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Cannabidiol (CBD) is rising in popularity as people find out about its potential health advantages, which vary from relaxation, pain relief, and combating swelling to dealing with individuals with epilepsy.
Unilever ( NYSE: UL) announced in 2015 that it would be going into the cannabis market through one of its subsidiaries, Schmidt’s Naturals. The current customer products company to get in the cannabis fray is Colgate Palmolive ( NYSE: CL)
Colgate purchases Hey there Products
In January, Colgate announced it would purchase an oral care brand, Hi Products. The company sells tooth paste, floss, tooth brushes, and other oral health products. Among the factors Colgate is thrilled about the deal is because of Hi Products’ concentrate on young consumers, with what Colgate CEO Noel Wallace calls “distinct on-trend positioning.”
Among the trends that Hello Products is relying on: hemp-derived CBD. Quickly after the acquisition statement, Hi Products announced on Feb. 4 that it would be introducing a line of CBD items: mouthwash, tooth paste, and even lip balm which contains CBD.
The business says in its press release that the CBD comes from “hemp grown by partner farms based in the U.S.” Although marijuana stays illegal in the U.S. at the federal level, hemp-derived CBD products are not, thanks to the farm Costs, and they provide a method for companies to stay on the best side of the law.
Image source: Getty Images.
Why it’s worth the gamble for Colgate
Getting into a brand-new line of health products is a fairly safe bet for Colgate to make. It already makes similar non-CBD products, and including a brand-new line to its portfolio might potentially tap the company into more youthful markets and help find a brand-new kind of client. Nevertheless, it’s still far prematurely to inform how popular CBD oral care items will be and whether they’re any much better than what’s on the market today. For Colgate, it’s most likely a low-risk relocation. Hemp-based CBD is legal, and considering that the products are offered through Hey there Products, Colgate’s name won’t directly be connected with marijuana– which might shut off some consumers, as cannabis legislation is still a polarizing topic for many individuals.
And as for the opportunity, investors only need to look as far as Charlotte’s Web ( OTC: CWBHF), which offers hemp items, to see the capacity that exists. Over the past 12 months, the company produced more than $93 million in revenue, and its items are sold in more than 9,000 areas throughout the country.
What does this mean for investors?
Getting into cannabis items, particularly oral care items, likely isn’t going to give Colgate’s numbers much of a bump in sales. Brightfield Group estimates that the total CBD market was worth more than $4 billion in 2019, however that consists of both hemp and nonhemp products.
If you were going to purchase shares of Colgate, its purchase of Hey there Products most likely won’t impact your decision. It’s prematurely to understand the effect of this acquisition and whether the products will achieve success in generating any substantial earnings growth. The important takeaway from this is Colgate’s move into marijuana in any kind, suggesting that there might be some interest in the market and that it might result in moves down the roadway ought to full legalization of marijuana in the U.S. make more development.
It’s a sign that there could be some more possible marijuana acquisitions this year. A cannabis stock like Charlotte’s Web, for example, would permit financiers to tap into the hype surrounding hemp-derived CBD products.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Charlotte’s Web. The Motley Fool has a disclosure policy.”> disclosure policy”>