Bloomberg Businessweek - USA (2019-07-22)

◼ BUSINESS Bloomberg Businessweek July 22, 2019

17

ILLUSTRATION:

GABRIEL

ALCALA.

DATA:

HEMP

BUSINESS

JOURNAL

◼Consumertextiles ◼CBD ◼Industrialapplications

China Australia Canada U.S. South& CentralAmerica Europe

GlobalHempMarketShareandSalesbyProductCategory in 2018

$392m

$847m

$424m

anxiety, and insomnia.Despite a paucityof

science to back up such claims,CBDhasbecome

a coveted ingredient in a hostofconsumerprod­

ucts, from skin lotions to sparklingwatertotinc­

tures to dog biscuits. Thesurgeindemandis

fueling a global Green Rush,evenincountries

where a legal market for cannabisproductswas

unthinkable just a few yearsago.“Wearegetting

phonecallsfrombigpharmagroupsinAsia,all

partsoftheworld:‘Canyougetproduct?Canyou

supplytous?’” saysGlennDavies,chiefexecutive

officerofindustrialhempgrowerCannAcubed

Pte.TheSingapore­based startupplanteditsfirst

commercial hemp crop in MayinChina’sYunnan

province. “It’s all about hemp.”

One of the first plants everdomesticated,canna­

bis was used for thousands ofyearsforfiber,food,

and medicine. Yet for the betterpartofthelast

centuryit’slargelybeentradedontheblackmar­

ket,bannedinmanycountriesalongsidecocaine,

heroin,andothercontrolledsubstances.Much

ofthatbad­boy reputationfadedlastyearwhen

Congress legalized CBD in theU.S.

Researchers estimate themarketforCBDinthe

U.S. alone could be worth almost$24billionby2023.

In Canada sales of legal cannabismayreach$4.7bil­

lion by that time, up from about$570millionlast

year, according to BDS Analytics.Annualsalesof

CBD could potentially be largerthanthoseofmari­

juana, analysts say, because ofthelargenumberof

products in which it can be used.

Investors are pouringmoney into massive

CBDextractionfacilitiesandprocessingplantsin

theU.S.,hopingtobereadywhenCoca­ColaCo.,

Procter & Gamble Co., and otherconsumergiants

finally embrace cannabis.Colorado CBDcom­

pany Mile High Labs has developedtechnologyto

removeunrefinedhempextractfromtheplant,and

it recentlypaid$18.8millionfora 400,000­square­

foot former Novartis factory whereit willmakeprod­

ucts such as lotions and tinctures.

American farmers are plowingintothehemp

industry in Colorado, Kentucky,Montana,Oregon,

and other states. This year,morethan200,

acres of hemp are licensedtobeplantedinthe

U.S., up from roughly 25,000twoyearsago.Asia,

which has a long history withnaturalmedicines,

is also seeing growing interestincannabis(page

21). In 2017, China plantedatleast113,000acres

of hemp, according to NewFrontier,anindus­

try researcher. Cultivationisalsoontherisein

Colombia, Greece, Jamaica,andeventhesouth­

ern African nation ofLesotho.“Yougetthedom­

ino effect: The farmerinBulgarialookingacross

at peers in Greece andaskingquestions, putting

pressure on the government to make similar steps,”

says Shane MacGuill, an analyst at Euromonitor

International.“Themoreit happens,themore

quicklywegetthespreadofcultivation.”

HempproducersinAsiaandotherlower­cost

regions could ultimately undercut U.S. farmers,

especially as the quality of their crop improves

and a global market takes shape, with hemp mov­

ing freely across borders like any other agricul­

tural commodity. In June, CannAcubed leased two

factories in Yunnan, one of only three Chinese

provinces that allows the production of hemp;

it plans to expand them into CBD research and

extraction facilities.

Not everyone is so sanguine. Mark Mees, CEO

of Setek Therapeutics in New Zealand, sees canna­

bis becoming another agricultural commodity, with

prices racing downward. And Mees, whose com­

pany has a license to grow medical marijuana in the

country,saystheCBDbusinesshasbeenoverhyped.

“Yougeta fewhippiesandthat’sgreat.Onething

that’smissingis old­fashioned business sense,” he

says. “We will see a train wreck of small companies

that completely underestimated the costs and the

complexity of what they’re trying to do.”

Restrictions on medical pot are loosening glob­

ally. More than 50 countries, including Australia,

Brazil, and Germany, have legalized access to

medicinalcannabis,accordingto Bloomberg

Intelligence,makingit easierforfarmerstoplant

hempormarijuana. But dealing with pot can still

be tricky. In New Zealand, companies can grow

medical weed only for research, though the gov­

ernment is working on a commercialization plan.

Cannasouth Ltd. has struggled as New Zealand’s

solepubliclytradedcannabiscompany,withits

sharesfalling24%sinceitsIPOonJune19.

Ascountriesremoverestrictions,cannabis

prices could fall. That would hurt farmers,

● Marijuana 101

THC

Tetrahydrocannabinol

is the chemical

in marijuana that

produces a high.

CBD

Cannabidiol, a

nonintoxicating

compound, can be

derived from hemp

and marijuana.

CANNABIS

Hemp and marijuana

are both types of

cannabis. Hemp faces

fewer restrictions

because it’s generally

cultivated with lower

levels of THC.

●U.S.hempimports

bysource, 2017

◼Europe

◼Canada

◼China

◼South& Central

America

◼ Other

88%