Adam JacksonJune 13, 2023
The disgruntled cohort is advocating for an independent chair to oversee the upcoming meeting.
Charlotte's Web Archives - Green Market Report
Adam JacksonJune 13, 2023Adam JacksonJune 12, 2023
The showdown follows a major decline in the company's performance over the past year.
StaffMarch 23, 2023
The Daily Hit is a recap of the top financial news stories for March 23, 2023.
On the Site
Exclusive Interview: Untangling New York’s True Party of Ownership Rule
New York cannabis policy czar Axel Bernabe spoke to Green Market Report to outline exactly what is and isn’t allowed for cannabis businesses under the state’s two-tiered market structure, including controversial “True Party of Interest” regulations. Read more here.
California State Officials Launching Crackdown on Local Cannabis Corruption
California’s state government has had enough of corruption in its marijuana industry at the city and county level, and is launching a new crackdown in at least six yet-to-be-named jurisdictions, to look for evidence of pay to play schemes, bribery, and other instances of wrongdoing. Read more here.
Curaleaf to Close New Jersey Grow, Lay Off Up to 40 Staff
Massachusetts-based cannabis titan Curaleaf (CSE: CURA/OTCQX: CURLF) confirmed this week that it plans to close its marijuana cultivation facility in Bellmawr, New Jersey, which could reportedly result in up to 40 layoffs. Read more here.
Charlotte’s Web Sales Fell in 2022 as CBD Demand Fades
Despite inking major deals, Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) saw falling revenue in 2022 due in part to waning demand in an increasingly saturated cannabidiol (CBD) industry. Read more here.
Emerging East Coast State Markets to Buoy Cannabis Industry as Legalization Stalls
While the most-seasoned legal recreational state markets saw declines in revenues for the first time in 2022, recently legalized states on the East Coast are expected to fuel growth for the time being, according to a report by New Frontier Data. Read more here.
In Other News
Cannabis rescheduling
U.S. Health and Human Services Secretary Xavier Becerra, whose agency was tasked last fall with kicking off a federal review of marijuana’s status as a Schedule 1 controlled substance, said during a TV interview this week that his office is working as quickly as it can, but didn’t provide any details or timeline. The review could ultimately lead to federal marijuana legalization, and Becerra shared a clip on Twitter. Listen to highlights here.
Georgia
Nine companies that applied for medical cannabis business licenses have filed suit against a state commission that was in charge of awarding permits, and the situation has led to a proposed compromise from a state lawmaker. Read more here.
Adam JacksonMarch 23, 2023
Despite inking major deals, Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) saw falling revenue in 2022 due in part to waning demand in an increasingly saturated cannabidiol (CBD) industry.
The hemp extract wellness company, which is the largest in the world, reported financial results for the fourth quarter and year ending December 31, 2022.
Net revenue for the fourth quarter of 2022 was $18.9 million, a downtick of 23.8% versus $24.8 million in the fourth quarter of 2021. The decline was mostly due to lower retail and online sales, it said. Earnings were for a loss of $0.23 cents.
For the entire year of 2022, the company reported a net revenue of $74.1 million, a 22.8% decrease from $96.1 million in 2021.
The company posted a fourth quarter net loss of $35.2 million, meaningful progress from the $118.2 million net loss in the same period in 2021. The net loss for 2022 was $59.3 million, also a marked improvement from the $137.7 million net loss in 2021.
The CBD industry has witnessed a shift towards lower-priced CBD products, primarily gummies and topical products.
Still, Charlotte’s Web in 2022 held the number one share position across the food, drug, mass (FDM), and natural retail channels. It also maintained its position as the market leader in e-commerce sales, according to cannabis research firm Brightfield Group.
CEO Jacques Tortoroli said that the company has focused on strategic initiatives and partnerships outside of lobbying regulatory action, which he said “has created uncertainty and confusion for the CBD industry overall.”
Charlotte’s Web received a $56.8 million investment from British American Tobacco (BAT), which strengthened its financial position, though the exact value and cost of that debt will play out over the next few years.
