Conferee Mitch McConnell signed the 2018 Farm Bill with a hemp pen as the usual staunchly conservative Republican has emerged as one of the most important advocates for the plant. The new bill signed into law by President Trump before the New Year effectively removes hemp from a substance monitored under the federal Controlled Substances Acts as a Schedule 1 Drug. One reason that McConnell specifically has pushed for the legalization of hemp is due to the growers in his home state of Kentucky.
Known mostly for bourbon, “The Bluegrass State” was once a leader in industrial hemp production and McConnell is trying to revive this potential cash crop for the state’s farmers. Already, Kentucky farmers planted 6,700 acres (2,710 hectares) of hemp in 2018– more than twice last year’s production, according to the state’s agriculture department. One company with its roots in Kentuckian hemp production is cbdMD.
Interestingly enough, being part of Cure Based Development LLC, cbdMD is now owned by Level Brands Inc.
Bringing High-Level Marketing to Online CBD Sales
This acquisition seemingly fell on deaf ears, but needs to be getting more attention as it’s a deal that could net LEVB $300 million in revenue over the next five years – if estimates hold. The deal is an exciting one in the CBD space as it incorporates LEVB’s Kathy Ireland Worldwide® established customer base (which includes Kathy Ireland Health & Wellness, Ireland Men One and Encore Endeavor One) and Level Brands’ marketing expertise along with cbdMD’s advanced product line and grassroots e-commerce site, where it sells everything from gummies, drops and even bath bombs.
“The brick-and-mortar market offers opportunities to allow the CBD market to grow exponentially. Where cbdMD will separate itself from our competitors is through our marketing campaigns for the e-commerce market,” Chairman and CEO of Level Brands Martin Sumichrast said in an industry interview.
This advantage might allow LEVB and cbdMD to skirt some of the competition of getting bottles on shelves as they develop a unique direct-to-consumer presence. However, cbdMD can definitely compete on the ground as they have 700 retail sellers on the books already and are generating sales at a run-rate of $12 million annually.
An Experienced and Dynamic Team Taking Shape
Furthermore, this acquisition is not LEVB’s first venture into the CBD space. Through a licensing deal with Isodiol, Kathy Ireland brands sold a range of CBD vitamin capsules and tinctures geared toward boosting energy level, pain management and immune boosters. However, Ireland and LEVB are not the only ones with notable experience. cbdMD’s Founder, Scott Coffman, is also the founder of Blu-Ecig that sold to Lorillard Tobacco for $135 million. Coffman is now on the board at Level Brands and he will certainly be putting his industry acumen to good use.
“With the acquisition of cbdMD, I believe Level Brands now becomes one of the leading CBD consumer companies in America,” said Sumichrast at the time of the deal’s closing.”The cbdMD brand has shown consistent month-over-month double-digit growth rates and, with the capital we have available, we believe we can significantly accelerate the revenue growth and execute on an aggressive expansion and brand positioning plan which should yield continued significant growth rates. Now that the Farm Bill has been approved, we believe the CBD market should drastically expand. CBD products will now have access to retailers nationwide, as well as through online channels. In addition, the passage of this legislation should help CBD gain mainstream consumer acceptance. We believe cbdMD will significantly gain market share in this growing industry.”
All told, with LEVB’s warchest of cash (they recently closed a $6.9 million public offering) and cbdMD’s proven industry sales, this could be an undervalued company in this important subsector.