CBD Product Sales Help Drive Tilray In 'Early Days' Of Global Cannabis Market

"We're in the first inning of the development of this global industry," says Tilray CEO Brendan Kennedy. Hemp and cannabis product firms' opportunities with retailers should grow beyond number of stores selling products to also offering cannabinoids in addition to CBD.

Two countries have legalized cannabis altogether, accounting for 1% of the world, says the founder of the first business to export cannabis outside North America. However, while it's not clear when additional countries will follow suit, he says momentum is building to extend lawful sales for adults' use beyond Canada and Uruguay.

"It's early days. We're in the first inning of the development of this global industry," says Brendan Kennedy, president and CEO of Tilray Inc.

Medical use of marijuana is legal in 41 countries, a number likely to increase faster than countries allowing recreational use by adults. "Medical is much more noble, right?" Kennedy said on 5 September at the Barclays Global Consumer Staples Conference in Boston.

Tilray anticipates the number of countries allowing sales of marijuana for medical use will reach 80 in two years. "So, we'll see the market opportunity double there," Kennedy said.

tilray ceo brendan kennedy: "most retailers in the US are going to sell cannabinoid products within the next 12 months."

Meanwhile, US consumers are becoming accustomed to buying food, beverages and nutritionals made with cannabidiol and other non-psychoactive ingredients derived from hemp and cannabis.

Retailers, for their part, are giving consumers ample opportunities to access CBD even as the US Food and Drug Administration officially deems hemp- and cannabis-derived ingredients ineligible for use as food additives or dietary ingredients, although the agency is allowing sales of non-drug products containing the substances under an unofficial enforcement discretion policy. (Also see "With Another Warning, FDA Pledges Report On CBD Use In Non-drug Products" - HBW Insight, 23 Jul, 2019.)

"I think that most retailers in the US are going to sell cannabinoid products within the next 12 months. And it doesn't matter what retailer, doesn't matter if you're talking about Whole Foods or Walmart, or Costco, they're all going to sell some kind of cannabinoid products," Kennedy said.

Hemp and cannabis product firms' opportunities with retailers should grow beyond the number of stores offering their products, he added, "More importantly, it might be CBD, it might be broad-spectrum hemp extract, it might be other cannabinoids, but they're going to start selling those products," Kennedy said.

"Americans are going to get used to buying those products. I think the next craze that we'll see or the next product category that gets a lot of attention is going to be about other cannabinoids."

Other cannabinoids available in US stores could be cannabinol (CBN), a non-intoxicating compound created when the psychoactive chemical compound in cannabis, tetrahydrocannabinol, ages; cannabigerol (CBG), which is the chemical parent of THC and CBD but is present in low levels – usually less than 1% – in most cannabis strains and considered a minor cannabinoid; or tetrahydrocannabivarin (THCV), a compound in cannabis linked to more effects and medical benefits than other cannabinoids.

With Manitoba Harvest, Cultivate CBD Market

Tilray already was orchestrating its plan to eventually reach global distribution of cannabis for medical and recreational purposes and it had conducted an initial public offering of its shares before it entered the CBD food, beverage and nutritionals space.

In January, the Nanaimo, BC-based firm acquired hemp food company Manitoba Harvest, which had annual revenues around CAD100m ($74.90m), for CAD419m ($317m). "They have an interesting model," Kennedy said.

With Manitoba Harvest, tilray acquired a broad line of cbd consumer health products distributed across the US and Canada.

Winnipeg-based Manitoba Harvest supplies hemp seeds to farmers cultivating 30,000 acres of hemp, purchase hemp from those farmers, process and package it and has a distribution channel in about 3,000 retailers in Canada and about 13,000 in the US, including national chains.

In May, Tilray launched a broad-spectrum hemp extract line including a plant protein product, oral spray, two gel caps and two tinctures; through the end of August, distributed the products to 1,000 retailers.

"We'll continue to add additional retailers throughout the course of the second half of this year. We'll also use that same retail relationship to add new products and different brands through this Manitoba Harvest supply chain in the second half of this year," he said.

There's more to hemp in Tilray's plans for Manitoba Harvest, though. "We bought this company because they understood hemp. If a farmer can grow hemp, a farmer can grow cannabis," Kennedy said.

'Orders Of Magnitude Larger Than Canada'

Tilray currently supplies cannabis for nine pharmaceutical clinical trials for conditions including pediatric epilepsy, post-traumatic stress disorder and chemotherapy-induced nausea and vomiting and has a medical advisory board led by experts in epilepsy, cancer, dermatology and mental health.

It has partnerships with Anheuser-Busch InBev Cos. LLC to add CBD to beer and other beverages and with Authentic Brands Group to add cannabidiols to products marketed under brands it represents. (Also see "Continuing FDA Regulation Doesn't Dampen Cannabis Investment Enthusiasm " - HBW Insight, 28 Dec, 2018.)

The firm also has an agreement with Novartis AG's Sandoz Inc. division to co-brand and -market Tilray's products in other countries. (Also see "Sandoz comments on Tilray" - Generics Bulletin, 6 Apr, 2018.)

Tilray cannabis products are sold in 13 countries and Manitoba Harvest's hemp products are distributed to 18 countries in addition to the US and Canada.

"We're building a global platform. We were the first company to export medical cannabis from North America," Kennedy said, adding, "Canada is interesting, but the US market, Europe are orders of magnitude larger than Canada."

That point also was emphasized by Tilray's corporate development chief, Andrew Pucher. "Our strategy is really global in nature. It's not adjusted to compete in Canada in recreational adult use in the medical market, but it's really to compete globally in medical markets as they open up and, ultimately, be well-positioned to enter recreational markets as they open up internationally," he said.

Tilray doesn't have the cultivation and production capacity it expects it would need for a potential global market, but it's grown its footprint quickly since early 2018 when it was operating with its initial 60,000-square foot venue in Nanaimo. It currently has 1.1m square feet of operations across six facilities in Canada and one in Portugal, where it is focusing its product development and distribution for Europe. It's also grown since 2018 from 250 employees to more than 1,250 currently.