Go Back

Pot stocks playing the long game after FDA public hearing on CBD

Last week, the FDA held its first public hearing regarding CBD. Over 100 people gave testimony over ten hours, and the FDA will continue to hear public comments until July 2. But in this industry, a lot can happen in a month. The growing confusion around CBD caused many cannabis stocks to steadily drop in price last Friday.

The most confusing caveat that could be leading investors to think twice about the CBD industry is that it is (technically) illegal to add CBD to food. According to Dr. Ned Sharpless, acting Commissioner of Food and Drugs, cannabis and its derivatives are being approved to be used as medicine. This makes it “unlawful” to add CBD or THC to food, animal products, or even market it is as a health supplement. The FDA is fully capable of issuing regulations to modify these statutes, but they haven’t done so just yet.

[What you should know about the quality of cannabis seeds before you grow]

“There are important reasons to generally prohibit putting drugs in the food supply. When FDA approves a drug, we carefully evaluate the risks and benefits of a specific formulation, dosage form, and strength for a particular population,” Dr. Sharpless explained in his speech. “There are real risks associated with [CBD and THC] and critical questions remain about the safety of their widespread use in foods and dietary supplements, as well as other consumer products.”

Until the FDA can effectively regulate CBD and other cannabis extracts, investors eyeballing the cannabis-infused food and beverage industry will really have to play the long game. It is only a matter of time until regulated products start to hit shelves legally, but investors can bet that it won’t happen as fast as they would like. In the meantime, here is a look at what long-term plays these stocks are making while the industry waits for FDA approval:

Harvest Health & Recreation signs CBD distribution agreement with AATAC

On Tuesday, Harvest Health & Recreation (CSE:HARV)(OTCQX:HRVSF) announced their landmark agreement with the Asian American Trade Associations Council, a distribution deal that will put Harvest’s branded CBD products in over 10,000 retail locations. The AATAC is a network of convenience stores, including Circle K, Sunoco, and Chevron, a niche market that is anticipated to garner an $8 billion piece of the $22 billion CBD industry over the next three years.

[CBD oil proves a big draw at the CWCBExpo in New York City]

“This exclusive partnership enables a massive advance in distribution for Harvest-owned CBD brands and follows our strategic path of expanding the scale of our wholesale and retail distribution nationally,” Harvest Chairman Jason Vedadi stated in the press release.

Harvest Health will see their products hit shelves in small towns as well as major cities across North America, giving them a pretty big strategic advantage when it comes to saturating the market. Being available almost everywhere will surely pay off once the confusion starts to clear around the CBD industry over the coming months.

Charlotte’s Web Holdings moves to TSX, launches new line of CBD gummies

With the 2018 Farm Bill legalizing the cultivation of industrial hemp, Charlotte’s Web Holdings  (CSE: CWEB) (OTCQX: CWBHF) jumped on their chance to uplist on the Toronto Stock Exchange, making them the first U.S.-based cannabis company to do so. “The company will have more international reach with this move,” said CEO Deanie Elsner in the company’s May 30 conference call. This makes Charlotte’s Web a pretty stable bet for an investor looking for a cannabis stock to add to their CBD portfolio, especially with new products coming down the pipeline.

[Can cannabis help you hit the gym?]

Despite the FDA’s confusing public hearing, Charlotte’s Web announced a new line of CBD gummies on Monday. The gummies are marketed to support specific health functions related to sleep, stress relief, and exercise recovery. And in an edibles market slated to be worth $4.5 by 2025, Charlotte’s Web is setting themselves up to be a competitive brand just in time.

Revolution Enterprises enters pet wellness market with new hemp-derived acquisition

Revolution Enterprises, a cannabis company based in newly legalized Illinois, acquired HempVet on Tuesday, officially entering the pet wellness market with a suite of hemp-derived pet products. HempVet comes with over 35 years of experience in the CBD market, developing products that have all been awarded by the National Animal Supplement Council.

“This accretive acquisition represents a highly complementary position to our brand and product portfolio while strategically leveraging Revolution’s IP and operating capabilities,” explained Oleg Movchan, Revolution’s CSO and Deputy CEO. “Together, HempVet and Revolution will capture one of the fastest growing addressable markets for hemp-derived products.”

The market for pet care products was worth nearly $73 billion by the end of last year, according to Grand View Research, giving this little-known U.S. cannabis company a pretty good shot at making a name for themselves among consumers and investors alike. And now that legislation in Illinois includes a fully legalized recreational market, investors can assume that this is probably the first step in a much broader strategy. Unfortunately, the market will just have to wait and see which companies’ strategies pay off in the end.

(Photo courtesy of Toa Heftiba on Unsplash)
Add comment