Click here for The Motley Fool’s resources on Coronavirus and the market. Companies are slowly dipping their toes into the industry now that hemp-derived CBD products are legal federally. Cannabidiol (CBD) is rising in popularity as people learn about its potential health benefits, which range from relaxation, pain relief, and fighting inflammation to treating people…
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Cannabidiol (CBD) is increasing in appeal as individuals learn about its prospective health advantages, which range from relaxation, discomfort relief, and fighting inflammation to dealing with people with epilepsy.
Unilever ( NYSE: UL) revealed last year that it would be going into the marijuana industry through among its subsidiaries, Schmidt’s Naturals. The most recent consumer items business to go into the marijuana fray is Colgate Palmolive ( NYSE: CL)
Colgate purchases Hey there Products
In January, Colgate announced it would buy an oral care brand name, Hello Products. The business offers toothpaste, floss, tooth brushes, and other oral hygiene products. One of the reasons Colgate is delighted about the deal is because of Hey there Products’ focus on young consumers, with what Colgate CEO Noel Wallace calls “unique on-trend positioning.”
Among the trends that Hello Products is relying on: hemp-derived CBD. Shortly after the acquisition statement, Hi Products revealed 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 news release that the CBD comes from “hemp grown by partner farms based in the U.S.” Although cannabis remains prohibited in the U.S. at the federal level, hemp-derived CBD items are not, thanks to the farm Costs, and they offer a way for business to remain on the right side of the law.
Image source: Getty Images.
Why it’s worth the gamble for Colgate
Entering a new line of health items is a relatively safe bet for Colgate to make. It already makes similar non-CBD products, and including a new line to its portfolio might potentially tap the business into younger markets and assist find a brand-new type of client. It’s still far too early to inform how popular CBD oral care products will be and whether they’re any 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 Hi Products, Colgate’s name won’t directly be related to marijuana– which might turn off some consumers, as cannabis legislation is still a polarizing topic for many people.
And as for the chance, investors just require to look as far as Charlotte’s Web ( OTC: CWBHF), which sells hemp products, to see the capacity that exists. Over the past 12 months, the business created more than $93 million in income, and its items are sold in more than 9,000 areas throughout the nation.
What does this mean for financiers?
Getting into cannabis items, particularly oral care items, likely isn’t going to offer 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 items.
If you were going to purchase shares of Colgate, its purchase of Hi Products most likely won’t affect your decision. It’s too early to understand the effect of this acquisition and whether the products will be effective in generating any considerable profits growth.
It’s a sign that there could be some more possible marijuana acquisitions this year. A cannabis stock like Charlotte’s Web, for instance, would permit investors to tap into the hype surrounding hemp-derived CBD items.
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”>