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Business of CBD in Food & Beverages Business of CBD in Food & Beverages Josh Long Keith Butler Roy Bingham Paul Frantellizi Todd Halpern Legal & Regulatory President & Lead Hemp CEO, Co-Founder & CEO, Chief Partner, Editor, Researcher, BDS Analytics Innovation Officer, Venable LLP Informa Markets Life Patent Inc. Joyful Hemp Co. Inc. Courtney N. Moran, Justin Prochnow Jourdan Samel Ari Sherman Perteet Spencer LL.M. Shareholder, CEO, President, Evo Hemp Principal, Strategic Founding Principal, Greenberg Traurig Evo Hemp Partners Group, Attorney and Counselor SPINS, LLC at Law, Earth Law LLC SPINS’ Perspective on the State of CBD 1 Today’s Objectives 1 The State of CBD 2 SPINS’ View of the CBD Landscape 3 Growth Drivers in CBD 2 STATE OF CBD Wh a t i s CBD? CBD CBD (Canna bidiol) is a compound that comes from the cannabis plant. It is one of at least 113 cannabinoid compounds found in both marijuana and hemp, though CBD is not psychoactive. CONFIDENTIAL Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 3 STATE OF CBD How are Hemp & Marijuana different? Cannabis Family of Plants Hemp Marijuana Variety of cannabis grown specifically Psychoactive drug used for medical for industrial uses or recreational purposes CBD <0.3% THC CBD >0.3% THC Key differentiator for legal production CONFIDENTIAL Source: Forbes. Cannabis Companies Expect Big Growth After Trump Legalizes Hemp. Published 12/30/2018. Online Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 4 STATE OF CBD The hemp derived CBD Market is expected to grow to at least $1B by 2022 Estimated Market Size of Hemp Derived CBD1 Tot a l US- Tracked & Untracked Outlets, 2015-2022 $1.322B+ $22.0 B $0.1B $0.6B 2015 2016 2017 2018 2019 2020 2021 2022 Source: 2015 Figure- Forbes. The Cannabis Market That Could Grow 700% By 2020. Published 12/12/2016. Online. 2018- 2022 Figures: Brightfield Group vis Rolling Stone Magazine. Exclusive: New Report Predicts CBD Market Will Hit $22B by CONFIDENTIAL 2020. Published 9/11/2018. Online Green Entrepen CBD & 2019 Global State of Hemp Report (Hemp Business Journal) Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 5 STATE OF CBD Consumer desire to increase wellbeing and legislation changes have facilitated growth of CBD Pharmaceutical Distrust Purported Health Benefits Loosening Legislation • The opioid epidemic means devastating Some benefits of CBD include… • The 2018 Farm Bill legalized nationwide addiction and increased the production of hemp awareness of over prescribed drugs (which cannot contain more • Pain Management than 0.3% of THC) 1 • Consumers • Regulate Appetite continue to move • CBD is no longer considered towards a more • Anxiety Abatement Schedule I and is legal as long as holistic approach it is derived from hemp and is • Reduces Inflammation to wellbeing and consistent with regulations 1 moving away from • Stress Relief • Reforms to hemp policy and the idea of a pill the legalization of cannabis • Stabilize Insulin Levels serving as a “magic for medical purposes (33 bullet” • Facilitate Sleep States) and adult use (10 States) is a positive • Desire to alleviate the • An t i -Seizure Properties indicator for broader financial burden of cannabis reform 1 long term prescriptions ….all the while CBD is non- • However, risk remains in introducing CBD into psychoactive and non-addictive food or dietary supplements, as it is an active ingredient in FDA-approved drugs2 Source 1: The Brookings Institute-The Farm Bill, hemp legalization and the status of CBD: An explainer. 12/14/2018.Schedule 1 are illegal under the law and have the highest level of control due to their designation as having no safe medical use and has a high risk of abuse or misuse; CONFIDENTIAL Source 2: https://www.fda.gov/news-events/press-announcements/statement-fda-commissioner-scott-gottlieb-md-signing-agriculture-improvement-act-and-agencys Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 6 For 20 years, our mission has been to grow the Natural Products Industry and increase the accessibility of better-for-you products that help consumers live healthier and more vibrant lives. 7 SPINS’ VIEW OF THE CBD LANDSCAPE We have built the largest product attribute database in existence, with over 2 million UPCs coded Categories Certifications e.g. Energy Bars, Non-Dairy Beverages, 103 13 e.g. Non-GMO Project, Fair Trade USA, Meat Alternatives, Homeopathy, Herbal B Corporation, Paleo Foundation, Formulas Whole Grains Council Subcategories Health Focus e.g. Medicinal Teas, Cheese & 510 24 e.g. Blood Sugar, Bone, Joint, Alternatives, Yogurt and Kefir, Functional Cardiovascular, Immune, Digestive, Beverages and Kombucha Prenatal, Prostate, Weight Ingredients Attribute Types e.g. Chia, Fish Oil, Fiber, Plant Sterols, Spanning 75 attribute groups such as NOP 5000+ 640 Vitamin D, Probiotics, DHA, Protein, Organic, Gluten-Free, Glucosamine Allergy-Friendly, No Added Hormones, Functional Ingredient, Paleo, Sprouted, Vegan CONFIDENTIAL Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 