The company also became the “official CBD of Major League Baseball,” which will help it tap the sports industry and expand brand recognition, in addition to obtaining a certification from quality assurance firm NSF.
Charlotte’s Web gained new distributor partnerships to expand retail opportunities across new industry verticals – inking a distribution deal with Southern Glazer’s Wine & Spirits, along with new partnerships in Canada and other regions as part of its asset-light international strategy.
However, business-to-business (B2B) net revenue dropped 32.6% year-over-year from $9.5 million to $6.4 million. The decrease was mainly attributed to lower comparable shipments to retail customers, some of which reduced total shelf space for CBD products. However, B2B net revenue did increase by 20.8% sequentially, reflecting seasonal holiday sales demand.
Direct-to-consumer (DTC) net revenue saw an 18.3% drop over the year from $15.3 million to $12.5 million, due to lower traffic to the company’s online webstore and competitive discounting. Sequentially, DTC net revenue increased by 6.0%, again reflecting seasonal holiday sales demand.
Brightfield Group released a mid-year CBD report in July, which stated that growth in the CBD industry is “heavily dependent” on Food and Drug Administration (FDA) regulation. However, there has been little progress on federal regulation for CBD since the provisions legalizing hemp and hemp derivatives were passed in the Farm Bill of 2018.
The lack of regulations has led to a competitive market with a constantly-changing product mix. Still, companies are finding ways to integrate CBD into the broader wellness market, creating non-CBD products to sell through mainstream outlets, and partnering with retailers that don’t sell CBD to reach new customers.
According to the Brightfield Group, if federal regulation were implemented by 2024, sales could reach $11 billion by 2027, driven by accelerated growth of ingestible products like capsules and gummies and increased acceptance by mainstream retailers. Without such guidance, the CBD market is expected to remain decidedly lower.
Charlotte’s Web said it has been active in supporting federal and state legislative pushes for a comprehensive CBD regulatory framework. The company is part of a coalition in Washington D.C. to support Congressional legislation, and has shared quantitative safety data study results with the FDA, it said.
CFO Jessica Saxton said that the company made its business operations simpler and more efficient, resulting in a cost reduction of nearly $30 million. The fall in total cash usage from $29.6 million in 2021 to $5.3 million in 2022 more than compensated for the decrease in revenue, she said.
Thanks to the investment from BAT, the company was able to finish 2022 with a cash balance of $67 million.
“We remain committed to being good stewards of capital through prudent expense and cash management. Our strong liquidity position enables us to be choiceful when investing in our growth initiatives,” Saxton added. “Moreover, our key strategic partners – MLB and BAT – have become important stakeholders in the company.”
Adjusted EBITDA losses showed a positive trend, with a 45.8% improvement in the fourth quarter and a 42.5% improvement over 2022.
StaffNovember 2, 2022
The Daily Hit is a recap of cannabis business news for Nov. 2, 2022.
ON THE SITE
Green Thumb Beats on Record Revenue, Circle K Stores Remain in Question
Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) posted positive results that beat analysts’ expectations, with record revenue showing the demand for cannabis even as profits shrink industrywide. Green Thumb reported third-quarter revenue of $261.2 million, up 2.7% sequentially and up 11.8% from the prior-year period. This beat the Yahoo Finance average analyst estimate of $257.3 million. Read more here.
The Parent Company Sells Off Extraction Division
In yet another sign that the licensed California cannabis market is struggling, San Jose-based TPCO Holding Corp. (NEO: GRAM) (OTCQX: GRAMF) announced Wednesday that it had sold off its entire extraction division, a subsidiary called SISU Extraction LLC, for an undisclosed sum. Read more here.
Tilray Inks Distribution Deal with Charlotte’s Web Ahead of Health Canada Review
Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) has inked a partnership with U.S.-based CBD giant Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) to sell hemp extract products in Canada. Under the agreement, Charlotte’s Web’s full-spectrum CBD products will be reach dispensary shelves through Tilray’s distribution network. Previously Charlotte’s Web products were only available in Canada to those that qualified for a special access medical exemption through Health Canada for specific need-states. Read more here.
