Hemp Industry

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Hemp Industry

This research provides trends in the hemp industry, as well as an analysis of consumer preferences or expectations in this market. Research suggests that cannabinoid (CBD) products are the most demanded commodities in this market, with approximately 6.4 million unique searches every month. However, there is a "rising demand for industrial hemp in the textile [industry]." More details have been provided below.

TRENDS

Several Governments Are Legalizing Hemp Cultivation

  • According to Technavio’s recently published market research study, "several governments, and regulatory agencies are focusing on legalizing hemp cultivation." Also, these governments are "approving the use of hemp for commercial applications." Consequently, it is expected that hemp cultivation would increase, thereby resulting in less dependency on the hemp seeds imports.
  • A Forbes report also confirms that the legalization of cannabis is going global. It is expected that countries such as Colombia and Portugal that are among the first to legalize this commodity are positioned to continue establishing their dominance globally.
  • The major factor influencing this trend is the fact that there is a growing focus on using natural resources to decrease the dependence on petroleum resources.
  • Examples of companies that are leaning into this trend and taking advantage of the legalization to gain market share include Alkaline Water Company Inc, New Age Beverages Corp, and Canopy Growth Corp.

Increased Demand From Textile Industries

  • Technavio further reveals that there is an increase in the use of hemp fibers as a raw material for producing textile yarn. These hemp fibers are also considered as a great substitute for synthetic fibers and cotton.
  • Grand View Research corroborates this trend, stating the there is a "rising demand for industrial hemp in the textile [industry]." Hemp is useful in this industry because it has robust fibers with a high absorbent capacity. These fibers also contain a large amount of hemicellulose.
  • The major factor driving the textile industry's growing demand for hemp is the fact that hemp is considered technologically, ecologically, and economically superior.
  • Industrial hemp is used to manufacture canvas, sacks, rope, sailcloth, specialty textiles, clothing, and other products. Therefore, the high demand within the textile industry is expected to drive the market size of industrial hemp during the 2019-2023 forecast period.
  • Notable examples of brands that specialize in producing hemp clothing and accessories include Woolrich, Hemp Authority, and Cannabeings Designs. Other companies that are producing commercial hemp products include Hemp Active (Austria) and Hemp Textiles (Canada).

Excess Supply of Hemp

  • There are price wars among end-users and producers in the hemp market due to the "oversupply of hemp in various countries such as Canada and China."
  • According to the Financial Post, hemp prices are taking a plunge because the market is grossly oversupplied." The prices of hemp biomass reached a high of more than $40 per pound in July last year. As of January this year, hemp biomass was trading under $10 per pound. The supply had increased fourfold from 2018 to 2019.
  • One of the reasons why the hemp market is experiencing this excess supply is the rise in the legalization of hemp production globally. This has resulted in the overproduction of hemp.
  • The Coots Farm is an example of a grower that has joined the rising number of hemp cultivators. Typically, it cultivates corn, wheat, soybeans, and tobacco in southern Kentucky. However, the farm added 7 acres of hemp last year.
  • In Canada, The Green Organic Dutchman is seen as one of the top producers that boasted a peak output of 195,000 kilograms last year. However, it struggled with making sales and is expected to reduce its scale of production.

More Mergers, Acquisitions, and Consolidations Are Expected

  • Several companies have started venturing into the federally legal United States hemp market in order to expand their footprint in the industry. To achieve this aim, these companies are entering the market through start-ups, mergers and acquisitions (M&A), or consolidation. M&A activity in the hemp industry is particularly evident in the North American region.
  • The major factor that has triggered rapid consolidation within the hemp industry is the passage of the US Agriculture Improvement Act of 2018 (widely known as the 2018 Farm Bill).
  • One of the biggest deals that took place in the North American hemp industry is Tilray's acquisition of Manitoba Harvest. To further its growth strategy, Tilray — the second-largest cannabis producer in Canada — acquired Manitoba Harvest — the largest hemp foods manufacturer in the world.
  • Other examples of recent M&A activity within the industry include SOL Global's purchase of majority stake in Blühen Botanicals. Aurora Cannabis also acquired Hempco Food and Fiber Inc.
  • Experts predict that more of these mergers would occur in the near future. Through these partnerships and collaborations, businesses and investors would try to "gain efficiencies and improve the top and bottom line in a young, but highly competitive market."

