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Can Superior Yield and Potency Help Charlotte’s Web Holdings Buck the Trend?

13 Mar Can Superior Yield and Potency Help Charlotte’s Web Holdings Buck the Trend?

Charlotte’s Web Holdings (OTCQX: CWBHF), a pioneer in hemp-derived CBD products, announced the completion of an audit of its 2019 hemp harvest, which is the primary source of its full spectrum extracts. The Company grows 100 percent of its Hemp in its American facilities located in Colorado, Kentucky and Oregon to ensure highest quality produce and reduce crop risk. In addition, the Company has full control over its supply chain and leverages its proprietary cultivation knowledge ensuring optimal quality at affordable prices.

The results from the audit show that the 2019 CBD harvest is 22 percent more potent that the previous year. Furthermore there was a 10 percent increase in the yield per acre and a 245 percent increase in total dried biomass to 2.34 million lbs. The Company achieved a 33 percent reduction in per milligram of cost for an estimated 36 thousand kg CBD harvested as per a Company statement.

Deanie Elsner, CEO of Charlotte’s Web, commented,

“We are very pleased with the results of the 2019 harvest, achieving yield and potency levels that surpassed our expectations. This reflects the tremendous expertise we have gained in hemp cultivation over the last six years, More than half of our harvest was certified organic in 2019 with the remaining acres in transition. We are well on our way to becoming one of the largest providers of certified organic hemp CBD extract in the country.”

The Company has a dedicated horticulture division that is focused on creating innovative full spectrum extracts through hemp genetics that lead to superior cannabinoid expression. In fact Charlotte’s Web introduced two novel varieties namely, “Lindorea and Kirsche”, developed in house and filed for patent approval, which exceeded expectations on critical parameters such as potency, THC levels and greater yield.

Charlotte’s Web Holdings (OTCQX: CWBHF)

Market Cap: $397.93M; Current Share Price: 3.78 USDChart
Data by YCharts

Industry
Hemp and Marijuana, though used interchangeably, are distinct strains of the Cannabis sativa plant and have different phytochemical uses and composition. Hemp has very low concentrations of THC and is rich in CBD, which results in very negligible psychoactive effects. Hemp is extensively used in industrial and commercial processes such as paper, textiles, biofuel, animal feed and clothing.

The Cannabis plant has an estimated 113 different compounds out of which THC and CBD are the two main constituents. These affect the receptors in the brain to alter an individual’s physical and mental state. THC is mainly responsible for the psychoactive effects or the feeling of “high” caused by the use of cannabis.

CBD on the other hand, has several powerful anti-inflammatory, analgesic, neuroprotective and anti-anxiety properties, which explains its growing popularity to treat a plethora of medical conditions. Unlike THC, CBD does not have any psychotropic effects and hence is widely preferred. It is increasingly being used to treat conditions such as cancer, cardiovascular anomalies, arthritis, anxiety, depression and Insomnia. In addition it has also been proven to possess neuroprotective benefits that can treat diseases such as seizures, Multiple Sclerosis (MS), Alzheimer’s, Parkinson’s and Schizophrenia to name a few.

There is a growing demand for CBD derived from Hemp, as it eliminates the negative effects caused due to THC and ensures a safe product. The U.S hemp industry received an impetus, with the passing of the Agriculture Improvement Act of 2018. The bill made a clear demarcation between marijuana and hemp, essentially making the sale of hemp legal, thereby boosting the sale of hemp-derived cannabidiol (CBD) products.

According to a report by Grand View Research, the global industrial hemp market is expected to reach $10.6 billion by 2025. We take a look at some pioneers in the field, who are helping redefine the functioning and public perception of the Hemp Industry.

Image Source: Company

Company
Named after Charlotte Figi, whose story revolutionized the cannabis-based medication space, Charlotte’s web is a high-cannabidiol and low-tetrahydrocannabinol strain, which was created by the Stanley brothers in Colorado. The Company formerly known as Stanley Brothers Holdings Inc, made its stock market debut on August 30, 2018, with an IPO in Canada. Today the Company is one of the world’s leading brands of hemp-based cannabidiol (CBD) wellness products. It is the #1 hemp brands by market share and is sold in over 8000 retail locations. In 2019 alone, the Company had over 862 acres planted and had produced more than 675,000 lbs hemp in 2018.

The Company’s products are made from the highest quality whole-plant hemp extracts containing a full spectrum of phytocannabinoids, which undergo rigorous quality control and testing, both by in-house and third party independent testing laboratories.  All of its produce is grown on family farms in the U.S, with no place for imported hemp or hemp extracts.

Image Source: Company

A vertically-integrated Company, It maintains checks and balances each step of the way to ensure that the best quality product reaches the final consumer. The Company grows its own proprietary non-GMO hemp genetics, which is then manufactured into premium, full-spectrum phytocannabinoid health and wellness products, in a FDA-registered cGMP facility. It has its cultivation operations primarily in northeastern Colorado, with source contracts with farms in Kentucky and Oregon.

The Company also offers a range of edible pet supplements addressing issues such as Hip & Joint support, Senior Dogs and Calming, which carry the seal of approval from not only National Animal Supplement Council (NASC), but also the U.S. Hemp Authority™. Charlotte’s Web currently has a 12 product pet line, registering a 57 percent YoY revenue growth in Q3, 2019.

Risk Assessment

  • Charlotte’s Web is operating in a highly uncertain regulatory environment, which has lack of clarity with respect to regulations governing hemp-based foods and dietary supplements, acting as an impediment in the company’s expansion plans. However in January 2020, Rep. Collin Peterson introduced a bill proposing amendment to the Federal Food, Drug and Cosmetic Act asking for inclusion of CBD in the list of legal dietary supplements and its removal from the prohibited foods list.
  • The Company is diversifying its offerings by venturing into the PET CBD industry, which is expected to constitute nearly 7 percent of a potential $ 24 billion market by 2023, in the U.S alone. The market will grow by leaps and bounds once regulatory concerns are addressed and an increasing number of well-established pet-focused brands will make a foray into the industry.
  • Charlotte’s WEB has a robust retail and distribution network with presence in over 40 states and over 9000 retail stores across the country. As the call for legalization of marijuana gains steam, establishing a strong distribution and retail network will help the company hit the ground running when legalization does happen in the U.S.
  • The company is currently a leader in the hemp-based CBD market, however hemp remains one of the most attractive entry points for easy access to the U.S cannabis market for not only local competitors but also for those in the Canadian cannabis market seeking to establish themselves in the U.S market. This will lead to increased competitions and lowering of prices, which in turn can affect the margins of the Company.
  • Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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    Source

    https://www.newswire.ca/news-releases/charlotte-s-web-2019-harvest-delivers-10-increase-in-yield-and-22-increase-in-cbd-potency-due-to-proprietary-genetics-818787890.html

    https://www.bloomberg.com/news/articles/2019-07-17/the-cbd-industry-is-betting-that-pets-need-to-chill-too

    https://www.fool.com/investing/2020/01/24/why-cbd-stocks-could-soon-skyrocket.aspx

    https://www.prnewswire.com/news-releases/charlottes-web-pet-products-approved-for-nasc-quality-and-us-hemp-authority-seals-301008164.html

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