Hemp Legalization in 2018 Farm Bill Activates CBD Stocks as Mainstream Acceptance Increases

December 18, 2018 - Baystreet.ca


Embedded within the recently passed $867 billion 2018 Farm Bill, was a provision for industrial hemp legalization. The greenlighting of hemp is indicative of a growing mainstream acceptance of cannabidiol (CBD), and the market potential being targeted by companies such as The Yield Growth Corp. (CSE:BOSS), Canopy Growth Corp. (NYSE:CGC) (TSX:WEED), Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), Green Growth Brands (formerly Xanthic Biopharma Inc.) (CSE:GGB) (OTC:XTHCF), and HEXO Corp. (TSX:HEXO) (OTC: HYYDF).

No longer a fringe sector, the CBD space is attracting the valuable experience of several talents from mainstream retail and branding backgrounds. A recent example is the appointment of two cosmetics executives, Urban Juve Provisions Inc.—a 100%-owned subsidiary of The Yield Growth Corp. (CSE:BOSS). The first appointment was President Sandi Lesueur, and Chairman Thomas Bond.

Both Lesueur and Bond have impressive backgrounds in cosmetics. Both worked at M.A.C. Cosmetics, one of the worlds’ top 3 cosmetic brands, for over 8 years. Bond served as COO and CFO for the cosmetic company serving an integral role in the leadup to its high-profile sale to Estee Lauder. The Lesueur and Bond appointments fit with the overall strategy of The Yield Growth Corp., whose team of directors and officers have experience from Aritzia, Skechers, Pepsi, Coca-Cola and now M.A.C. Cosmetics.

Stacking a team with mainstream talent is becoming a growing trend in the cannabinoid-based sector. Like The Yield Growth Corp., other companies are building their teams on valuable backgrounds, like Green Growth Brands who are led by former brand builder for Victoria’s Secret, American Eagle Outfitters, and DWS, Peter Horvath.

Mainstream giants themselves are wanting in on the CBD space as well, with multi-billion-dollar investments coming from groups such as Constellation Brands and Altria Group into cannabis companies Canopy Growth and Cronos Group respectively.

Much of this momentum is coming from pressure easing off from the US federal government on its stance on CBD, through an acceptance of industrial hemp.

According to Canopy Growth’s CEO Bruce Linton, the “Farm Bill is the first step to active” involvement in the U.S. for his company, adding: “The world’s changing: This is the first step in the U.S. to manage cannabinoids.”

THE COMING GREEN BRANDING WAVE

Through the passing of the Farm Bill by both Congress and now the Senate, the new law is being project to spark a boom for the $1 billion marijuana-linked CBD industry. In fact, some are already projecting that the bill’s passing could take the US cannabis industry up from its current $800 million value to $20 billion by 2022.

Until recently, low-THC cannabis (more commonly known as hemp) was bred almost entirely for industrial uses like manufacturing. Today, these plants have very low amounts of THC—the psychoactive chemical responsible for marijuana's high. Now, through this breeding process, hemp plants are often higher in CBD, which is thought to be responsible for several of cannabis' therapeutic effects.

Mainstream acceptance of new CBD-based products is already booming. New products such as a CBD-infused “beer” from Heineken, to high-end CBD-infused beauty products are starting to hit the market.

HEMP-OIL-INFUSED BEAUTY PRODUCTS ON THE RISE

Among the leading players in the emerging hemp beauty products market, is Urban Juve—a 100%-owned subsidiary of The Yield Growth Corp. (CSE:BOSS). With roughly 50 products set to enter the market in late 2018 and into 2019. With ownership of formulations, The Yield Growth Corp. is primed for the opening up of a CBD products line internationally. Urban Juve has already registered with Health Canada 26 products containing hemp oil and filed 11 provisional patent applications in the United States for its extraction process and formulations.

Launching the Urban Juve line will be newly-appointed President of Urban Juve, Sandi Lesueur. With a background that includes the design and launch of several product lines for physicians and celebrities as well as eight years at M.A.C. cosmetics (which was later bought by Estée Lauder), Lesueur is now tasked with utilizing her vast experience in beauty products to make the Urban Juve line a winner.

Being joined by former M.A.C. executive, Thomas Bond, Lesueur’s team also has the connections it needs to get the company’s products on the most prominent cosmetics shelves. Bond has been instrumental in getting products in leading retail locations around the world, including Shoppers Drug Mart (Canada), Sephora (USA) and Harvey Nichols (UK). Bond’s connections should be quite valuable as Urban Juve rolls out its new lines.

