The marijuana industry flourishes under our eyes. Having spent many decades as a taboo and illicit substance, cannabis is now perfectly legal for adult consumption in Canada (as of October 17, 2018). Although supply shortages and regulatory burdens have slowed the launch of Weed, estimates suggest that Canadian cannabis could generate an annual business turnover of nearly $ 6 billion by 2022. .
The movement of marijuana is also gaining momentum in the United States. By the end of the year, 33 states had approved marijuana for medical purposes and another 10 allowed consumption by adults. According to a Gallup survey conducted last October, with 2 Americans out of 3 favoring legalization, it would be prudent to expect further expansion at the US state level.
Do not overlook the hemp industry in strong growth
However, it is not just the legal marijuana industry that is developing suddenly. After the adoption of the Farm Bill in the United States last December, which legalized hemp and cannabidiol products made from hemp (CBD), hemp was all the rage.
Although my colleague, Todd Campbell, explains very well the differences between cannabis and hemp, the biggest difference you need to know is that hemp has industrial uses and will not make you hover. Hemp is often rich in CBD, the non-psychoactive cannabinoid better known for its perceived medical benefits, and usually contains small traces of tetrahydrocannabinol (THC), the cannabinoid that attracts many users. Meanwhile, cannabis plants are usually rich in THC.
Hemp has long been used in paper, plastic, pet and human food, clothing, insulation and many other products. The adoption of the Farm Bill, which has been proclaimed by Senate Majority Leader Mitch McConnell, R-KY, a longtime spokesperson against the marijuana movement, will allow licensed businesses to legally cultivate hemp , as well as extracting CBD from hemp plants. marketing of oils, lotions and possibly even edible products derived from hemp. Please note that CBD derived from cannabis is still illicit at the federal level and that some states have chosen to crack down on consumer products containing CBD, regardless of their form, even if they are derived from hemp.
At what level of growth can we expect from the US and global hemp industry? According to the first report of New Frontier Data's data analysis firm, "The State of World Hemp: Prospects for the 2019 Industry", global hemp sales totaled $ 3.7 billion in 2018 and is expected to reach $ 5.7 billion by 2020.
On a more individual level, China dominated all countries in 2018 with nearly $ 1.2 billion in hemp sales, followed by the United States with $ 1 billion, all of Europe with 980 million dollars and the consolidation of Central and South America with $ 220 million. However, by 2022, the New Frontier Data report estimates that US hemp sales will have jumped to $ 2.6 billion, a compound annual growth rate of 27%. Of this $ 2.6 billion in hemp sales, half ($ 1.3 billion) will be generated from CBD products derived from hemp.
These "ex-hemp" stocks are intended to profit
The big question then is which companies want to take advantage of the rising tide of hemp. The most logical choice is … a Canadian company.
Although Cover growth (NYSE: CGC) Focusing on its 5.6 million square feet of cannabis growing spaces in Canada, the company recently obtained a license to grow and process hemp in the state of New York. Canopy Growth intends to invest between $ 100 million and $ 150 million to develop a facility in the south of the state with the goal of transforming hemp for its high-margin CBD.
Making Canopy Growth an even more compelling asset in the hemp field is the ebbu acquisition of the Colorado-based hemp research company last year, for an amount of about 330 millions of dollars, under a purchase and sale contract based heavily on shares. For its transportation, Canopy Growth has access to the ebbu intellectual property portfolio for the hemp industry, which could provide it with attractive long-term returns.
The adoption of the Farm Bill and the expected increase in sales of CBD derived from hemp should also be excellent news for Charlotte Web Holdings (NASDAQOTH: CWBHF), which lives from the sale of petroleum products derived from hemp. Although Charlotte's website is not allowed to imply that its products offer any medical benefits, the public has sufficiently interested in CBD-based products that this does not seem to be of much importance. Even before the adoption of the Farm Bill, Charlotte's CBD products were spread across more than 3,600 retail outlets. This is one of the few stocks of kettles to have recorded operating profit without the benefit of one-off or fair value benefits. adjustments.
Another company that could very well do its job but is not even involved in the US hemp industry is still Aurora Cannabis (NYSE: ACB), The biggest competitor of Canopy Growth. In an interview with Business Insider in mid-January, Cam Battley, CEO of Aurora, announced that his company would soon unveil a strategy to target CBD derived from hemp in the US market. After a capital increase of convertible notes of Can $ 345 million ($ 261.1 million), Aurora Cannabis now has a capital available of approximately Can $ 500 million ($ 378.5 million), which would facilitate entry into the United States. Aurora, Canada's largest producer of advanced marijuana, is expected to have no trouble finding a foothold in the US hemp market.
Naturally, the overall monetary value of hemp is still relatively low compared to legal cannabis, but annual sales of $ 2.6 billion should not be neglected.