8 SPINS’ VIEW OF THE CBD LANDSCAPE Sizing the CBD Market: Our Methodology SPINS created a CBD Functional Ingredient Attribute • Attribute is coded across categories • Labeled as a priority ingredient in the ingredient declaration • Hemp is also coded as a functional ingredient from which we can discern activated hemp extract CONFIDENTIAL 9 Copyright © 2019 SPINS LLC. All Rights Reserved. (312) 281-5100. SPINS’ VIEW OF THE CBD LANDSCAPE Our visibility into innovation channels, delivers a full view of the CBD marketplace in traditional retail PROPRIETARY INNOVATION CHANNELS PROGRESSIVE S CALE TO SHOPPERS NATURAL CONVENTIONAL MAS S MARKET DRIVING INNOVATION SUPERMARKETS RETAILERS EXPERIENTIAL/SPECIALIZED MAS S GROCERY RETAIL OUTLETS SPINS EXCLUSIVE, MULTI- TENET CHANNEL VIEW INFRASTRUCTURE CLUB CONVENIENCE MID MARKET SPECIALTY PET HEALTH & FITNESS CBD / DISP ENSARY GROCERY CHANNEL CENTERS MILITARY DOLLAR HORIZON OMNI VITAMIN & AIRPORT ETHNIC CHANNEL SUPPLEMENTS CONCESSION BUILDING THE NEXT GENERATION OF EXPANDED MARKET VIEWS CONFIDENTIAL Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 10 SPINS’ VIEW OF THE CBD LANDSCAPE CBD has grown +342% in the past year to reach $185MM across SPINS Tracked Channels CBD Functional Ingredient Dollar Sales Growth Tot a l US- MULO+C, Specialty, Natural Channel and Alternative Retailers, 52 Weeks ending 8/11/2019 +292% 2 YR CAGR: +351% $185.1 MM +419% $47.2 MM $9.1 MM 2 Ye a r s Ag o Ye a r Ag o 52 Weeks ending 8/11/2019 CONFIDENTIAL Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 11 SPINS’ VIEW OF THE CBD LANDSCAPE CBD growth is outpacing most other functional ingredients except Ketones and Creatine Functional Ingredient Growth Across Channels Tot a l US- MULO+C, Specialty, Natural Channel and Alternative Retailers, 52 Weeks ending 8/11/2019 808% 353% 292% 187% 136% 95% 81% 72% 69% 60% KETONES CREATINE MCT (MED CHAIN CAPRYLIC ACID BRANCHED CHAIN ELDERBERRY COLLAGEN SELENIUM PEA PROTEIN CBD TRIGLYCERIDES) AMINO ACIDS PRODUCTS CONFIDENTIAL Notes: Only showing functional ingredients with sales over $10MM Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 12 SPINS’ VIEW OF THE CBD LANDSCAPE CBD is showing signs of growth continuation Increased Awareness Strengthening Supply Investor Interest 1 CBD Interest (Google Trends) • With loosening legislation, manufacturers • In August 2018, 100 will be able to transport CBD more freely Constellation Brands across state lines2 upped their investment in • Hemp has been Canopy Growth to 38% 50 4 touted as the next ($4B Investment) big cash crop for the Cannabis Investment 5 0 United States and it 2016 2017 2018 2019 will need a market $4 B $14 B • Mainstream media outlets are reporting on the benefits of CBD oil, providing CBD purchase 2017 2018 101, and helping remove the associated stigma • CBD products are readily available • Cannabis companies raised 300% more in high-end and capital in 2018 to reach $14B 5 • CBD incorporation natural retailers into a wide range of • Largest Canadian Cannabis products allows for • CBD products remain companies, Aurora and consumer expensive, but increased Canopy, are investing in experimentation in a supply could lower price licenses production comfortable way point and increase access3 capabilities in the US 1. Interest over time determined using Google Trends (CBD, United States, 1/31/16-1/27/19): Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. A score of 0 means there was not enough data for this term. 2. The Brookings Institution. The Farm Bill, hemp legalization and the status of CBD: an explainer. Published 12/14/2018. Online. 3. NPR All Things Considered. Legalizing Hemp Will Likely Shake Up The Market. Published 12/25/2018. Online. 4. Constellation Brands Financial Report. Published 11/1/2018. Online. 5. Fortune. Cannabis Investments Nearly Quadrupled in 2018. Published 12/20/2018. Online. 5.Motley Fool. Us Hemp Revenue to Grow 27% Annually, Hit $2.6B by 2022. Published 2/17/2019. Online CONFIDENTIAL Co p yrigh t © 2019 SPINS LLC. All Righ t s Re se rve d . 13 Growth Drivers in CBD CONFIDENTIAL Copyright © 2017 SPINS LLC. All Rights Reserved. (312) 281-5100. GROWTH DRIVERS IN CBD Natural & Convenience Channel continue to drive growth of CBD; MULO is over contributing to CBD growth relative to channel size CBD Channel Sales- $MM and $ % Change CBD Channel Share and Contribution to Growth Tot a l US- MULO+C, Specialty, Natural Channel and Alternative Retailers Tot a l US- MULO+C, Specialty, Natural Channel and Alternative Retailers 52 Weeks ending 8/11/2019 52 Weeks ending 8/11/2019 NATURAL CONV MULO ALTERNATIVE S P ECIALTY NATURAL CONV MULO ALTERNATIVE S P ECIALTY +292% 2 YR CAGR: +351% $185.1 MM $185.1 MM $137.9 MM 86 50% 58% 58% 119 127 +419% 27% $47.2 MM 22% 22% 110 82% 13% 13% 16% $9.1 MM 97 6% 6% 6% 73% 10% 1% 1% 1% 2 Years Ago Year Ago 52 Weeks S HARE CONTRIBUTION FAIR S HARE INDEX TO GROWTH SHARE/ CONTRIBUTION TO GROWTH CONFIDENTIAL Co p yrigh t © 2019 SPINS LLC.
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