Hemp Market Sizes and Analysis - HIA Presentation

Copyright © Frontier Financial, Inc
The State of Hemp
Sean Octavius Murphy
Director of Hemp, New Frontier
Data
Founder, Hemp Business Journal

• Global Market Overview
• U.S. Market Overview
• Rise of CBD Processing / Wholesale
• Hemp M&A and Investments
• Applied Economic Theory: Forecasting Industry Development
• Conclusions & What to Watch for in 2019
State of Hemp

Hemp Industry Sector Breakdown
1. Food
- Dairy
- Bread
- Grains
- Beverages
- Snack Foods
- Packaged
and Prepared
Foods
- Condiments
2. Supplements
3. Personal Care
4. Consumer Textile
5. Other Consumer
- Pet Food
- Household Cleaners
- Paper
- Jewelry/Crafts
- Other
6. Industrial Applications
- Automotive
- Green building
- Industrial Textiles
- Bedding Materials
- Bio-fuels
- Bio-plastics
- Oil Wells
- Other
7. Hemp-Derived CBD

Where does the data come from?
1. Data Partners and Collaborators
• Trade Associations
• Companies, Non-Profits
• Government Agencies, Depts. of Agriculture, University Research
2. Point of Sale *
3. Import / Export
4. Surveys and interviews with executives, experts & industry leaders

22,000
6,700
18,600
Licensed – 102,000
Planted – 75,000
7,800
2018 Estimates
3,185

• Montana increases from 542 acres to 22,000 with just 56 farmers growing.
• 22 states growing in 2018 if you include California which is not yet state regulated.
• California had a number of groups planting under existing state law by claiming
affiliation with research institution but without CA Dept. of Food and Ag. (CDFA)
licenses.
• More states coming online in 2019 including Arkansas, Florida, Kansas and
Oklahoma (Michigan & Wyoming seem less likely)
• Feds are cracking down on some of the projects. CDFA regulation process has
been painfully slow.
• North Carolina is also coming along strong and South Carolina emerging
Cultivation State Analysis Highlights

The Story of the Three Channels
2018
• Hemp CBD: $325-$350 million
• MJ CBD: $250-$300 million
• Epidiolex: sales begin
2022
• Hemp CBD: $900 million - $1.3 billion
• MJ CBD: $800 million - $1.1 billion
• Epidiolex: $400-$600 million
Updated Estimates (October, 2018)
(pending EOY 2018 data analysis)

Hemp CBD Channel Size

Not Blurry
Not Blurry
Blurry
Blurry
Not Blurry

CBD Oil
(variable potency)
Source
Getting From Hemp to CBD
Hemp CBD Concentrates
CBD Isolate
(99%+ purity)
Extraction
Finely Ground
Shucked
With Sticks/Stems Extracted “Juice”
Purification
• Technology
• Capacity
• I.P.
• Scaling
Extracted “Crude”
CBD Oil
(customized purity)

Hemp Wholesale Pricing
Full Spectrum Oil
(60%+ CBD)
CBD Isolate
(99.8%+ CBD)
THC Free CBD Distillate
(60%-80% CBD)
CBG Isolate
(99.8%+ CBG)
$2K-$4K/Kilo $5K-$8K/Kilo
Fall 2018: Assumes a one time order of 1-10 Kilograms
$14K-$18K/Kilo $20K-$34K/Kilo

Let’s talk Pharma.
CBD as a Drug.

Hemp as a
Food
(without CBD)

Hemp as a
Dietary
Supplement

Leading Hemp CBD Product Types
• Extracts
• Personal Care
• Vapes
• Capsules
• Pet

Labeling: Hemp vs. CBD

The Big Canadian LPs

Canopy Growth: Sign of the M&A Times
$4 billion | now 38%
$200 million | 9.9%
Warrants | up to 50%
$330 million | 100%
“We are in the cannabinoid business,
not the cannabis business.”
Jon Cooper, CEO, ebbu
10/17
8/18
Next 3 Years
10/18
Green Hemp
Industries Ltd.1/18 $630K in stock | 100%

“We love hemp as a door opener. Because hemp is a very inexpensive way to get
CBD out. Because (at our scale) your ingredients are basically free.”
Bruce Linton, CEO, Canopy Growth

• Great companies at a fair price, not fair
companies at a great price
• Enduring competitive advantage
• Trying not to be stupid vs. trying to be smart
The Tao of Munger

Hemp Supply Chain Investing
Genetics/R&D/Seed
Cultivation &
Equipment
Processing
Brokers/
Distribution
Consumer
Brands
Retailers
Agtech: Increase
efficiency,
potency, scaling,
reduce risk
Better have competitive advantage and/or
be vertically integrated. To scale or to
premium niche, that is the question
Got dominant brand? Best of Breed in
Channel or online?
Mass Market?
Land
Ancillaries (Picks and Shovels, Insurance, other technology)
DEA, FDA, USDA State Level Banking / Processing Public Markets
Our good friends, interpreters, advisors and the industry muscle…. the not so blood sucking lawyers

• Monopoly Market
• Oligopoly – dominant players, high cost structures, fixed prices
and output, may collude or compete, high barriers to entry
• Monopolistic Competition – many players, lower cost
structures, differentiation, competition but not perfect substitutes
• Perfect Competition
Economic Structures – Which will Prevail?

Eco
Extracts
Third Party / Toll / White Label Processors

Vertically Integrating Companies

“In Portland, You Can Drink
CBD-Infused Beverages
From Morning Till Night. So
We Did.” Matthew Singer
Sita Fidler

“We strive to mix the pleasure of craft
cocktails and well made food with the
numerous benefits of CBD oil.”

Is this what peak
hype looks like?

Examples of “Blurring”
Supplying products for clinical trials
• Chemotherapy induced nausea and vomiting
• Dravet Syndrome and severe epilepsy
• PTSD

• Farm Bill 2018 – Committee
• Epidiolex’s Go-to-Market: Scheduling and successive FDA actions
• “Big Hemp” entering the CBD market
• Canadian LPs entering the Hemp Industry; Marijuana companies entering the
hemp industry.
• CW Hemp’s IPO; CVSI stock; Public Markets. Good and legitimate companies
rising to the top and illegitimate companies falling off the radar.
What to Watch For – Looking back

What to Watch For –2019
• Farm Bill and the Great American Hemp Revolution
• The Regulators: FDA, DEA, USDA (CDFA and other state level activity))
• Will the three CBD Channels square-off or play nice?
• Big Hemp makes its move with some swash out of illegitimate and/or small players
• Global industry expansion; keeps eyes on China
• Continued M&A activity, how will companies deploy growth capital and scale—who
will execute and rise in size and who will be gobbled up?

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