Scotts Sales Drop 33% in Fourth Quarter, More Than Forecast
The Scotts Miracle-Gro Company (NYSE: SMG) announced in its financial results for the fourth quarter that ended Sept. 30, 2022, that sales fell by 33% to $493.6 million reflecting decreases in both major business segments. This missed the Yahoo Finance analyst estimates for sales of $519 million. Read more here.
Treez Acquires Payment Company Swifter
Cannabis cloud commerce platform company Treez is buying the payment solutions company Swifter. The value of the transaction was not disclosed. However, it does follow Treez Series C funding round of $51 million in April 2022. At the time the company said it would use the new funds to expand its footprint, pursue market expansion opportunities, and invest in partnerships that would connect each link in the supply chain. Read more here.
India Globalization Revenue Rises as it Shaves Losses
India Globalization Capital Inc. (NYSE American: IGC) posted rising revenues and cut losses as it reported its second fiscal quarter 2023 financial results. Revenue was roughly $202,000 for the second quarter, versus $56,000 during the same time last year. The company said that the rise in revenue is due mostly to growing sales of its CBD-based products and services, which increased 345% over last year. Read more here.
IN OTHER NEWS
Heritage Cannabis
Heritage Cannabis Holdings Corp. (CSE: CANN) (OTCQX: HERTF) has entered into an equity line of credit agreement with Obsidian Global Partners LLC whereby Obsidian proposes to purchase common shares in the capital of Heritage for the aggregate gross proceeds of up to $20 million by private placement, at Heritage’s discretion. Read more here.
Cansortium Inc.
Cansortium Inc. (CSE: TIUM.U) (OTCQX: CNTMF), a vertically integrated cannabis company operating under the Fluent brand, has agreed with certain of its directors to issue an aggregate of 1,048,386 common shares to such directors in exchange for the cancelling $162,500 of owed director fees. Read more here.
Adam JacksonNovember 2, 2022
Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) has inked a partnership with U.S.-based CBD giant Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) to sell hemp extract products in Canada.
Under the agreement, Charlotte’s Web’s full-spectrum CBD products will be reach dispensary shelves through Tilray’s distribution network. The company said that its products had previously only been available to those that qualified for a special access medical exemption through Health Canada for specific need-states.
“Partnering with Charlotte’s Web, the market leading CBD brand, opens new opportunities for Tilray Brands in Canada as we evolve our distribution channels from the dispensary model to natural wellness retail channels and eventually mass retail opportunities,” Tilray Canada president Blair MacNeil said.
Charlotte’s Web will sell the same core hemp extract products it has in the U.S., with Tilray handling licensing, manufacturing, quality, marketing, and distribution.
“This underscores our strategic expansion into international markets with leading domestic partners by leveraging well-established infrastructure, co-production, and route-to-market capabilities,” Charlotte’s Web CEO Jacques Tortoroli said in a news release.
The company expects Charlotte’s Web CBD products to be widely available in Canadian dispensaries by early next year.
Hemp-derived CBD falls under the same regulatory framework in Canada as cannabis, so Canadians for now can only purchase CBD products legally through a licensed cannabis retailer or through prescription by a doctor.
However, with Health Canada signaling a move toward simplifying CBD’s legal status, the company said that establishing Charlotte’s Web’s supply chain and distribution in the country also prepares for the possible introduction of natural health products regulations and potential ability to sell CBD products through traditional retailers.
Cory Pala, director of investment relations at Charlotte’s Web told Green Market Report in August that the company — which is based in the U.S. — is “particularly excited” about Health Canada’s inquiry to make CBD more accessible.
Charlotte’s Web cannot export its products to Canada under current law, “which is sort of ironic” considering it is federally legal in both countries, he said, so it has mapped out a plan to partner with cultivators in the country instead.
