Slides for the Nutrition Business Journal Summit (NBJ Summit) on the emerging Hemp CBD Market. Prepared by Hemp Business Journal

1. The CBD Report
Mid-Year Updates
Data Partners
Report Sponsor
Report Sponsor

2. “…The data surrounding its (CBD) efficacy,
particularly indications such as pain relief, traumatic
brain injury, suppression of seizures among others
auger well for its future in the market if the
molecule were derived from almost any other
plant. If CBD has been found in another plant, it
would be considered a miracle cure, a miracle
functional food, or a miracle drug…”
Mark Blumenthal
American Botanical Council

3. .3% THC

6. Getting to Retail:
Understanding the Supply Chains
“Industrial Hemp” vs. “Marijuana”
• Different Legal Definitions, Regulators, Licensors
• Industrial Hemp: Section 7606 of 2014 Federal Farm Bill (State Departments of Agriculture and
Institutions of Higher Learning)
• Marijuana: State Laws and Enforcement/Regulatory Divisions
• DEA and FDA concerns and risks apply to both, but in different ways through different
interpretations of the law.
• “CBD” as an ingredient best understood in context of “Hemp Derived Source” vs. “Marijuana
Derived Source.” Does the product being sold come from a marijuana grower or a hemp grower?
• Products containing CBD are processed in both supply chains but ultimately sold into different
retail channels.
• Natural, Specialty and Traditional Channels vs. Dispensary Channel. Hemp derived products can
crossover into Dispensaries, but Dispensary products can not cross into mainstream channels.
• Pharmaceutical (CBD Isolate) vs. Natural Products (Hemp Extract) = A clash we’ve all seen before
• Ultimately, products in all channels contain “CBD” but are regulated by different bodies, grown
under different licenses, sold through different channels, and come in different forms (isolates
vs. oil/extracts). Therein lies the complexity of the emerging CBD ingredient industry.

7. $93mm $80mm
2015 2016 2020 (e)
Grown and Sold through a Marijuana Supply Chain
vs.
Grown and Sold through a Hemp Supply Chain
Total CBD Sales
$132mm $130mm
$417mm $395mm
Pharmaceutical
Marijuana Marijuana Marijuana
Hemp Hemp
Hemp
$350mm
Source: Hemp Business Journal estimates (consumer sales), BDS Analytics and New Frontier Data

9. Several top “cannabis brands”
are targeting both distribution channels
but in different ways.
Hemp Channels
“Hemp Extract” or “CBD”
Marijuana Channel
Dispensaries
Channel Specific Branding
Totally Different Branding
Same Branding, Different Packaging

10. The Marijuana/Dispensary Channel

11. Methodology Used to Analyze CBD Dispensary Sales
2. Medical vs. Recreational
3. Branded Product vs. Flower
1. State Where Dispensary is Located
Continue to next slide…

12. CBD : THC Ratio
Negligible THC High CBD High THC Variable
> 4:1 < 1:2 Between
4:1 and 1:2
<.3% THC
Consumer Buying Intent

13. 5:1
1:1
15:1
CBD:THC
Ratio on the Label

16. Marijuana Channel Advantages
(vs. Hemp Channel)
• Products can contain THC
• Can more aggressively market “CBD” and
other Cannabinoids (CBN, CBG, THC-A,
etc.) on the label.
• More knowledgeable consumer
• Higher and more difficult barrier to entry for
competition
• Hip, New, Cool, Innovative

17. The Hemp Channel = Everywhere else

21. Top Selling Branded Products:
“CBD” vs “Hemp Extract”
(on the label)

22. CBD For Pets
Emerging Hot Product Category

26. Feb. 2015 – FDA sends 6 Warning Letters
“Your products are not generally recognized as safe and effective for the above
referenced uses and, therefore, these products are ‘new drugs,'” the FDA wrote to
CBD Life Holdings in Arizona. “New drugs may not be legally introduced or delivered
for introduction into interstate commerce without prior approval from the FDA…You
should take prompt action to correct the violations cited in this letter.”
Feb. 2016 – FDA sends 8 Warning Letters
(From FDA Website) “FDA has tested these products, and many were found to not
contain the levels of CBD they claimed to contain. It is important to note that these
products are not approved by FDA for the diagnosis, cure, mitigation, treatment, or
prevention of any disease. Consumers should beware purchasing and using any
such products.”

27. Consider.
• The FDA has sent a total of 14 letters the last three and half years while
there are 100+ companies (that we are aware of) selling CBD based
products.
• The letters were sent to companies making clear medical claims and are
considered by those in the industry to be less than legitimate companies
with less then legitimate products. None of the major players/brands
received a letter.
• The FDA didn’t specify what types of enforcement actions it may take
against companies that continue to market CBD as a dietary supplement.
The FDA website says that the FDA “considers many factors” in such
decisions, including input from other federal agencies and state officials,
and whether such products constitute a threat to public health.
• The FDA acknowledged this point, and wrote that it will continue to work
with companies that are “interested in appropriately bringing safe,
effective, and quality products to market, including scientifically-based
research concerning the medicinal uses of marijuana.”

28. In December 2016, the DEA issued a three-
page “clarifying” document on cannabis oil
products, including CBD-rich extracts, entitled
“Establishment of a New Drug Code for
Marihuana Extract.”
The document asserts: “The DEA has
previously established separate code numbers
for marihuana and for tetrahydrocannabinols,
but not for marihuana extract. To better track
these materials and comply with treaty
provisions, DEA is creating a separate code
number for marihuana extract with the
following definition: ‘Meaning an extract
containing one or more cannabinoids that has
been derived from any plant of the genus
Cannabis, other than the separated resin
(whether crude or purified) obtained from the
plant.’”
In essence then, the DEA is saying that under
the Controlled Substance Act CBD is a Schedule
I Drug and is called “Marijuana Extract.”

30. What’s really going on.
• The DEA is applying its “interpretation” of Federal Law (the Controlled
Substance Act). Under their interpretation a Schedule I Drug, by definition,
has “no medical benefit.”
• Industrial Hemp is legal under Federal Law (Sec. 7606 of the 2014 Federal
Farm Bill (also Federal Law). The Hemp Industry’s interpretation of the law
is it has full legal ground to implement research and commercial pilot
projects involving all constituents of hemp (defined as anything anything
with <.3% THC)
• There is a chorus of companies the marijuana industry that wants to see
hemp producers not allowed to produce CBD, and thus allow marijuana
producers o corner the market through the dispensary channel. The hemp
industry is pushing back with its sights to expand in the natural products
channel and break into big box retailers the next 1-3 years.
• HBJ is waiting to see what happens with the Hoban Law Group lawsuit.
Until then, business and commerce is thriving and many people are
receiving tremendous benefit from CBD.

31. While there’s a sense to some a chill is in the
industry regulatory air, a top selling hemp CBD
product is in 1000+ stores (and counting).

32. Private Labeling
Pure Hemp
Botanical’s tincture
under the generic
product name
“Hemp Extract”
Market leader with
10+ branded Hemp
CBD products in their
“locked case”
“Flying off the
shelves.”
-Alfalfa’s Buyer

33. The CBD Big Pharma Giant Awakens

34. 2017 Forecasted Total
U.S. CBD Sales
2016 End of Year Cash
on GW’s Balance Sheet
Consider.
$358mm
$483mm

35. Why There is Even More Looming
Big Pharma Opposition

43. Want more on CBD?
• Data Charts
• Market & Product Analysis
• Top Company Profiles
• State Rankings
• M&A Activity
• FDA & DEA Intel

44. The CBD Report | $399
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