviana to obtain hemp-derived CBD to supply into key EU markets.

HEXO Corp. (TSX: HEXO) (NYSE American: HEXO) is also in the development of beverages through its partnership deal with Molson Coors. Aligned with the Canadian brewing giant, HEXO is gearing up for cannabinoid-infused beverages that could one day be sold in the refrigerated aisle of the local grocer. HEXO also recently outlined plans to enter eight U.S. states with CBD products — but not until 2020. The company wouldn’t say which states it is targeting, but expectations are that it will make the move through its joint venture with Molson Coors, which includes plans to co-launch a portfolio of cannabis-infused beverages called Truss.

Key relationships and a promising cannabis beauty space bode well for continued strong growth in the CBD sector. Companies such as Green Growth Brands appear well positioned to take advantage of these opportunities.

For a free research report on Green Growth Brands, visit PotStockNews.com

For more information on Green Growth Brands, visit Green Growth Brands Inc. (CSE: GGB) (OTCQB: GGBXF)

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Acquisitions Reveal the Steadily Changing Shape of the Cannabis Sector

CannabisNewsWire Editorial Coverage: The cannabis sector continues its steady shift toward big business, big money and a focus on the value add of immaterial assets.

TransCanna Holdings Inc. (CSE: TCAN) (FRA: TH8) (TCAN Profile) has made several key acquisitions, creating a large operation with various licenses and recognized brands. HEXO Corp. (TSX: HEXO) (NYSE American: HEXO) has taken a similar path with the acquisition of Newstrike. Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) is building a positive public profile through releasing educational tools. Aphria Inc. (TSX: APHA) (NYSE: APHA) has expanded the hunt for cultivation licenses to Germany. Meanwhile, companies such as Charlotte’s Web Holdings Inc. (TSX: CWEB) (OTCQX: CWBHF) keep releasing new products into the market.

Cannabis companies are increasingly engaging in multimillion-dollar acquisitions.
These support a consolidation of the industry as it moves from scattered creativity to efficient large businesses.
The trend built in part on intangible assets, including brands and licenses.

To view an infographic of this editorial, click here.

A Very Different Business

The image of the cannabis industry varies hugely depending upon one’s point of view. To proponents, the market is a radical and transformative sector that’s bringing the world together. For opponents, it is one more vice threatening public morals. For many in the middle ground, it’s a space where hippies and stoners can thrive, though not one that encourages the buzz and dynamism of mainstream business.

In reality, the cannabis sector fits none of these images. The industry is emerging from its early, tentative steps into legality to become a significant business sector much like any other, with all the apparatus of modern capitalism and a focus on intangible assets such as intellectual property. All of this is reflected in the sector’s recent burst of mergers and acquisitions.

Big Money Deals

The most eye-catching aspect of mergers and acquisitions in the cannabis sector is the amount of money that goes into them. Take just two recent examples from a single company, TransCanna Holdings Inc. (CSE: TCAN) (FRA: TH8). In the past few months, the Vancouver-based cannabis company has made announcements on two major deals. First came the acquisition of a 196,000-square-foot vertically integrated cannabis facility for a total purchase price of $15 million. Then came a letter of intent relating to Californian company Lyfted Farms outlining TransCanna’s plans to acquire Lyfted’s business and assets for $5.5 million.

By the standards of some businesses, these might not seem like huge deals. But when a company is investing $20 million on expansion in the space of a couple of months, that certainly says something. That TransCanna can make these deals is a show not only of the strength of the company but also the strength of the industry.

The idea that there’s a lot of money in cannabis might not be surprising to anyone who’s seen TV depictions of the drug trade. Dramas such as Narcos show a world of high earners with big stacks of cash. But as sociologists such as Sudhir Venkatesh have shown, the reality for most people working in the illegal drug trade is vastly different. They earn less than minimum wage in jobs that are dangerous and uncertain.

The financial growth of the legal cannabis industry has therefore been a positive move for everyone from company leaders to their lowest-paid employees. The legalized trade is pulling money out of the black-market economy and allowing those at the top to earn big bucks while also providing employees with a decent wage. Far from weakening the power of legal providers, paying employees properly is leaving them with enough money to go around buying up competitors, as TransCanna is doing.

Success has also brought funds from outside. From private individuals to big alcohol and tobacco companies, investors are pouring money into pot, allowing businesses to expand while keeping their employees happy. There are living wages at the bottom and big money at the top.

Tidying Up the Market

The growth of the legal cannabis industry started with a scattershot approach. TransCanna is just one of many companies that have grown into the market from relatively small beginnings. Some began with entrepreneurs seeing a new industry within which to operate. Others were experienced cannabis cultivators moving from the illegal to the legal market. Still others were pharmaceutical companies dipping their toes into a new medicine and, from there, into the recreational industry.

