In a period when people are spending more time at home, they are also spending a lot more time with their pets. And with more time to connect with furry coworkers, people are becoming more atune to their pets' behaviors and health needs. This is where cannabidiol (CBD) comes in. CBD, the second most prevalent active ingredient in cannabis (after tetrahydrocannabinol, or THC), is earning attention as a potential treatment for many of man's best friend's problems, including anxiety, arthritis, and pain.

Earlier this year, Canopy Growth Corporation (CGC -2.83%) began offering CBD oils and soft chews that can help calm your pet's behavior and treat other health conditions. But does the revolutionary product make the stock a buy?

Young woman walking four dogs of different breeds

Image Source: Getty Images

Making moves

In January of this year, Canopy Animal Health, a subsidiary of Canopy Growth, announced that the company was furthering its partnership with Martha Stewart by launching a  line of cannabidiol (CBD) products for pets. By teaming up with Stewart, Canopy definitely has one advantage in its corner -- brand name recognition. Canopy Growth has made strides of its own in building brand awareness through internal development as well as through mergers and acquisitions (M&A). It's also attracted attention through collaboration with other celebrities, such as Snoop Dogg and Seth Rogen.

Although Stewart is the only celeb currently collaborating on pet products, it's easy to see how the many followers of such highly visible and cannabis-knowledgable celebrities could easily become customers of the pet line. And Canopy makes the products easy to purchase as well. The Martha Stewart line and the Canopy Animal Health line of SurityPro products are currently available for online purchase. The SurityPro line is focused on a product that offers the most CBD per body weight on the market. Canopy is looking toward pet specialty stores and the veterinary channel as a strong means of growing the line's sales.

Canopy is also having conversations with a number of multi-chain stores and e-retailers interested in carrying its pet products, and expects to announce retail partners in the near future. 

A large yard to play in

Online availability through a few select websites does help in generating sales, but there is no denying that partnering with leading pet retailers such as Petco (WOOF -2.65%) or PetSmart, and building relationships with veterinary groups could be a game-changer. There are over 3,100 stores in North America between the two retailers. And in the most recent fiscal year, the two kings of pet retail generated $10 billion in revenue. Imagine if Canopy could edge its way into a sliver of those sales by selling to just a portion of households with dogs.

According to Grandview Research, the global CBD pet product market size is expected to grow at a serious clip -- reaching a 40% compounded annual growth rate (CAGR) between 2020 and 2027, reaching upwards of $400 million. High awareness among pet owners and the benefits of CBD products are seen as two of the leading drivers of this growth. 

There are currently over 75 million dogs in the U.S., spread across 63.4 million households. By 2030, the number of dogs is expected to increase to an estimated 100 million, while the percentage of households owning a dog is expected to grow from 38% to 45%. If each current household bought only one bag of CBD soft chews or an oil product from Canopy in an entire year at an average price of $25, we're looking at revenue of $1.5 billion. Now, let's add in veterinary stats. Veterinarians have had an impact on how people increasingly view their pets as family members. In doing so, the number of wellness visits for pets has also increased, and is expected to increase 6% more through 2030. With wellness exams come treatments; with increased treatments, Canopy will have the potential to sell its CBD products.

Too early to tell

All things considered, it's a bit early to tell if CBD pet products will play a part in the success of Canopy Growth. It's already a crowded and competitive field. If you were to perform an online search for the top companies in CBD pet products, you probably wouldn't find Canopy anywhere near the top.

However, Canopy's inroads are just starting to pay off. With $1.6 billion cash in hand, the company could decide to push more into this segment, depending on how the launch of the Martha Stewart and SurityPro went -- we should get a glimpse of those numbers during the next earnings call, estimated to arrive June 4. Let's remember that Canopy already has solid footing in Canada, and studies are starting to show signs of success when using CBD for pets to treat health conditions such as pain, arthritis, seizures, cancer, and even anxiety. And the number of households with pets is definitely there for future growth. 

But for now, with an unproven product line, a stock price that's been all over the board, and too many unknowns about pet product market, I'll be holding what stock I have, but not adding to my position. Hopefully, we'll see some further evidence that Canopy is a true force to be reckoned with in June.