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New cannabis industry gains expected via CBD wellness market

CBD-infused health and wellness products are a growing sector of the cannabis industry that are inspiring many to turn to CBD for help. Though sometimes classified as wellness products, many CBD products are clearly medicinal and some can be considered more recreational. Understanding this confusion of categories is an important starting point for investors considering the CBD sector of the cannabis industry. Such an understanding will help investors evaluate specific companies as potential investments.

Category confusion

Hemp-derived CBD products are currently the biggest news in the CBD sector because of the legalization of hemp and hemp-derived CBD by the 2018 Farm Bill. Unfortunately, there is a bit of category confusion due to the history of what we know as “medicine” and “wellness.” For example, one writer recently claimed that cannabis with THC, aka marijuana, has been “looked at as medicinal- or adult-use.” But the widespread use of CBD with zero to low levels of THC is leading to a “third cannabis category — wellness.”

Though it is true that marijuana has been treated legally as either medicinal or adult-use, with adult-use sometimes referred to as recreational, wellness effects were clearly being sought by many marijuana users. Even The New Yorker covered the concept over a year ago in an article titled “California Makes Marijuana A Wellness Industry.” This confusion is due, in part, to a historical split in the U.S., as well as many other nations, between medicine and what is sometimes known as alternative health care, of which wellness is a component.

An overly simplified version holds that medicine focuses on the use of prescription and over-the-counter drugs that are manufactured using a variety of chemical components. Alternative health care, including wellness, focuses on natural remedies though many are now refined and manufactured with the same purity level as medicinal drugs. These days the lines between these categories are getting blurry and so some think of marijuana as medicinal, due to state-level legal requirements for a doctor’s prescription, and CBD as a wellness treatment, which has now come under the purview of the FDA.

CBD wellness market growing rapidly

But the real news is not that CBD has added a wellness sector to the cannabis industry since that already existed. Rather the truly exciting news is that the use of CBD and CBD-infused products for wellness is accelerating rapidly as more products come on the market. CBD products are going mainstream with the passage of the 2018 Farm Bill and widespread accounts of the use of CBD to address issues such as epilepsy.

Obviously, CBD’s status as a treatment for epilepsy seizures places it in the medicinal category. But a growing range of wellness products also places it in the wellness category. To further upset such categories, CBD is also being added to alcoholic beverages, giving it a strong presence in the recreational category as well. Nevertheless, while CBD crosses categories and all these sectors are growing, the current growth does look especially strong for products and business initiatives that emphasize wellness.

Examples of CBD wellness products

So what kind of CBD products beyond CBD itself are now available for consumers interested in wellness? An excellent example of the possibilities can be seen by considering the many lotions and balms now available for pain reduction and for skincare. A variety of such products are promoted by retired sports figures from injury-prone sports such as football and boxing while others are more likely to be promoted by celebrities in the beauty industry.

For example, Diamond CBD, a wholly-owned subsidiary of Pot Network Holdings Inc  got into the game fairly early with the LT Pain Master CBD collection, a branded line developed with former football star Lawrence Taylor. This collection offers both CBD oil and a topical CBD cream which are marketed for pain relief.

Another popular company is Charlotte’s Web, a wholly-owned subsidiary of Charlotte’s Web Holdings Inc which offers two topical hemp extract products, a cream and a balm, that are marketed for skincare.

For investors just entering the CBD space, these two public companies are a good starting point for understanding the CBD product sector. Given that CBD in any form has some kind of wellness effect, both companies’ products could be said to be wellness products. But most cannabis products cross the categories discussed above, which is one reason they are important for investors to understand. In the case of Diamond CBD, its full array of product lines cross most strongly into the recreational category. On the other hand, Charlotte’s Web is clearly more about the medicinal category.

Understanding CBD company focus

If one finds such distinctions confusing, try reviewing the above discussion regarding how such categories came into being and then browse the product section of each company. Consider the packaging and text, including the names of products, and consider the likely target market and use cases for the majority of products on offer from each company. With a clearer understanding of how each company’s product lines differ and which consumer segments each company seems most likely to attract, the potential for individual company growth in the emerging CBD product sector will be much easier to evaluate. While hardcore technical analysts may find such an exercise beside the point, investors who like to understand what a company actually does will find it a helpful approach to evaluating CBD-related investments.

By: J. Frank Sigerson for equities.com