Jefferies CBD beauty market report predicts huge growth
Jefferies Financial Group began covering cannabis stocks in February and then released a research report on CBD beauty products in March. Oddly enough, the projections in each report for the CBD market differ radically but, either way, a big market is expected to emerge in CBD beauty products. While many public companies are now offering CBD products, not all are offering beauty-related products beyond CBD oil which can be used topically.
Cannabis stocks
In February, Jefferies Financial Group, typically referred to as Jefferies, began coverage of a group of cannabis stocks. The nine stocks covered include such major public cannabis companies as Canopy Growth Corp (TSX:WEED, NYSE:CGC) and Aurora Cannabis Inc (TSX:ACB, NYSE:ACB). While the company is projecting a global cannabis market of $50 billion annually by 2029, it also believes the market could go as high as $130 billion if widespread legalization of marijuana occurs. However, at the moment the nine stocks are a mix of ratings from Underperform to Buy.
CBD market size
In their initial report, Jefferies also forecast a much smaller market for CBD than other analysts have predicted. Their forecast predicts a global market size for CBD at $4 billion by 2029, likely the most conservative to date. In contrast, Cowen & Co. also released a CBD report that predicted in the U.S. alone, the CBD market would reach $16 billion by 2025. Furthermore, Cowen analysts consider their estimate conservative.
CBD beauty market
In further contrast, a new report from Jefferies focused on CBD beauty products is reported to estimate the CBD beauty products market at $25 billion globally by 2029. Clearly, a different group of Jefferies analysts worked on the second report which is exceptionally optimistic. However, the report also points out that it expects new CBD beauty products to replace sales of existing non-CBD products rather than enlarging the beauty market beyond already expected growth.
One factor in Jefferies’ new CBD beauty estimates is a growing interest in CBD products expressed by consumers. Given that CBD has been prominent in U.S. news since the December passage of the 2018 Farm Bill and subsequent CBD-related business announcements, that heightened interest is no surprise. In addition, the report notes that online searches for CBD beauty products have risen by 370 percent since the start of the year.
CBD companies as acquisition targets
The report is said to have noted related beauty products from major companies such as Estee Lauder and L’oreal. However, it also noted that the majority of new CBD beauty products are being produced by “smaller indie brands.” It pointed out that larger companies may be adding CBD products to their current lines but are likely to also begin acquiring smaller companies.
In addition to a wide range of private companies, there are public CBD companies that will certainly benefit from a growing interest in CBD beauty products and have the potential to be future acquisitions. Established public CBD companies that have such promise include Green Growth Brands (CSE:GGB, OCT:GGBXF) and PotNetwork Holdings Inc (OTCMKTS:POTN), though neither could be said to be a CBD beauty pure play.
Green Growth Brands
Green Growth Brands has numerous retail brands including both products and retail outlets. Its brands are a mix of marijuana and CBD products and outlets but the focus of the company’s current expansion is on their Seventh Sense Botanical Therapy line of hemp-infused CBD health and beauty products. The company’s new store openings feature Seventh Sense products as does its deal with U.S. mall giant Simon Property Group. Given the more medicinal focus of Charlotte’s Web, a wholly-owned subsidiary of Charlotte’s Web Holdings Inc (CSE:CWEB, OTCMKTS:CWBHF), Green Growth Brands may well become the leader in the CBD beauty market if its expansion plans are a success.
PotNetwork Holdings
PotNetwork Holdings also has a diverse group of brands in the cannabis industry including Diamond CBD as well as PotNetwork News and First Capital Venture. It is more broadly diversified than Green Growth Brands though primarily focused on hemp-derived CBD. Currently, the company’s primary exposure to the CBD beauty market is through Bath & Body products and Hemp and CBD skin care products available through Diamond CBD.
However, the company has a broad CBD product line and is expanding distribution nationwide. This opens the potential for new CBD beauty products with a largely guaranteed distribution network. In addition, Diamond CBD’s e-commerce operation allows for direct-to-consumer sales throughout the U.S.
The future is unwritten
The growth potential for both Green Growth Brands and PotNetwork Holdings is quite strong as is the acquisition potential. However, unless either company spins off CBD beauty product holdings, any acquisition offers will come from companies that are seeking more than a foothold in the CBD beauty sector. Nevertheless, given the overall projected growth of CBD both nationally and globally, one can expect a variety of potential suitors to be considering the possibilities.
