The New Gold Green Rush - January 2019 - Global Market Development Center
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The New Gold Green
Rush
January 2019
A little history is in order.
4000 BC Cannabis in Chinese medicine
1840’s Queen Victoria use tincture
1936 Reefer Madness movie
1937 “Marijuana Tax Act”
1942 Removed from Pharmacopeia
1970 CSA Schedule 1 classification
1996 California approves medical MJ
1999 IoM reports on medical benefits
2014 Colorado legalization
2018 Canada legalization
2018 Farm Bill – Hemp legalization
2019 Cannabis Conclave World Economic Forum
Legalization markets
Americas
2019 US and Global Landscape • Canada
• USA1
Countries where Medical or Recreation Cannabis is Legal • Chile
• Colombia
Canada
• Jamaica
• Mexico
• Peru
• Argentina
• Uruguay
EMEA
• Georgia • Luxembourg
• Spain • Malta
• Uruguay • Norway
• Netherlands • Poland
• Croatia • Romania
• Czech • Switzerland
Republic • Macedonia
• Denmark • San Marino
• Finland • Turkey
• Germany • UK3
• Greece
• Israel
• Italy
Other
• Australia
• Zimbabwe
Recreational Law Medical Law CBD/Limited Law
1. Select states only
Source: Technavio, United Nations World Drug Report 2017, Brightfield Group, Grand View Research, Kindland,
Arcview
Tremendous growth opportunities are forecast
Global Medical & Recreational Market Size1
(USD $B)
CAGR
APAC EMEA Americas
15-20F
$141
$11 62%
CAGR
$106 $41 38%
37% $8
$78 $31
$5
$56 $23
$3
$40 35%
$16 $88
$29 $2
$12 $67
$8 $1 $50
$36
$20 $26
2015 2016F 2017F 2018F 2019F 2020F
Reports suggest expected CAGR of ~20-60% over the period – estimates differ
based on bullishness of favorable regulatory policy
1. Figures illustrate legal markets only.
Source: Technavio, United Nations World Drug Report 2017, Brightfield Group,
Grand View Research, Kindland, Arcview, A.T. Kearney
A recent A.T. Kearney survey of 2,000 consumers
Have indicated acceptance of
recreational cannabis, and
75% willingness to try various cannabis-
infused products
Have shown interest in cannabis-
40% infused alcoholic and non-alcoholic
beverages
A greater level of trust and
Trust awareness for new product segments
from beer brewed from cannabis to
alcohol alternatives with fewer
negative health impacts
Source: A.T. Kearney survey 2,000 consumers September 2018
The evolution of cannabis from medical, recreational to
therapeutic
Spectrum of Cannabis Uses
Self medication Wellness Recreational high THC
• Uses: Treatment of mild • Uses: Promote general health and • Uses: Chase “high” using
afflictions such as anxiety, wellbeing; similar in approach to concentrated plant derivatives. Often
nausea, sleep issues daily multivitamin, meal high potency blends
replacement or “active ingredient”
• Typical forms: soft gels, tablets, • Typical forms: smoking,
topicals, sub-lingual sprays, • Typical forms: edibles, soft gels, dabbing/vaping, edibles, tinctures
dabbing/vaporizing tablets, topicals, sub-lingual
sprays, infused beverages
Medical Recreational
Clinical & Rx Therapeutic /
Homeopathic Recreation low THC
Replacement
• Uses: High potency medical • Uses: Treat ailments without • Uses: Heighten senses and sense of
products to treat severe consent of medical professional belonging, induce euphoria, promote
conditions such as cancer, with limited side effects relaxation. Most common form, used in
chronic neuropathic pain, and • Typical forms: edibles, soft social situations.
multiple sclerosis gels, tablets, topicals, sub- • Typical forms: smoking, infused
• Typical forms: soft gels, tablets, lingual sprays, smoking, beverages
topicals, patches, suppositories tinctures
Source: NCBI, United Patients Group
83%
Would have a positive / neutral
perception of a personal care
company that integrates
cannabis into its products
Positive perception
means I would…
Buy brand more Feel more loyal Perceive brand as Feel my values are
frequently to brand innovative / trendy represented by
brand
49% 46% 42% 36%
Demographically representative sample of respondents from US and
CA with awareness of the term “cannabis” (n=2000)
Source: A.T. Kearney US and CA consumer survey
79%
Agree or strongly agree
that cannabis can offer
wellness and therapeutic
benefits
1. Demographically representative sample of respondents from
US and CA with awareness of the term “cannabis” (n=2000)
Source: A.T. Kearney US and CA consumer survey
43%
Would try legal and
therapeutic personal care
products infused with
cannabis
1. Demographically representative sample of respondents from US
and CA with awareness of the term “cannabis” (n=2000)
Source: A.T. Kearney US and CA consumer survey
What is Cannabis, Hemp?