With cannabis sativa hemp seed oil and hemp root oil as its key ingredients, Urban Juve’s product line combines natural and pure essential oil-based formulations to create quality products that are now available online and will soon be available at select retail stores across Canada.

Natural cannabis sativa hemp seed oil is a powerhouse oil packed with antioxidants, essential amino acids and vitamins and minerals, including calcium, potassium, magnesium, copper, folate, vitamins B-6 and E. Hemp root oil contains terpenes which are known penetration enhancers and enhance the body’s ability to absorb other plant based ingredients. It should be noted that upon initial release, Urban Juve products won’t contain any CBD or THC. However, the Farm Bill’s passing will open the door to new product launches with cannabinoid infusion.

Urban Juve has developed a proprietary method for hemp root oil extraction. The Urban Juve formulas are proprietary and could be infused with Cannabidiol (CBD) or Tetrahydrocannabinol (THC) as new product lines.

The Urban Juve formulas and products combine ancient knowledge and modern techniques to create exceptional beauty and wellness solutions. Ayurvedic knowledge delineates three general categories or skin types, which Urban Juve has translated as Vitalize, Balance and Align, each with its own dedicated range of skin and body care formulations.

Urban Juve’s introductory product line will include an anti-aging serum and a lip balm. The premium Anti-Aging Serum (selling for $85 CDN) incorporates the soothing qualities of hemp root and hemp seed oil with a proprietary blend of essential oils, tailored to absorb into and hydrate skin cells. The lip balm (selling for $10 CDN) creates a soothing protective layer with coconut oil and beeswax, which provides a healthy, hydrating environment for the critical hemp root and seed oils to moisturize and freshen.

The Yield Growth Corp.’s subsidiary is currently manufacturing another ten products and within its first year expects to grow to offer as many as 50 SKUs. These may include massage and body oils, face mists, moisturizer, deodorant, and topical creams for acute and chronic pain.

ADDITIONAL MAINSTREAM CBD DEVELOPMENTS

Canopy Growth Corp. (NYSE:CGC) (TSX:WEED)

When news of the deal between Canopy Growth and major beverage giant Constellation Brands hit, the market saw massive potential of the marriage between cannabis and beverages. But it wasn’t until August 2018, when the dowry was delivered, as Constellation pledged an investment of $5 billion in Canopy to get the joint venture rolling. CNBC host of Mad Money, Jim Cramer, continues to declare that Constellation/Canopy are the best way to play the Canadian cannabis market. CEO Bruce Linton says the latest passing of the Farm Bill is the first step toward his company’s US expansion.

Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON)

Looking to gain a foothold in the cannabis space, tobacco giants Altria Group acquired a 45% stake in Cronos Group for approximately $1.8 billion. Moving forward, Altria will discontinue its MarkTen and Green Smoke e-cigarette products, while Cronos will be increasing investments in R&D and brands, as well as its global infrastructure and distribution footprint. The deal was seen as the latest in a series of conversations between the consumer products industry and the newcomer cannabis industry that threatens the growth of the mainstream products. Both Altria and Cronos are getting out ahead of federal regulators, in anticipation for the green wave to continue rolling.

Green Growth Brands (formerly Xanthic Biopharma Inc.) (CSE:GGB) (OTC:XTHCF)

After hitting the scene in mid-November through an RTO, Green Growth Brands was launched to thrive in the blooming cannabis retail space. Headed by CEO Peter Horvath, formerly of Victoria’s Secret, American Eagle Outfitters and DSW fame, Green Growth Brands’ management team is a who’s who of retail heavyweights, put together with the expressed goal of launching new brands and dispensaries. Through its wholly-owned asset Xanthic Biopharma, the company will also have the ability to develop new products, through water soluble cannabinoids for its brands that include the Seventh Sense line of beauty products.

HEXO Corp. (TSX:HEXO) (OTC: HYYDF)

Through a partnership with Molson Coors Canada, HEXO Corp. launched the creation of Truss, a joint venture designed to create new products including new beverages. HEXO hopes to successfully utilize Molson Coors’ distribution channels to capitalize on the cannabis-infused beverages market. The company recently reported sales of $5.2 million for adult-use cannabis during the first two weeks of legalization in Canada (a total $6.7 million in revenue for the first quarter of fiscal 2019). HEXO also has been making progress into Europe, including a new partnership in Greece to establish a Eurozone distribution center.

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