With experts such as the Brightfield Group predicting the hemp-derived CBD (cannabidiol) market will reach $22 billion by 2022, major industry players such as Anheuser-Busch are seeing value and viability in the direct selling approach to selling CBD products.
- With a predicted 130 percent compound annual growth rate (CAGR) over the next three years, the hemp-derived CBD industry looks primed to explode.
- The direct selling approach to selling CBD products pioneered by brands such as Youngevity International is attracting the interest of large-scale companies.
- Given new medical studies proving the efficacy of daily CBD intake, the market appears ripe for companies with vested interests in other lifestyle markets.
Following the passing of the groundbreaking 2018 U.S. Farm Bill that legalized the industrial cultivation of hemp nationally, scores of companies not endemic to the cannabis industry are looking to find a way to enter the booming CBD market. Partnerships and acquisitions look to be one of the most promising ways to do that, with many savvy companies utilizing the direct selling route originated by brands such as Youngevity International Inc. (NASDAQ: YGYI) (Profile), a leading omni-direct lifestyle company. New Age Beverages Corporation (NASDAQ: NBEV) recently merged with a direct selling company with the intent to distribute its CBD products inside – and potentially outside – the United States. Beer giant Constellation Brands, Inc. (NYSE: STZ) poured a $4 billion investment into Canadian cannabis company Canopy Growth Corporation (NYSE: CGC). Anheuser-Busch InBev (NYSE: BUD) (OTC: BUDFF) also partnered with a leading Canadian cannabis producer to research cannabis-infused drinks and owns 20 percent of Icelandic Water Holdings, which recently entered into an exclusive joint-marketing/development agreement with Youngevity to develop and sell CBD-infused products.
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A Market Primed to Skyrocket
The recent deregulation, legalization and proliferation of the cannabis industries in the United States and Canada made 2018 a landmark year for those industries, creating an ideal scenario for an astronomical growth rate. Canada’s recent move to legalize recreational marijuana and the United States’ decision to legalize the industrial cultivation of hemp nationwide has experts forecasting the global cannabis industry to exceed $39 billion by 2023 and possibly exceed $95 billion by 2026.
Within that market, the hemp-derived CBD segment will likely grow at an even faster rate, with that growth buoyed by the fact that it doesn’t have to pass any state legalization hurdles across the United States. Brightfield Group expects the hemp-CBD industry’s growth to outpace the rest of the cannabis industry combined, and Hemp Business Journal estimates the hemp market to grow around 700 percent by 2020. With the meteoric growth predicted, companies such as Youngevity International Inc. (NASDAQ: YGYI), which already have established direct-selling channels that can nimbly adapt and upscale marketing, production, and delivery, could see a boon in business.
Direct Selling Method Attracting Corporate Giants
Given the nascent nature of the cannabis industry, many consumers are just learning about CBD products, meaning that growth within the industry is happening in the most organic fashion possible: word-of-mouth marketing. Brightfield Group notes that more than 50 percent of CBD consumers in all U.S. regions first learned about CBD from friends or family, which makes direct selling companies a “fantastic fit” for the CBD industry.
Studies by Direct Selling News show that direct selling companies already lead the global market in sales of CBD products with more than $300 million in annual sales. Therefore, the interest of larger, non-endemic companies in the direct selling model of brands such as Youngevity only makes sense and may signal that, as the cannabis market continues its stratospheric growth, so too will the direct selling sector within the industry.
Increased Medical Studies Cause Increased Interest in CBD
One of the main driving forces behind the rapid increase in popularity in CBD globally is increased awareness by consumers of the widespread medical uses of CBD. Research has shown that CBD, particularly when used daily, can help treat and prevent symptoms of Alzheimer’s disease, chronic pain, anxiety, insomnia, arthritis, epilepsy and a slew of other ailments.
