Hemp Oil: A U.S. Cannabis Market Sweet-Spot

With the 2018 Farm Bill, hemp became a huge opportunity in the United States. Legalized for cultivation and commerce, hemp has full exposure to the U.S.’s 329 million consumers.

In contrast, only about two-thirds of the U.S. population have access to even medicinal cannabis (marijuana). And only about half of that total have full consumer access to legal cannabis.

A major part of the excitement surrounding the U.S. hemp market is that hemp is a rich source of cannabidiol (CBD).

Hemp is legally defined in the U.S. as cannabis with less than 0.3% THC content (the psychoactive cannabinoid in the cannabis plant). But it can possess CBD content approaching or exceeding 20%. Both consumers and investors have read plenty about CBD.

Cannabidiol is the common – but non-psychoactive – cannabinoid contained in the cannabis plant.

Cannabinoids are produced naturally in the human body. They are essential for maintaining human health, via the endocannabinoid system (ECS).

CBD binds easily to these cannabinoid receptors in our bodies. Proponents of CBD use cite empirical evidence that CBD can provide benefits for a diverse array of health issues including:
 

1. Chronic pain
2. Insomnia
3. Nausea
4. Inflammation
5. Anxiety
6. Depression
7. PTSD
8. Fibromyalgia
9. Epilepsy

Relieving specific health issues. Generally promoting human health. CBD demand is powered by a number of consumer drivers.

Investors have heard about the potential of the market for CBD before. Billions in revenue on the table – in the U.S. alone – with a robust growth rate projected.

For consumers and cannabis companies alike, the problem is that CBD has yet to be approved for use by the FDA as a consumer product. Thus, while CBD sales are soaring in the U.S., it’s a tale of two markets.

CBD supplements became the #1 herbal dietary supplement in the United States in 2019 – through the “natural and health food channel” [source: Nutrition Business Journal].

However, when it comes to the “US mainstream multi-outlet channel”, cannabidiol doesn’t even rank in the top-40 among herbal dietary supplements. Mainstream retailers are more sensitive to this regulatory limbo and are steering clear of CBD products as dietary supplements.

Hemp oil (and the products derived from it) is not subject to the same regulatory scrutiny. That’s advantage #1.

Advantage #2 is that “full spectrum” hemp oil, a whole-plant extract, contains much more than just CBD. There are roughly 100 known cannabinoids in the cannabis plant.

Most of these phytocannabinoids (plant-based cannabinoids) occur only in trace amounts. That’s why commercialization has focused on CBD and THC – by far the two most abundant cannabinoids.

Many practitioners of naturopathic medicine assert that is the combination of all these cannabinoids (along with the terpenes and flavonoids in the plant) that produce the optimum health/therapeutic benefits. This is known as “the entourage effect”.

Advantage #3 is that as a whole-plant extract, hemp oil is also a rich source of nutrients.

One company seeking to capitalize on the advantages of retailing hemp oil products is Canafarma Hemp Products (CAN:CNFA / GER: WKN A2P0WJ). New York-based Canafarma is a fully vertically integrated hemp company.

Its New York hemp farm (certified organic) is generating both above-average yields (2,320 lbs per acre) and above-average CBD content (>14%). Combined, that represents roughly double the average productivity per acre.

The Company is ramping up its hemp cultivation from 55 to 100 acres in 2020. However, the real story with Canafarma is its hemp oil product line – and the market penetration it has already achieved.

Sold under the brand name Yooforic™, Canafarma’s hemp oil products are currently distributed by major retailers, including Amazon, Walmart, Costco, Overstock, and Target.

A strong distribution base.

Canafarma has leveraged this into nearly $3.5 million in sales (up to January 2020) since launching Yooforic™ in June 2019.

The Yooforic™ product line is led by Yooforic™ hemp oil-infused chewing gum. Canafarma’s patent pending technology delivers a very high absorption rate of these hemp oil phytocannabinoids (84% bioavailability).

This compares to an absorption rate of from 6 – 20% for competing cannabis gummies and capsules and the 33 – 46% bioavailability in competing tinctures, oils and vaping products.

Yooforic™ is also marketed in liquid form, with 300 mg of phytocannabinoids per bottle.

Superior bioavailability. And it provides the full spectrum of phytocannabinoids from the hemp plant.

Then there are the nutritional benefits: vitamins and nutrients, along with Omega-3 and Omega-6 fatty acids. Hemp oil naturally contains these essential fatty acids – in the ideal 3:1 ratio.

More and less.

Consumers get even more from purchasing Canafarma’s Yooforic™ hemp oil products.

They get more cannabinoids and related health benefits than from CBD alone. They get more nutrition.

Meanwhile, since Canafarma’s products are not produced and marketed as “CBD products”, these hemp oil products face less regulatory scrutiny. This means getting access to the shelves of mainstream retailers today.

The long-term picture in the cannabis space represents a unique growth opportunity (no pun intended). Over the shorter term, capitalizing on this opportunity has been a significant challenge for many companies.

Canafarma Hemp Products has chosen a strategy for success in today’s cannabis market. It has backed that up with a product line that delivers superior quality – and value – to consumers.

As investors look for cannabis stocks capable of delivering strong returns, those are two powerful reasons for taking a closer look at Canafarma.

DISCLOSURE: Canafarma Hemp Products is a client of The Seed Investor.