“In the U.S., we have 2,500 different competitors that have similar products,” Pala said. “But in Canada, we have maybe half a dozen, if that. And so it’s really, really compelling to us as a market opportunity. This is big for multiple reasons.”
Charlotte’s Web has been focused on expanding its presence in the U.S. and abroad. Last month, the company also became the “official CBD of Major League Baseball” after the two organizations struck a lucrative sponsorship deal.
StaffAugust 9, 2022The Daily Hit is a recap of cannabis business news for August 9, 2022.
ON THE SITE
Cronos Makes Gains in The Second Quarter
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) reported its 2022 second-quarter earnings with net revenue of $23.1 million which jumped from last year’s $7.4 million for the same time period. However, total revenue before taxes was $28 million which just beat the Yahoo Finance average analyst estimates for revenues of $27 million. It was also better than the first quarter‘s revenue of $25 million. The stock was dropping by roughly 8% in early trading to lately sell at $3.26. Read more here.
Acreage Holdings Sees Revenues Climb, Pushes Eastward
Acreage Holdings, Inc. (CSE: ACRG.A.U, ACRG.B.U), (OTCQX: ACRHF, ACRDF) delivered positive results in the second quarter as the company moves away from established western markets in favor of emerging markets east of the Mississippi. The company reported its financial results for the first quarter ending June 30, 2022 after the market closed on Monday. Read more here.
Weedmaps Beats on Earnings, But Gives Cautious Outlook
WM Technology, Inc. (Nasdaq: MAPS) announced its financial results for the second quarter ending June 30, 2022. WeedMaps reported that its revenue increased 24% to $58.3 million over the second quarter of 2021. This slightly missed the Yahoo Finance average analyst estimate for revenues of $62 million. Net income was $19.8 million as compared to net income of $16.8 million from the prior year period. Read more here.
Hydrofarm Stock Craters as Sales Wither
Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM) slumped in trading on Tuesday as it posted second-quarter results that missed expectations — showing that consumer demand for hydroponics remained flat as a lack of regulatory guidance and recessionary pressures facing the sector persist. The company released its financial results for the second quarter ending June 30, 2022. Read more here.
MariMed Edges Up in Second Quarter Earnings
After the close on Monday, MariMed, Inc. (CSE: MRMD) (OTCQX: MRMD) delivered its financial results for the second quarter ended June 30, 2022. MariMed’s revenue of $33 million just barely edged out the previous year’s revenue of $32 million and was higher than the first quarter’s revenue of $31 million. However, it missed the Yahoo Finance average analyst estimate for revenues of $36 million. The company reported a net income of $1.9 million versus last year’s net income of $7.6 million. Read more here.
Village Farms Beats on Revenue, as Produce Stays Strong
Village Farms International, Inc. (NASDAQ: VFF) (TSX: VFF) announced its financial results for the second quarter ended June 30, 2022. Total consolidated sales increased 18% year-over-year to $82.9 million from $70.4 million. This beat the Yahoo Finance average analyst estimate for revenues of $70 million. Read more here.
Charlotte’s Web Misses on Revenue, Finds Hope Beyond The U.S.
Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) missed expectations as the CBD company continues to struggle amid a patchwork regulatory landscape. The company reported its financial results for the second quarter ending June 30, 2022. Read more here.
Cannabis Operators Plan to Raise Prices, Blaming Inflation
The word “inflation” has dominated headlines and earnings calls this year, and a survey from a leading national cannabis accounting and advisory firm solicited feedback to gauge how such rising costs are affecting the sector. In a month-long survey this year asking operators a series of questions regarding the impacts of inflation on their cannabis operation, GreenGrowth CPAs found that one in four operators reported planning to raise prices in the near or immediate future to combat rising inflation costs. Read more here.
Psychedelics Plays a Role In Metamodernism
There are stories about how psychedelics changed the minds of entrepreneurs not only seeking enlightenment in the San Francisco Bay Area beginning in the late 60s and early 70s but incorporating their psychedelic visions into business models. Read more here.