Given that, companies such as Youngevity – which has the ability to deliver CBD in convenient packaging and applications for daily use – may have an upper leg when it comes to profiting off the growing trend. Knowing that, it makes sense that Youngevity recently announced an exclusive joint-marketing agreement with Icelandic Water Holdings, a company in which Anheuser-Busch has 20 percent ownership.
Youngevity and Icelandic plan to develop and sell CBD-infused dietary supplements, children’s drinks, pet products, and coffee products via Youngevity’s direct selling platform. This move seems to validate not only the viability of the direct selling model in selling CBD products but also the potential windfall businesses already established in other lifestyle industries may experience by integrating into the CBD sector.
Lifestyle Direct Selling Companies Poised to Capitalize on Expanding CBD Market
Globally, the direct selling market is growing. Research by Euromonitor shows that the direct selling market is expected to reach $163 billion by 2020, with the largest portion of that business coming from the wellness industry. Given the aforementioned promise of the CBD market in the direct selling industry, along with the expected continual growth of the direct selling industry at large, it only makes sense that direct selling companies poised at the intersection of the cannabis, wellness and other lifestyle industries may be best suited to capitalize on the inclusion of CBD in other industries.
Youngevity could be an ideal example of just such a company. The direct selling expert has already established a sterling presence in the coffee industry through its wholly-owned subsidiary CLR Roasters, a proven farm-to-cup pipeline that can be quickly and easily adapted for hemp cultivation. Its holdings in other markets ripe for CBD inclusion such as the beauty and wellness industries, Youngevity may be best positioned to harness the incredible growth in the CBD market, particularly via large-scale corporate partnerships and mergers.
CBD Market Continues to Draw Non-Endemic Interest as Direct Selling Flourishes
New Age Beverages Corp. (NASDAQ: NBEV) recently merged with the direct selling company Morinda with the stated intent to sell CBD products through Morinda’s direct selling model. This appears to be a solid endorsement of the viability of direct selling in selling CBD. Created in 2016, New Age has developed a brand portfolio competing in the highest growth segments of the beverage industry and has created the only one-stop-shop of healthy beverages. By combining with Morinda, New Age plans to rapidly grow its brands by adding a direct-to-consumer infrastructure and market access to 60 countries around the world.
Constellation Brands (NYSE: STZ) has similarly shown that the beer industry is keenly interested in the CBD market. It recently invested $4 billion in Canadian cannabis producer Canopy Growth (NYSE: CGC) (TSX:WEED), telling U.S. lawmakers it was “extremely bullish, if not more bullish” on the prospect of selling CBD-infused drinks in the United States. following the nationwide legalization of industrial hemp cultivation via the 2018 U.S. Farm Bill. Given its positioning as a premium beer, wine, and spirits company, Constellation’s interest in the market may signal that other large corporations in the premium beverage market may see viability in CBD.
Canopy Growth was the first cannabis company in North America to be publicly traded, then followed that milestone by becoming the first North American cannabis company to diversify its platform to include both greenhouse and indoor growing, to acquire a major competitor and to be listed on the Toronto Stock Exchange. Through its subsidiary, Canopy was also the first cannabis company to introduce the now-standard concept of compassionate pricing, making medical cannabis more affordable for patients.
Anheuser-Busch Inbev (NYSE: BUD) (OTC: BUDFF), the massive brewer that makes Budweiser Bud Light, and more than 500 other beer brands, has shown a keen interest in the CBD market. The company recently partnered in a $100 million joint venture with Tilray Inc., a leading Canadian cannabis company, to research cannabis-infused drinks for the Canadian market. Currently the partnership is limited to Canada, with the companies making decisions regarding the commercialization of the beverages in the future. Anheuser-Busch said it would participate in the project through its subsidiary Labatt Breweries of Canada.
The recent nationwide legalization of hemp cultivation in the United States, as well as the nationwide cannabis legalization in Canada, has created a rapidly expanding CBD market. With the proven success of direct selling companies in selling these products, it seems the direct selling industry will continue to help propel the CBD market as large-scale, non-endemic companies look for ways to gain entry into the market.