Breaking News: Passage of 2018 Farm Bill Could Lead to a Flurry of M&A Activity in CBD Sector With Established Players
December 17 2018 - 11:10AM
Cannagreed.com News Commentary
With the passage of the 2018 Farm Bill, there are many companies
in the CBD space that are poised to receive significant interest
from industry leaders in numerous sectors that are looking to
capitalize off the passage of the 2018 Farm Bill by acquiring or
forming partnerships with the companies that have already
entrenched themselves in the CBD sector.
Cannabidiol, or CBD, is the non-psychoactive chemical compound
found in the hemp plant. The 2018 Farm Bill nationally legalizes
the cultivation and farming of that plant, which in turn will allow
for the national legalization of CBD, removing barriers that have
restricted mainstream commercial acceptance of the compound.
Many companies have already staked positions in their
industries to take the lead in establishing their leadership in the
CBD and Hemp space.
Industry leaders have been taking notice of these events. They
do not want to be left behind by the “CBD revolution”, as this bill
“is a watershed moment for the CBD industry” said Brightfield
Group, a company that specializes in cannabis and CBD market
research, which projects that the medical and recreational CBD
market is expected to reach an estimated value of $22 billion by
2022. Many companies have already expressed interest in acquiring
or partnering with companies in the sector. The markets could
positively reward these companies for their interest in the
space:
GW Pharmaceuticals (OTC:GWPRF), the maker of Epidiolex, an
epilepsy drug containing CBD. This Company had the first
FDA-approved drug made from the cannabis plant, and its approval
was done in tandem with the FDA reclassifying certain drugs
containing CBD to Schedule 5 drugs. Now that CBD is a legal
substance, there are expectations that the Company will be looking
to develop other CBD derived drugs. Johnson & Johnson (J&J)
would be natural fit to either invest or acquire GW Pharmaceuticals
as they have invested in two startup bio-tech companies, Avicanna
and Vapium Medical through its JLABS Innovation startup. In light
of the recent scandal that has plagued the Company, further
investment into the hot CBD sector might help J&J turn their
business around.
New Age Beverage (NASDAQ:NBEV), the US based energy and natural
beverage manufacturer recently announced that it was beginning to
produce CBD infused beverages. This got the attention of the entire
beverage industry, including Coca-Cola, whom was reportedly
interested in acquiring a minority stake or acquiring New Age
outright. This is would be a natural play for Coca Cola, as their
core soft drink business is being eroded by healthier alternatives.
They continuously looking for new beverages to add to their
portfolio to address the growing consumer demand for healthy
alternatives. New Age’s CBD infused beverages would fit within
Coca-Cola’s mandate of diversifying through health conscious
beverages, and would take advantage of the hot CBD sector.
American Premium Water Corporation (OTC:HIPH), the marketer and
distributor of the first hydro-nano CBD infused beverage on the
market, is another company in the CBD space that has been linked to
a larger, established beverage company. It was reported that
American Premium Water’s CEO had met with National Beverage
Corporation (NASDAQ:FIZZ), the manufacturer and distributer of
various beverage brands, including the premium carbonated brand
LaCroix, to discuss a potential partnership or minority investment.
This would make a lot of sense for National Beverage, whom has also
been besieged by its own scandal involving arsenic with its
signature brand LaCroix. American Premium Water announced that it
acquired proprietary CBD hydro-nano formulations which National
Beverage could utilize for its line of beverages, including
LaCroix. An entry into the burgeoning CBD space would re-invigorate
the company, and they would be able to scale very quickly their
wide distribution network a CBD infused beverage where there is a
lot of thirst for product.
Youngevity International (NASDAQ:YGYI), the coffee and
nutritional product manufacturer, entered the CBD space in 2017, by
introducing a number of CBD infused products into its direct and
multi-level channels, including a CBD coffee product, which has
become one of its most popular sellers. This company has had
tremendous success building a captive CBD customer base with its
coffee product, has drawn attention from many players in the
industry, including Keurig Dr Pepper, which has extensive
distribution in the coffee space, including its Green Mountain
Coffee subsidiary. It would be very easy for Keurig to drop
Youngevity’s CBD infused coffee blends into its distribution
channel, as coffee is one of the top products infusing CBD. Its
only a matter of time before the country’s largest coffee
distributor enters the CBD space, and Youngevity looks like a
natural target.
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