IN OTHER NEWS
Curaleaf Holdings, Inc., Pharma GmbH
Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF), a U.S. provider of consumer products in cannabis, today announced that Curaleaf International Holdings Limited, the company’s European holding company, has signed a definitive agreement to acquire a 55% stake in Four 20 Pharma GmbH, a fully EU-GMP & GDP licensed German producer and distributor of medical cannabis with its own product line. Read more here.
Lowell Farms Inc.
Lowell Farms Inc. (CSE: LOWL; OTCQX: LOWLF), a California-born cannabis cultivation and maker of brand Lowell Smokes, announces unaudited revenue and operating results for the second quarter (ended June 30, 2022). All figures stated are in US Dollars. Read more here.
AFC Gamma, Inc.
AFC Gamma, Inc. (NASDAQ:AFCG) today announced its results for the second quarter of 2022. AFCG issued a presentation of its second quarter 2022 results, titled “Second Quarter 2022 Earnings Presentation,” which can be viewed at www.afcgamma.com under the Investor Resources section. AFCG also filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, with the Securities and Exchange Commission on August 9, 2022. Read more here.
Akanda Corp., Cansativa GmbH
International medical cannabis platform company Akanda Corp. (NASDAQ: AKAN) today announced it has signed a multi-year supply agreement with European medical cannabis leader Cansativa GmbH to supply EU-GMP quality THC dried flower strains cultivated from its Portuguese operations at Holigen. This new supply agreement marks one of the largest for medical cannabis to be exported from Portugal to serve the emerging European medical cannabis market. Read more here.
TRP, Cookies Florida, Inc.
TRP is bringing recognized cannabis brand Cookies to the Florida market through an exclusive partnership. The first Cookies dispensary in the state is opening at 8303 Bird Road in Miami, Florida on August 13, 2022. TRP looks forward to serving South Florida’s patients via its subsidiary and MMTC license holder Cookies Florida, Inc. Read more here.
22nd Century Group, Inc.
22nd Century Group, Inc. (Nasdaq: XXII), a leading agricultural biotechnology company dedicated to improving human health with reduced nicotine tobacco, hemp/cannabis, and hops advanced plant technologies, today reported results for the second quarter ended June 30, 2022, and provided an update on recent business highlights. Read more here.
MediPharm Labs Corp.
MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ), a pharmaceutical company specialized in precision-based cannabinoids, announced it has entered into a research support agreement with the Keck School of Medicine of University of Southern California (USC) to conduct a randomized double-blind placebo-controlled Phase 2 trial on the efficacy of THC and CBD to treat hospice-eligible patients diagnosed with dementia and experiencing agitation. Read more here.
Mindset Pharma Inc.
Mindset Pharma Inc. (CSE: MSET) (FSE: 9DF) (OTCQB: MSSTF), a drug discovery and development company focused on creating novel, optimized, next-generation psychedelic and non-psychedelic medications to treat neuropsychiatric and neurological disorders with unmet medical needs, today issued a letter to shareholders from James Lanthier, Chief Executive Officer of Mindset. Read more here.
Cybin Inc.
Cybin Inc. (NEO: CYBN) (NYSE American: CYBN), a biopharmaceutical company focused on progressing “Psychedelics to TherapeuticsTM”, announced that it has established an at-the-market equity program that allows Cybin to issue and sell up to USD $35,000,000 of common shares. Read more here.
Adam JacksonAugust 9, 2022
Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) missed expectations as the CBD company continues to struggle amid a patchwork regulatory landscape. The company reported its financial results for the second quarter ending June 30, 2022.
For the key metric of total revenue, Charlotte’s Web missed expectations as it delivered approximately $18.9 million during the period — missing the Yahoo Finance Average analyst estimate for revenues of $27.13 million. The revenue decreased 21.8% versus $24.2 million in the same period last year. The company said that the decrease was primarily due to lower comparable customer shipments, consumer shift to lower priced formats, a return reserve as well as lower comparable online traffic.
