Cowen & Co. recently published their new research findings on the cannabis compound market. There’s already enough hype being built around it, but these guys have the numbers to prove it – $16 billion to be exact. That’s the estimated value of this market in the year 2025.
To get even more findings, the Cowen asked 11 of their analysts from their industrials, consumer, healthcare and regulatory teams to do a basic assessment of this upcoming market.
They’ve also found out that nearly 7% of Americans are already using some form of cannabidiol or CBD, as it’s popularly known. These numbers are just the initial turnout and it’s possible that they might change soon.
Cowen had conducted a consumer survey in January with 2,500 adult respondents. During this time, they had found that 6.9% of these respondents took CBD as a supplement.
Why it’s important
Vivien Azer, the key analyst in this survey, mentioned that this response was what piqued their interest, since it was much higher than suspected. Especially when compared with the 4.2% who reported using Jull Labs Inc.’s e-cigarette devices and another 19.6% who say that they’re tobacco users.
Azer also said that going by the high level of consumer awareness discovered during that survey, Cowen expects that a full 10% of US adults will make up part of the global CBD market. That’s roughly about 25 million people, turning this market opportunity into one that’s valued at $16 billion.
There are other factors contributing to the CBD market growth as well. One of those happen to be the benefits that CBD Oil has, like treating everything from arthritis to insomnia. It’seven clinically proven to be effective on two rare forms of childhood epilepsy.
Time that those changes might take
A farm bill passed in the US in December legalised the use of hemp-derived CBD, but that’s only under certain conditions. Of course, that’s not without some obstacles though; the Food and Drug Administration has made it illegal to sell CBD products as dietary supplements.
Also, CBD products that claim to have therapeutic benefits have to be approved for their intended benefits first before they can be introduced into the markets or interstate commerce, for that matter.
Regulators have been blocking the use of CBD products in many jurisdictions. In fact, New York City health officials had ordered many restaurants and bakeries to stop using CBD oil as an additive in food and beverage products they sell. Ohio and Maine followed suit, curbing the sale of similar products, even the compound itself.
What’s Cowen & Co.’s take on the numbers
Cowen’s survey had some other interesting details too. For example, the use of CBD was found to be the highest in the age group of 18 to 34 years.
Liquid extracts or tinctures made up 44% of the CBD market, the biggest share, this was followed by the topicals at 26%, capsules at 22% and beverages at 19%.
All of these findings are conservative, says Cowen. And that extends to the forecast worth over $16 billion. The research firm also says that they’re envisioning consumers that already use CBD capsules or tinctures to be the first to convert it into a beauty regimen, or perhaps even use it as a topical applicant.
On further dissecting this industry, Cowen says that the health and wellness segment will lead the market. Based on that, they valued nutraceuticals at $6.4 billion and topicals at $4 million. Interestingly, it’s the vapor, food and beauty segment that will witness lower sales, falling somewhere around $1 billion and $2.5 billion.
Still, no one knows if the medical benefits that it supposedly contains are for real or not. CBD oil is said to have properties that can treat conditions like inflammation, pain, anxiety and cancer.
As of now, hemp is being cultivated for cannabidiol for use with seizure medications, as it’s the only medical usage that’s been approved of by the FDA.
Research firms say that black market will start transitioning over to legal markets once states begin legalising marijuana. Consumers are of the same belief too, saying that they’ll only try it once it legal and FDA approved.
Mainstream companies that are interested in dabbling in the legal marijuana trade, appear to be the most naive. You see, they want to explore the benefits and profits that this could rake in, but aren’t sure where to start. Or which part of the plant to use in that sense and so they need some real research to be done.
Where investors stand
But the real value of this report is intended for institutional investors, who can do some real investing in CBD lines, hemp cultivation, distribution of CBD products. It gives them a much better idea of what’s happening and how they can pursue these investments safely. Much like it is with the alcohol and tobacco industries.
For those interested in investing, Azer recommends starting out with smaller stocks. An unusual approach for larger investment firms, but one that will pan out eventually.
When established investors speak about a stock favourably, regardless of its size and turnout, it triggers increased buying activity – and that’s what matters. Investing small means that you get your cut of the profits, whatever they might be and wait for the expert reviews to fall in and weigh things out. Smaller stock are volatiles and easier to liquidate too.