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Martha Stewart, Canopy aim to conquer ‘cluttered and confusing’ CBD market

2017 MTV Movie and TV Awards – Photo Room – Los Angeles, U.S., 07/05/2017 – Snoop Dogg and Martha Stewart. REUTERS/Danny Moloshok
(REUTERS/Danny Moloshok)

Canopy Growth (WEED.TO)(CGC) and Martha Stewart are launching their long-awaited line of cannabis products, further expanding the Canadian pot giant’s celebrity-backed portfolio into the crowded U.S. CBD market.

The famed TV personality and lifestyle guru joined the Smiths Falls, Ont.-based pot company as an advisor on hemp-derived CBD products in early 2019. Their first joint offerings, available through Canopy’s U.S. online store, are set to include infused gummies with flavours ranging from kumquat to huckleberry, along with soft gels and oil drops. The next phase is expected to focus on treating anxiety in pets.

Canopy has not announced any plans for Canadian distribution.


“I’ve found that CBD supplements are a simple way to enhance my own health and wellness, especially when it comes to managing the stresses of daily life,” Stewart said in a statement on Thursday. “I set out to create the most delicious CBD products on the market, drawing inspiration from some of my favourite recipes and flavour profiles from my greenhouse and gardens.”

Stewart said her CBD line will be a departure from the gummy bear-like confections that have surged in popularity in recent years as a way to treat anxiety or pain without the high produced by cannabis with greater amounts of THC. The 79-year-old, who hosts a tongue-and-cheek VH1 television show with Snoop Dogg called Martha & Snoop's Potluck Dinner Party, said to expect “French confections, pâte de fruits, rather than the sticky, overly sweet versions you might find elsewhere.”

Canopy chief executive officer David Klein said in June that he expects the U.S. CBD market will hit US$10 billion in annual sales by 2023, up from about US$3 billion today.

“We’ve chosen to collaborate with Martha Stewart, someone who people turn to for advice on living well,” he said in a statement on Thursday.

Klein hopes Stewart’s sizeable following will help the new line stand out in a “cluttered and confusing” CBD space. He estimates there are 2,700 brands in the market today, and 94 per cent of companies are realizing sales of less than a million annually.

Speaking at the Barclays Global Consumer Staples Conference on Wednesday, he described CBD as an “entrance category” that will pave the way for the company’s stateside expansion if federal authorities change their stance on the legality of cannabis, which he expects in 2022 regardless of the outcome of the U.S. presidential election in November.

Canopy has emerged as a leader when it comes to recruiting star power to back its brands amid strict regulations surrounding advertising and promotion of cannabis. On the THC side, the company has recruited Snoop Dogg, Seth Rogen and Drake. However, Klein said the collaboration with the Canadian rap star has “not been progressing as originally intended” in a recent interview with BNN Bloomberg.

Along with Stewart, celebrity backers include NFL quarterback Patrick Mahomes, who endorses BioSteel Sports Nutrition’s products. The company, in which Canopy owns a 72 per cent stake, has been linked to athletes including Wayne Gretzky, Edmonton Oilers star Connor McDavid and golfer Brooke Henderson.

While recreational cannabis has been legalized in a number of U.S. states, the drug is classified a Schedule 1 narcotic by U.S. federal authorities. As a result, Stewart has been careful to distance herself and her brand from cannabis containing federally illegal levels of THC, as opposed to legal hemp-derived CBD products.

“We're not really working in the cannabis industry. We're working in the CBD industry,” she told Yahoo Finance Canada last June.

However, speaking at a conference in Toronto last September, she gave a candid account of her personal cannabis use.

“We were all eating gummy bears before dinner,” she said, describing a gathering of friends. “We all got a little silly. I had a big weekend party up in Maine. In Maine, it’s legal and every adult can grow eight plants in the garden. I haven’t seen any in my garden up there yet, but I’m sure it’s somewhere on the property.”

Jefferies analyst Owen Bennett said Canopy’s U.S. CBD lineup is “now looking very impressive” as the company expands beyond its First & Free, BioSteel and This Works offerings. Canopy also expects to launch a CBD-only beverage under its Quatreau banner in the near future.

Bennett said Stewart increases brand recognition in a fragmented space, and could even pave the way for distribution through Marquee Brands, which owns Martha Stewart brands, and reaches more than 70 million households with its products.

He added that momentum from Canopy’s U.S. operations could also offset some of the pressure the company faces in Canada, as it struggles to achieve profitability and loses ground in recreational pot sales.

“We would expect the contribution to pick up strongly over the next several quarters,” he wrote in a note to clients on Thursday. “This should help to offset the ongoing market share weakness in Canada.”

Toronto-listed Canopy shares climbed 3.31 per cent to $22.19 at 1:02 p.m. ET.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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