As a result, the cannabis industry is cluttered with diverse and disconnected businesses. But now it’s moving on from this scatter-gun approach to a period of consolidation.

This doesn’t mean that the variety created in that early surge is being lost. When larger companies buy up smaller ones, it’s often with the aim of continuing the individual brands and styles the smaller companies have created. For example, TransCanna has announced the acquisition of GoodFellas, which will allow it to take control of the Daily Cannabis Goods brand. TransCanna CEO Jim Pakulis has talked not in terms of absorbing the Daily brand into TransCanna’s existing identity but in terms of maintaining Daily and expanding its sales.

The consolidation of multiple brands and businesses into a smaller number reflects a dialectic process that’s common in new business areas. First comes a burst of creativity. With few precedents and no big players dominating the market, entrepreneurs and creatives have free rein. Some of their experiments fail, but the ones that succeed get consumers interested and fill the market with ideas.

While this creates plenty of exciting idea and products, it’s also inefficient. In the phase that follows, bigger companies step in or emerge from among the smaller ones. Consolidation creates efficiency, providing more reliable products for consumers and better value for companies.

The contrasting approaches of small innovative companies and larger efficient ones together create excellent value. That’s the point the cannabis industry is now approaching and that TranCanna’s acquisitions are a part of.

The Power of the Immaterial

In the illegal market, all that mattered for cannabis sellers was the product. But in the legal market, things work differently. When a company can use the full apparatus of marketing, intangible assets such as intellectual property become important. That’s why GoodFellas is valuable to a company such as TransCanna — not just for its cannabis but for the Daily brand that’s attached to it.

And while intangible assets are normally talked about in terms of brand and IP, there’s another sort of asset that gets much less publicity and that the cannabis industry is bringing to investors’ attention: legal licenses.

Licenses of various sorts are important for a wide range of industries, from food production to mining. But they have a particular prominence in the cannabis industry because tight regulation has created a scarcity of licenses. When TransCanna subsidiary TCM Distribution Inc. gained cannabis manufacturing and distribution permits from the City of Adelanto, California, it was an important step in the company’s growth within the state. And when a deal like TransCanna’s acquisition of Lyfted is announced, the target’s cannabis licenses are often mentioned. These licenses are a crucial asset and one that investors are concerned about. Without the licenses, the business can’t function.

The prominence of licenses is a new feature of investment for those going into cannabis. But it could be a feature that helps investors recognize these assets in other companies. Cannabis companies are increasingly about immaterial assets, and immaterial assets are increasingly about licenses as well as IP.

Keeping Profiles High

In such an atmosphere, cannabis companies are working hard on keeping their profiles high while building up their portfolios of products.

Canadian cannabis company HEXO Corp. (TSX: HEXO) (NYSE American: HEXO) has, like TransCanna, been using acquisitions to build up its business. Originally a medical cannabis provider, HEXO joined the recreational market when Canada changed its laws last year. Since then, it has completed an acquisition of Newstrike, the parent company of Up Cannabis Inc, a licensed producer and distributor. It’s a deal that fits with the importance of immaterial assets. Licensing is important in Canada, both for production and distribution, and acquiring a company that is already licensed is the easiest way to expand a company’s footprint in the country.

Good publicity is another of the intangible assets that come with a good company, and few have achieved more publicity within the sector than Canopy Growth Corporation (TSX: WEED) (NYSE: CGC). When the company received a multibillion-dollar investment from Constellation Brands, it was the first time the sector had received such a big input of cash from outside, so the move drew substantial attention. Now the company is raising its profile in a different way, demonstrating its responsible attitude through the release of digital cannabis education tools.

Aphria Inc. (TSX: APHA) (NYSE: APHA) has taken the hunt for intangible assets global, with the acquisition of five cultivation licenses in Germany. With the North American cannabis industry increasingly well established, Europe is the next big frontier, and Aphria is racing in ahead of many of its competitors.

All this work on intangibles would be useless without physical products to go with it, and product innovation continues at a high pace. Charlotte’s Web Holdings Inc. (TSX: CWEB) (OTCQX: CWBHF) has recently announced the release of hemp-extract CBD gummies designed help with calm and sleep. CBD products are an increasingly important subsector of the market, and products of this kind have potentially wide reach.

The cannabis industry is changing, with big money, consolidation and growing intangible assets, but it remains grounded in a strong consumer desire for cannabis.

For more information on TransCanna Holdings, visit TransCanna Holdings Inc. (CSE: TCAN) (FRA: TH8)