You might picture several things when Martha Stewart comes to mind: Recipes. TV shows. Entrepreneurial success. Now you can add cannabidiol (CBD) to the list.
Top Canadian marijuana grower Canopy Growth (NYSE:CGC) announced on Thursday that Stewart is joining the company as an advisor to assist with developing and marketing a lineup of new hemp-based CBD products. The partnership between Canopy Growth and Stewart also includes Sequential Brands Group, which markets and licenses Martha Stewart media and merchandising brands as well as other consumer brands.
The terms of the collaboration weren't disclosed. But this is a big win for Canopy Growth, regardless of the financial considerations -- and there could be big money to be made.
Products for pets
Canopy Growth chairman and co-CEO Bruce Linton was enthusiastic about Stewart coming on board. Linton said, "Martha is one of a kind and I am so excited to be able to work alongside this icon to sharpen our CBD product offerings across categories from human to animal."
Linton's reference to animals appears to be a key part of the deal, as Stewart is well-known for her love of pets. "I am delighted to establish this partnership with Canopy Growth and share with them the knowledge I have gained after years of experience in the subject of living," Stewart said in a statement. "I'm especially looking forward to our first collaboration together, which will offer sensible products for people's beloved pets."
Canopy Animal Health, a subsidiary of Canopy Growth, has already completed several preclinical studies evaluating CBD products in treating anxiety in companion animals. The company has also wrapped up safety trials for cannabis-based therapeutic products in animals.
Linton hinted at his company's interest in CBD products for animals on Canopy Growth's third-quarter conference call two weeks ago. He highlighted the company's intentions to move forward with clinical studies in dogs, and said that Canopy has an opportunity to develop a wide range of products targeting animal health.
A big opportunity
Canopy Growth and Stewart aren't limiting their focus to animals. The company stated in its press release announcing the news of the partnership that it "will be leaning on Martha's vast knowledge of consumer products" as well.
No details were shared about the specific types of consumer products that Stewart will help Canopy Growth develop. However, there are lots of possibilities, including CBD-infused blemish creams, lip balms, body lotions, muscle rubs, and more.
The U.S. legalized hemp -- which by definition is cannabis that contains low levels of the psychoactive ingredient THC -- in December 2018. Canopy Growth was the first major Canadian marijuana grower to announce plans to expand into the U.S. hemp CBD market, and the company is investing between $100 million and $150 million in developing a hemp industrial park in New York state. Partnering with Stewart could give Canopy Growth interesting avenues to explore in this new market.
Estimates vary on just how big the U.S. hemp CBD market will be. The Hemp Business Journal thinks that the market will grow to $1.3 billion by 2022. However, cannabis market researcher Brightfield Group is significantly more optimistic, projecting sales of $22 billion by 2022.
Check out the latest Canopy Growth earnings call transcript.
Linton noted that "as soon as you hear the name Martha, you know exactly who we're talking about." He's right. The Martha Stewart connection for Canopy Growth's hemp CBD products could give the company a competitive advantage in the form of instant recognition by consumers.
There's a case to be made that Canopy Growth is becoming something of an icon in its own right, too. The company is the largest marijuana business in the world in terms of market cap. Canopy Growth scored the biggest deal in the cannabis industry with its $4 billion investment from alcoholic beverage maker Constellation Brands.
The collaboration with Stewart is a nice feather in Canopy's cap. Over the long run, the deal could prove to be a key milestone in Canopy Growth's quest to achieve success in the United States.