Charlotte’s Web also reported a second-quarter net loss of $7.9 million compared to a net loss of $5.9 million in the same period last year. The company said that the net result was primarily impacted by “lower net revenues, higher return reserves and increased inventory provisions, which were offset by significantly reduced operating expenses.” The earnings were for a loss of five cents per share, a cent below analysts’ loss estimates of four cents a share.
“While we are disappointed with the second quarter revenue, we achieved significant distribution and customer wins consistent with our growth priorities to expand our coverage in existing channels and enter new vertical,” CEO Jacques Tortoroli said. “We’re also focused on improving operating cash flow as we progress through the second half of the year. Operating expenses were down over 31.5% year-over-year in the second quarter. In July, we further lowered our staffing levels and administration expenses. In aggregate, our focus on right-sizing our business is bringing operating expenses below $70M on an annualized run rate.”
The company also saw a $2.4 million decline in the e-commerce platform versus $15.7 million at the same time last year. Charlotte’s Web maintains the largest e-commerce business in the CBD industry; and e-commerce represents the largest channel in the industry with an approximate 40% market share, according to the Brightfield Group.
Business-to-business net revenue was $5.6 million after a $0.9 million returns reserves — representing $2.9 million, or 33.9%, lower year-over-year “primarily due to lower comparable shipments to some of the company’s largest retail customers.”
“Charlotte’s Web holds the number one share position across major retail channels including food/drug/mass retail, natural grocery & vitamin retailers, and e-commerce, based on market share data from leading third-party analysts such as The Nielsen Company and Brightfield Group,” the release said.
Gross profit was $9.3M, or 49.4% of revenue versus $15.8 million and 65.5% of revenue respectively in same period last year. The company said the decrease was primarily related to lower net revenue “including a $0.9 million customer return reserve, and $1.9 million of inventory provisions.” Excluding the return reserve and inventory provisions, gross profit was 61.0% of revenue, it said.
Adjusted EBITDA fell to $5.4 million in the second quarter, versus a loss of $5.1 million in the same period last year.
Net cash used from operations during the first half of the current fiscal year was $4.3 million versus $16.2 million for the same period last year. The company’s cash and working capital as of the second quarter were $14.8 million and $64.6 million, respectively, versus $19.5 million and $75.6 million in the latter half of the previous fiscal year.
Total selling, general and administrative expenses of $17.3 million improved 31.5% year-over-year due to a $7.9 million reduction versus the second quarter last year. The company said the improvement reflects lower staff levels and compensation as well as increased operating efficiencies “resulting from actions implemented year-to-date.”
New Pathways For CBD
As companies in the cannabis sector suffer from a lack of regulatory guidance from the federal government, new opportunities are opening up for CBD companies.
Overseas, the company’s original CBD oil formula has been placed on the Foods Standards Agency list of products allowed to be sold in the U.K — making Charlotte’s Web the only substantially vertically-integrated U.S. company with a full-spectrum hemp extract to have passed the validation phase and advance to the safety assessment phase in the United Kingdom, it said.
Also, the Scientific Advisory Committee for Health Canada unanimously agreed CBD is “safe and tolerable for short-term use” — recommended hemp CBD products should be considered for mainstream retail availability.
Cory Pala, Director of Investment Relations, told The Green Market Report at the time that the company is “particularly excited” about the recommendation.
The company cannot legally export its products to Canada under current law “which is sort of ironic” considering it is federally legal in both countries, he said, so it has partnered with cultivators in the country instead. The new recommendation presents a juncture for the company.
“In the US, we have 2,500 different competitors that have similar products,” Pala said. “But in Canada, we have maybe half a dozen, if that. And so it’s really, really compelling to us as a market opportunity. This is big for multiple reasons.”
The health board will take consultation with stakeholders and advocates to hash out regulation guidelines and figure out whether it actually wants to move in that direction before seeking approval from the Canadian government.
