Writen by: Sean Williams(TMFUltraLong) Jul 14, 2019 at 9:06AM
t’s no secret by now that the marijuana industry is a big-money business. Having grown from $3.4 billion in legal global sales in 2014 to hit nearly $11 billion worldwide in 2018, it demonstrates just how quickly “going green” is catching on with consumers and investors.
However, there’s a potentially larger growth trend contained within the cannabis movement that investors simply have to know about: Cannabidiol (CBD).
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CBD growth could be off the charts
Cannabidiol is the nonpsychoactive cannabinoid that’s best known for its perceived medical benefits. Since products infused with CBD don’t get the user high, it has substantially broader appeal than products containing tetrahydrocannabinol (THC), the cannabinoid that gives consumers a buzz.
Further, CBD can be extracted from both the cannabis and hemp plant, whereas THC derives almost entirely from the cannabis plant, since hemp often contains very low levels of THC. Hemp plants are considerably cheaper to grow than cannabis, making hemp the preferred crop choice for CBD extraction.
The big question is: Just how big could the CBD market be?
Predictive analysis and market research company Brightfield Group believes it has the answer.
In a newly released report from Brightfield, the company is calling for year-over-year CBD product sales growth in the United States of 706% in 2019 to around $5 billion — not a typo – and sales of $23.7 billion by 2023. Comparatively, about $620 million worth of CBD products were sold last year in the United States (based on 706% growth to $5 billion). Growing CBD revenue from about $620 million in 2018 to $23.7 billion by 2023 works out to (drum roll) a compound annual growth rate (CAGR) of a whopping 107%! Compare that to some of the most robust broad-based growth estimates for cannabis, which call for a CAGR of around 25%, and you can see why CBD is all the buzz (without creating an actual buzz) on Wall Street.
Probably the next question on your mind is: How is such phenomenal growth possible?
According to the Brightfield Group, there are a number of catalysts fueling CBD’s rise.
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General retailers are stepping up
First, it sees significant sales growth from the entrance of major pharmacy chains into the CBD space. As you may be aware, CVS Health (NYSE:CVS) kicked things off in March by announcing plans to carry CBD topicals in approximately 800 stores across eight states. Walgreens Boots Alliance (NASDAQ:WBA) followed suit just days later by announcing its intention to carry CBD topicals in 1,500 stores in a handful of states. Rite Aid (NYSE:RAD) was last to join the party, with the company carrying CBD topicals in Washington and Oregon.
Traditionally, pharmacy chains are a low-margin business. Though the bulk of profits are derived from the pharmacy side of the equation, front-end store products are what can drive consumer loyalty and foot traffic. By adding CBD products to their stores, CVS Health, Walgreens Boots Alliance, and Rite Aid, are likely hoping that it brings in repeat business and new consumers.
Don’t overlook the role CVS Health, Walgreens, and Rite Aid have played in paving the way for other general retailers to carry CBD products. National grocery chain Kroger (NYSE:KR) recently announced plans to carry CBD items in 17 states, with Harvest Health & Recreation landing a game-changing partnership to supply CBD products to at least 10,000 gas-station convenience stores.
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