Cannabis
A plant family that includes many species including
hemp and marijuana
Classification THC level
Hemp < 0.3% THC
Low Potency Cannabis < 6% THC
Typical Cannabis 6% -14% THC
High Potency Cannabis 14% - 30% THC
Hemp Marijuana
Variety of cannabis with Variety of cannabis with
low levels of THC high levels of THC
Source: www.hempoil.comWhat are Cannabinoids, Terpenes and Flavonoids?
Compounds and Composition
CBD (non-intoxicating)
THC (psychoactive)
Cannabinoids
CBN, CBG, CBC, THCa,
CBDa…
Myrcene, Linalool, Limonene,
Terpenes
pinene, beta caryophellene…
Catechins, quercetin,
Flavonoids
cannaflavin-A…What are the effects?
Cannabidiol (CBD) ■ Tetrahydrocannabinol (THC)
Pain relief Psychoactive
Anti-inflammatory Pain relief
Anti-inflammatory
Anti-seizure
Anti-spasm
Anti-nausea
Anti-nausea
Anti-depressant
Appetite stimulant
Anti-anxiety Muscle relaxant
Neuroprotective
Improved blood sugar
controlWhat about other cannabinoids?
Cannabinoids Effect
Tetrahydrocannabinolic Acid Anti-inflammatory effects. This cannabinoid also
(THCA) acts as an antiproliferative and antispasmodic.
CBDA contributing to cannabis’ anti-inflammatory
Cannabidiolic Acid (CBDA)
effects.
CBG’s antibacterial effects can alter the overall
Cannabigerol (CBG)
effects of cannabis
CBC is known to relieve pain, reduce
Cannabichromene (CBC) inflammation, inhibit cell growth in tumor/cancer
cells, and promote bone growth.
Tetrahydrocannabivarin Reduction in panic attacks, suppression of
(THCV) appetite, and the promotion of bone growth.
Tetrahydrocannabinolic Acid Acts as an antiproliferative and antispasmodic.
(THCA)
Source: https://citiva.com/types-of-cannabinoids/What are the wellness applications of CBD?
ECS receptors throughout the body The ECS responds to cannabinoids1 produced by the
help balance functions such as: body as well as plant-derived cannabinoids (CBD)
Stress response Reduces anxiety
Sleep Improves sleep quality
CBD has been
Immune function Supports immunity shown to
support these
Metabolism Controls appetite benefits in the
body
Inflammation response Alleviates Inflammation
Pain management Relieves pain
These benefits can
Oil secretion (in skin) Fights acne, Moisturizes skin enhance personal
care products
Free radical production Fights aging, Heals skin
(due to anti-oxidant properties)
1. The role of cannabinoids in the ECS is to communicate messages throughout the
body aimed at balancing various functions
Source: National Institute of Health, Organic Facts, Health Jack, Thorne, A.T. Kearney
analysisConsumer Products will be in many forms § Tinctures § Topical Creams § Transdermal § Inhalation smoke § Inhalation vape § Edibles § Capsules § Beverages
Where in personal care products could CBD be applied?
CBD oil-infused personal care products can support compelling
and therapeutic benefits for a wide range of consumers
Alleviates Inflammation Relieves Pain
Shave cream that relieves Body lotion that eases joint
irritation from shaving and muscle pain
Potential consumer: Men and women Potential consumer: Athletes, those
shavers, especially those new to shaving with conditions such as arthritis
Fights Acne / Moisturizes Skin Fights Aging / Heals Skin
Face scrub Beard oil that Sunscreen that soothes
with anti-acne adds shine sunburns and reduces
treatment and moisture appearance of wrinkles
Potential consumer: Potential consumer: Potential consumer: Adult men and
Teens and adults with Men with interest in women with prolonged sun exposure
acne concerns beard groomingProduct lines are diverse, with offerings that have a range of
formulations and desired effects
A closer look at cannabis-infused cosmetics…
CBD Infused
• CBD Living’s Moon • Perricone MD’s • Milk Makeup’s • Lord Jones
Milk Bath Bomb CBD-infused Kush High Volume High-CBD
• Contains varying Men’s Moisturizer Mascara Body Lotion
doses of CBD • CBD formula soothes • CBD-infused oil is • 2mg/mL of CBD
promoting relaxation, dry skin, irritation, used as a thickening relieves sore
circulation, pain and promotes substitute for muscles, joint pain,
relief, moisture retention beeswax and skin conditions
Source: A.T. KearneyCannabis-infused beverages present many
benefits
The Case for Cannabis-infused Beverages
Maintain Revenue Health-Conscious Product Fit
•In regions where medical • Alcohol brands will have •Hemp and hops are
cannabis was legal, a product that: genetically related and
monthly sales of beer, –Does not cause share characteristics such
alcohol, and wine adverse health side as aromas and flavors (due
dropped by 13%, 14%, effects e.g., liver to similar terpene profiles)
and 15% respectively damage, dehydration, •Consumers can achieve
•Offering cannabis- hangovers, and other the same sensory
infused products can ailments some experience from cannabis-