Joanne CachaperoJuly 19, 2022
Cannabis research firm Brightfield Group released its CBD: FDA Impact and the Path Forward/ 2022 Mid-Year US CBD Report, which found that growth in the CBD industry is “heavily dependent” on Food and Drug Administration (FDA) regulation, though there has been little progress on federal regulation for cannabidiol (CBD) since provisions removing hemp and hemp derivatives from prohibition were passed in the Farm Act of 2018.
“If federal regulation were to be implemented by 2024, sales are expected to reach $11.0 billion by 2027, driven by accelerated growth of ingestible products like capsules and gummies as well as increased acceptance by mainstream retailers,” the Brightside report said. “Without such guidance, the CBD market is expected to remain decidedly lower.”
CBD Needs FDA
Currently, the U.S. CBD market is expected to reach $5 billion by 2022, according to Brightside. The report then offered two scenarios – projections with FDA guidance in place by 2024, or without. Their analysis predicted more than $4 billion in growth for the CBD industry by 2027, to $11 billion with the implementation of a regulatory scheme. However, without regulation, the report predicted relatively stagnant growth over the same time period to just over $6 billion.
Lack of FDA guidance, Brightside pointed out, presented challenges for CBD industry businesses by allowing a market environment with “a shifting product mix and competition from other hemp-derived cannabinoids, though price compression has begun to subside, and the industry is increasingly attracting attention from large firms.”
“While waiting for increased oversight, companies have been seeking to define CBD’s place in the wider wellness landscape and using tactics like creating non-CBD products that can be sold through mainstream outlets and partnering with retailers who do not sell CBD to increase distribution and reach a novel base of consumers,” the report surmised.
Brightside said CBD product companies Charlotte’s Web (OTC: CWBHF) and Your CBD Store (SunMed) were the two top leaders in company shares for the second year in a row. Charlotte’s Web saw the largest portion of industry online sales and was third in brick-and-mortar sales behind Your CBD Store (SunMed) and American Shaman. Companies that saw significant gains in Q1 2022 included High Tide and Heavenly Rx/Simply Better Brands.
Grocery store sales of CBD products grew 18 percent since 2021, with $131 million in sales predicted for 2022. Brightside called grocery companies “risk averse” in regards to CBD products, resulting in marketing challenges for ingestible CBD products. Topicals will account for more than 41 percent of grocery store CBD product sales in 2022, with tinctures a distant second place at just over 19 percent. With FDA guidance, the report said, the ingestible CBD product market was set to boom.
Hope Fades
Pundits and industry experts are not hopeful for any federal regulations to come from the agency any time soon. Though four years have passed since the hemp provisions were approved in the Farm Bill, only one CBD-based pharmaceutical application has been approved by the FDA; Epidiolex, which was developed to treat seizures associated with a severe form of pediatric epilepsy.
The FDA has said there is not enough data or research on CBD (or other cannabinoids) to allow comprehensive guidance for the industry. The COVID-19 pandemic also apparently slowed progress for the agency, as it prioritized vaccine approval over the last two years.
An open day-long meeting in mid-June was held by the Science Board to the FDA to discuss the challenges to evaluating cannabinoids as dietary supplements or food ingredients, as well as safety reviews and concerns regarding toxicity possibly associated with consistent consumption of large amounts of CBD. The agency claims concerns are based on data gathered during the approval of Epidiolex. CBD industry leaders said the meeting provided only more delaying tactics from the FDA.
In February, the appointment of new FDA Commissioner Robert M. Califf, M.D., gave attorney Blair Gue of Rogoway Law, a glimmer of hope for progress. Comments from Califf, though, were nonspecific regarding when FDA guidance on CBD may be forthcoming. Gue pointed out that continued pressure on the agency was needed from CBD industry companies.
“Though Commissioner Califf could not provide a plan or timeline for the adoption of hemp or CBD regulations, he did express a strong desire to work with Congress on the subject moving forward. Given Commissioner Califf’s comments about his willingness and desire to make real progress on the FDA’s industrial hemp product and derivative regulations, now is the time for the industrial hemp community to apply pressure to ensure that he actually does so,” she said.
