Despite the controversy over Delta-8, sales are beating some popular CBD companies. Hemp Benchmarks has been following the price of Delta-8 within the hemp industry and recently highlighted the company LFTD Partners (OTC: LSFP), whose sales rival many established CBD companies.
CBD Fever Dreams
When the Farm Bill was passed in 2018, there were high hopes for the CBD industry and in particular for the hemp farmers. Hundreds of acres were grown, but the huge demand for CBD never materialized. There was demand, to be sure, but not at the levels the market had anticipated. This resulted in a glut of CBD biomass in the market and prices plunged. Farmers plowed over crops instead of harvesting due to the cost and many dramatically reduced the acres of hemp they were growing.
Then Delta-8 came along and the farmers began to find a new market for their crops. It was discovered that within the language of the Farm Bill, only Delta-9 cannabis was carved out as an adult-use THC product, leaving Delta-8 in a grey area. Delta-8 is often referred to as cannabis light in that the psychoactive response is milder than Delta 9 cannabis. It is also extracted from hemp as opposed to the regular cannabis that produces the typical THC product. This loophole caught many off guard and with little regulation or oversight, the product began to take off.
Several states have banned the product from being sold due to the lack of oversight. The cannabis industry seems mixed on whether it supports the product or not. Some are happy that it has helped out hemp farmers, while others see it as competition that isn’t subject to the same onerous regulations. In addition to that, the FDA noted that it has received several troubling reports on Delta-8. Seeing a Delta-8 company beat a highly regulated CBD company in revenue has got to hurt.
LFTD Partners also known as Lifted Made, manufactures and sells branded products containing hemp-derived cannabinoids (e.g. delta-8-THC, delta-9-THC, delta-10-THC, THCV, THCO, CBDA, CBC, CBG, CBN, CBD), e-liquid, disposable nicotine vapes, kratom and kava products. In February 2020, LSFP acquired 100% of Warrender Enterprise Inc. d/b/a Lifted Made (formerly d/b/a Lifted Liquids). It recently announced that it was expanding its operations for the fourth time during the last 18 months, leasing an additional 8,000 square feet in a third building in Kenosha, WI. LSFP has also signed a letter of intent to acquire Savage Enterprises, owner of award-winning hemp-derived products brand Delta Extrax, sub-brand Chronix, Savage CBD, male enhancement products brand Vix, kratom and kava-based products brand Kanna, and plans to enter the California marijuana industry by purchasing Premier Greens LLC and MKRC Holdings, LLC.
Two weeks ago, the company reported its third-quarter revenue had risen 32% to $8.8 million and net income grew by 40% to $2.2 million. Savage reported that it had revenues of $20 million in the third quarter, but doesn’t look to have Delta-8 products in its portfolio. Still, the pro-forma of the combined companies puts it near a $30 million quarter.
CBD Companies Struggle
CBD brands have struggled under the massive amount of money it took to get established only to see competition muddy the landscape. CBD was being sold at grocery stores and gas stations. Consumers had no idea whether the cheap CBD at the gas station was the same, better, or worse than more reputable brands. With major restrictions on what CBD companies could say about themselves, consumers couldn’t even do their own research. Websites remain vague and companies that attempt to give consumers as much information as possible often get slapped by the FDA for making claims they can’t support with medical research.
This year, a well-respected brand Plus Products essentially went bankrupt. Aligning itself with a major celebrity like John Legend didn’t help as the company became overwhelmed with debt. The stock has quit trading as the company restructures. In its last earnings report, Plus only delivered revenues of $4 million for the second quarter.
While Charlotte’s Web (OTC: CWBHF) reported revenues of $23 million in the most recent third-quarter earnings report, this was down from 2020’s third-quarter revenue of $25 million. Another CBD with a large market share, CV Sciences (OTC: CVSI) reported that sales for the third quarter of 2021 were $5.1 million, which dropped 8% from $5.6 million in the third quarter of 2020.
FDA Warns About Delta-8
In September, the Food & Drug Administration (FDA) issued a warning about Delta-8 THC noting that the product hasn’t been evaluated or approved by the agency. Granted the FDA’s opinion on anything cannabis-related is received with a healthy dose of skepticism. The FDA still hasn’t made any determination on CBD after years of discussion and research. In the warning notice, the FDA said that from December 2020 through July 2021, it had received adverse event reports from both consumers and law enforcement describing 22 patients who consumed delta-8 THC products and 14 went to a hospital or emergency room for treatment. 19 of these patients said they had eaten delta-8 THC food products. The adverse events included vomiting, hallucinations, trouble standing, and loss of consciousness. In addition to that, the FDA said that the national poison control centers received 661 exposure cases of delta-8 THC products between January 2018 and July 31, 2021, 660 of which occurred between January 1, 2021, and July 31, 2021. Of the 661 exposure cases:
- 41% involved unintentional exposure to delta-8 THC and 77% of these unintentional exposures affected pediatric patients less than 18 years of age.
- 39% involved pediatric patients less than 18 years of age
- 18% required hospitalizations, including children who required intensive care unit (ICU) admission following exposure to these products.
CBD companies were already facing a tsunami of challenges and the onslaught of the Delta-8 products has only added to those troubles. Until the cannabis industry decides to take a position on Delta-8, one way or the other, it is likely the CBD-only companies will have to find new ways to succeed. The patchwork approach by some states banning the product, while others allow it only creates more chaos for consumers. In the meantime, it looks as if the lack of regulations and customer demand will keep Delta-8 companies in business and possibly more successful than the CBD companies who are trying to play by the rules.