Growing Preference for Hemp-Based Prescriptions

  • As consumers adopt products that contain cannabinoid (CBD), "they are increasingly ditching the pharmaceuticals used for anxiety, depression and other mental health and physical issues."
  • According to Patrick McCarthy, the CEO of ValidCare: Today, one in five Americans report they use hemp-derived CBD for “mental health reasons” such as anxiety." He further predicts: In 2020, we’ll see even more people ditch Prozac prescriptions for non-impairing hemp-derived CBD to support their mental health goals."
  • Due to this growing demand for CBD, it is expected that brands targeting this audience would commission research focused on the functional benefits of hemp-derived CBD for mental health.
  • PR Newswire reports that many countries have started adopting "CBD-based medications in order to treat a plethora of medical conditions."
  • Patrick McCarthy also disclosed: [The] AARP crowd is one of the largest demographics using hemp-derived CBD for chronic joint pain and sleep." This is a trend that is expected to increase as baby boomers seek to replace over-the-counter (OTC) and prescription pharmaceuticals with hemp-derived products.
  • Besides the demand from consumers, doctors are also expected to key into this trend. According to Linchpin SEO, one of the factors driving the shift toward hemp-derived CBD is the fact that problems such as illegal trafficking and overdose are associated with prescription narcotics. As a result, it is expected that "more doctors will be prescribing CBD as a remedy for illnesses like depression, joint pain, and other common illnesses."
  • Vida and Newleaf Brands are notable examples of companies that are establishing themselves in the CBD space.


CONSUMER PREFERENCES

Product Quality and Form

  • Consumers of hemp derivatives, especially in North America, prioritize product form and quality. While different surveys may rank one ahead of another interchangeably, they consistently appear as the top considerations in purchasing cannabis products. According to a Canadian survey by Vividata, "product quality is the top influencer in customer purchase followed by form [for example bud, pre-roll, vapes]."
  • In the United States, "54% of consumers have chosen edibles products based on the CBD content." Approximately "50% of cannabis consumers are heavily influenced by the convenience of cannabinoid product formats, such as edibles and topicals." Also, these consumers desire controlled and trusted experiences.
  • According to Cannabiz Media research, "product form is the most important factor to consider for the largest percentage of consumers (52%) followed by potency (41%)."
  • In Canada, there are currently 2.6 million edibles consumers. The most popular form of consumption in Canada is flower, followed by edibles.

Preference for Products That Meet Specific Needs

  • According to research conducted by Brightfield Group, in collaboration with HelloMD, CBD "consumers are willing to invest in products that contain the components that meet their specific needs."
  • While some consumers seek the effect that comes with using a CBD-dominant" product, others prefer the “entourage effect.” In many cases, these consumers are looking to balance the effects of CBD (cannabidiol) with THC (tetrahydrocannabinol) and take full advantage of each.
  • In some cases, consumers may prefer keeping THC out of the combination entirely. However, in cases where "these products are interchangeable when it comes to desired medical effects, then consumers will look instead to price, convenience, etc. as deciding factors."

Consumers Demand Hemp CBD for Pain Relief, Anxiety, and Sleep

  • According to research conducted by MSA's Stephen J. Gongaware: "the top consumer drivers of OTC Hemp CBD are pain relief, reducing anxiety and helping sleep."
  • In the first half of 2019, total sales of CBD in US convenience stores increased by 168%. Also, the average weekly dollar sales grew by 235%.
  • Supermarket News further reveals that the current surge in CBD products at grocery retailers, including Walmart and Kroger, is focused almost entirely on health and wellness products. These products usually fall under the following categories: supplements, sleep, external pain, skincare, and beverages.
  • This increased interest in using CBD products for health and wellbeing is also driving curiosity in the United Kingdom, inspiring major condition charities to publish educational materials in response to this demand.
  • According to Dr. John W. Ayers, the University of California's vice chief of innovation: Three years ago, there was essentially no one searching about CBD online, but now there are an estimated 6.4 million unique searches each month."
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