help alcoholic beverage experience from alcohol infused (non) alcoholic
companies maintain –Offers a Low/no calorie beverages that they have
sales if cannibalization option as alcohol not grown accustomed to with
occurs included products like beer
Source: A.T. KearneyLarge alcohol companies are making strategic investments while startups are bullish with new products Partnerships and Investments New Products Launched or Being Developed Source: A.T. Kearney
Farm Bill and FDA
u 2018 Farm Bill (Dec 20 2018)
u Removes Hemp from Controlled Substance Act (CSA)
u Allows commercial cultivation, R&D of industrial hemp
u Allows hemp production in all 50 states
u Allows inter-state commerce for hemp derived CBD
u Provides farmer access to federal resources
u FDA initial response (Dec 23, 2018)
u FDA will continue to treat cannabis-derived compounds like any other drug,
food or dietary supplement that the agency regulates, regardless of the source of
the cannabis-derived substance, e.g., plants classified as hemp
u It is unlawful to introduce foods that contain added CBD or THC into interstate
commerce
u It is a violation of the FDCA to market CBD and THC products as dietary
supplements
u FDA will take enforcement action against companies illegally selling any cannabis
and cannabis-derived products are in violation of the FDCA
u Indicated that FDA will update its guidance on cannabis products to address
questions under the 2018 Farm Bill
Source: USDA and FDA websitesRetailers – Cautious roll-out with many regulatory hurdles
As consumers look outside of traditional options, retailers are
keeping open to opportunities with CBD
Telehealth platform integrating Canadian pharmacy doubling down Convenience brand taking mass-
provider and retail services on MMJ, looking to therapeutics CBD rollout to ~5000 stores
Who? US-based telemedicine Who? Largest Canadian pharmacy One of the largest
platform connecting chain embracing role as MMJ
Who? convenience stores
physicians and patients; access point, eyeing founded in 1927 with
integrates provider & expansion in select wellness global reach to introduce
retailer function / therapeutic areas CBD products in stores
Dedicated online Entered distribution
Partners? education tool on hemp; Partners? Partnering with major Partners? agreement with Phoenix
insurance company
looking to expand into Tears, hemp-based CBD
ManuLife, in insurance
RMJ in Canada / US provider, to carry their
deal to supply MMJ
states products in 4,500 storesProduct companies – Developing the right
product, regulatory and finding distribution
Sourcing high quality CBD
oils and concentrates
Meeting ‘changing’
regulatory requirements
Retail distribution – local,
regional, national
Claims, efficacy and
promotional materialsMany segments are needed to support the industry
Source: A.T. Kearney, Ackrell Capital, LLC 2018 Global Cannabis ConsumersA careful plan must be developed
Guiding Principle Key Considerations
Marketing Controlling brand perception
• Key messages to patients and media outlets?
Awareness and narrative with the customer
Customer Increasing awareness and • Role of in-store, retail personnel, central
Education understanding of the product resources? Training required to upskill staff?
• Part of a destination strategy, or me-too offering?
Curating the mix and
Merchandising • Comparison to service / product offering of
presentation of the product
dispensaries? Other retailers?
Select right partner(s) to • Wholesaler / aggregator vs. direct to vendor?
Vendor
deliver product now & in the • Vendor ability to meet national scale?
Selection
future • Exclusivity agreements vs. multi-vendor?
• Integrate with DC’s or direct-to-store?
Optimal network for products to
Supply Chain • Vendor role & integration w/ sourcing strategy?
reach stores / customer
• Integration with e-commerce?
• Most attractive markets for a trial?
Best region to test the concept
Rollout • Capability and speed to expand geographically?
and ability to pivot / scale
• Ability to enter adjacent spaces (cannabis CBD)
Source: A.T. KearneySome considerations . . .
u Sourcing high quality, safe hemp and CBD will continue
to be an issue
u Hemp based CBD regulations are still in limbo with FDA
rulings plus local municipalities obstructing retail sales
u Careful on labeling and any health claims due to FDA
review.
u State by state implementation will continue until federal
legalization of medical use cannabis
u Monitor research from Canada and Israel and new
hemp research from US.
u Visit dispensaries in California and Las Vegas for ideas
and innovationshttps://www.atkearney.com/the-cannabis-opportunity/the- next-gold-rush-cannabis-and-consumer-products
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