November 19th, 2020
App, Exclusive, News, Top Story
The U.S. market for CBD products is projected to reach $23.7 billion by 2023, according to Brightfield Group, representing a seven-fold increase in the market’s size. While it’s one of the fastest-growing subsets of the multi-trillion-dollar wellness industry, CBD products remain absent from most mass-market retailers.
CVS became the first large-scale retailer to offer CBD products in an 800-store pilot program, which was quickly followed by a 1,500-store pilot program at Walgreens. Since then, several food, drug and mass-market retailers—known as FDM channels—have started carrying a wide range of both private-label and third-party CBD products.
Let’s take a closer look at CBD’s move into mainstream retail and how investors can position themselves for the explosive growth.
COVID-19’s Impact on Retail
COVID-19 lockdowns had a dramatic effect on brick-and-mortar retailers around the world. While second quarter sales experienced a sharp decline, there’s growing evidence that sales rebounded during the third quarter. In fact, Charlotte’s Web (TSX:CWEB), a popular CBD provider, reported that sales in many of its retail channels have returned to pre-pandemic trends.
At the same time, COVID-19 has amplified consumer interest in health and wellness products—including CBD. Early research suggests that CBD could offer benefits to those suffering from severe forms of COVID-19 by reducing ACE2 expression and pro-inflammatory cytokine production to fight lung inflammation—and it’s a possible antiviral.
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Many consumers have also turned to CBD as a way to relieve COVID-19-driven stress and anxiety. While research remains in an early stage, some small-scale studies have found that CBD could have a beneficial impact on stress reduction and anxiety. However, one meta-analysis found that there wasn’t sufficient evidence to suggest that it helps with depression.
HempFusion’s Growing Footprint
The CBD industry is highly fragmented since many larger consumer goods companies have remained out of the market. While many smaller competitors have focused on building a digital presence, a handful of larger companies have been building out a retail presence that could prove much more durable over time as consumers return to stores.
Map of HempFusion distribution – Source: HempFusion investor presentation
HempFusion has established distribution to approximately 4,000 retailers across all 50 states and select international locations, including Sprouts and Vitamin Shoppe. Built on a foundation of regulatory compliance and human safety, its diverse portfolio of probiotics and CBD products includes nearly 50 SKUs with another 30 products under development.
The company’s biggest differentiator is its line of proprietary FDA Drug Listed Over-the-Counter Topicals, which provide pain relief and help reduce the symptoms of acne and eczema. Unlike many competing products, the FDA Drug Listed status of the formulations means that it can make claims that are typically off-limits for CBD products and sell at premium prices.
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Investors interested in the CBD space have no shortage of investment options. With retail sales returning in the third quarter, investors may want to consider companies that are building a brick-and-mortar retail presence in addition to an online strategy. These companies could face less competition and greater market penetration.
HempFusion plans to go public in the near-term, providing retail investors with an opportunity to participate in its upside. If you’re interested in a private placement, click here to learn how to invest prior to its going-public transaction. Or, sign up to receive a free listing alert when the company goes public to be among the first investors.
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