Debra BorchardtMay 16, 2022Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) reported financial results for the first quarter ending March 31, 2022 as net revenue fell 17% to $19.4 million versus $23.4 million for the same time period in 2021. Sales also fell sequentially from the fourth quarter’s revenues of $24.8 million and greatly missed the estimates from Yahoo Finance for sales of $27 million. Charlotte’s Web said the decrease was partly due to a temporary closure of its production and shipping terminal in January after a local wildfire in Boulder County.
The net losses were trimmed to $8 million from last year’s net loss of $12 million. The company has also been trying to right-size itself as revenues continue to fall. Total selling, general and administrative of $20.4 million was reduced by 14.4% year-over-year. “The $3.4 reduction versus Q1-2021 was primarily the result of actions taken in late 2021 and early 2022 to bring expenses in line with current revenue levels to support a return to positive cash flow.”
“While our e-commerce traffic was lower compared to prior periods, subscriptions more than doubled since Q1-2021. With e-commerce revenue down $3.0 million year-over-year, rebuilding traffic and conversions remain key priorities for us in e-commerce, which is our largest revenue channel,” said Jacques Tortoroli, Chief Executive Officer. “In our retail business, shipping was disrupted in January due to a two-week closure after a local wildfire in Boulder County. Despite the slow start, the overall business improved through the quarter with March being the largest revenue month of the quarter. The quarter did not benefit from our new retail sales organization which was put in place in April.”
Revenue Breakdown
Charlotte’s Web said the direct-to-consumer (“DTC”) eCommerce revenue was $13.1 million, a decrease of $3.0 million or 18.5% year-over-year. The decrease was attributed to lower traffic to the online store, wildfire shipping delays, and an industry-wide consumer shift to lower-priced CBD products; primarily gummies and topical products, where Charlotte’s Web is the market share leader. New DTC subscriptions increased 107% year-over-year and eCommerce conversion rates were strong at 14.2%. Charlotte’s Web maintains the largest e-commerce business in the CBD industry. DTC sales contributed 67.9% of the Company’s total net revenue in Q1-2022.
Business-to-business (“B2B”) revenue was $6.2 million, $1.1 million or 14.6% lower year-over-year with reduced shipments to some of the Company’s largest retail customers after the warehouse closure and some supply chain challenges on top-selling CBD Clinic SKUs. This was partially offset by new retail distribution in grocery, natural, and pet retail, following the passing of Assembly Bill 45 in California.
“Our December/January reorganization reduced complexity and reduced SG&A expenses by more than $20.0 million on an annualized basis,” said Lindsey Jensen, Chief Financial Offer. “This resulted in improved gross margin percentage, lower operating expenses, and improved EBITDA(1) for Q1-2022 compared to the same quarter of 2021. We used $4.7 million in operating cash in the quarter with the majority of this occurring in January. In the quarter we received $0.5 million against our $10.8 million IRS receivable that we started the year with, and an additional $2.7 million has been collected since March 31 through the date of this press release. We continue to steward the use of cash while furthering our product rationalization to lower complexity and costs across our operations.”
International Update
Progress continued in key international markets. In the U.K., the Company achieved a milestone becoming one of the first companies to receive validation of its Novel Food applications from the UK Food Standards Agency (“FSA”) for full-spectrum hemp extracts in the United Kingdom. The milestone adds Charlotte’s Web to the FSA’s list of products allowed to be sold in the UK. The Company’s Novel Foods applications for the European Union were also validated during the quarter and are now proceeding through the safety evaluation process. In Canada, the Company is in discussions for extraction and distribution to bring to market Charlotte’s Web’s first international hemp harvest, which is anticipated for later this year. In Israel, the Company believes the regulatory environment for CBD sales in retail outlets continues to move forward. Charlotte’s Web expects to begin filing product registrations in the coming months through its Israeli partner, Intercure, with the Company’s first bulk product shipment anticipated in the second half of the year.
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