We have talked about this in the past, the CBD industry is predicted to have amazing growth over the next few years, possibly to more than $20 billion in a few years. Now we have the ex-president of Kellogg North America, Paul Norman, saying the same thing: “This market is going to grow four or five fold to 20 plus billion dollars in consumer value over the next five years,” Norman tells Yahoo Finance. “I believe, down the road, CBD will be widely available in all kinds of consumer products.”
Mr. Norman is now the CEO of HeavenlyRx, which is a CBD company that is acquiring and investing in other companies in the CBD industry. According to a recent press release:
“HeavenlyRx’s focus is on hemp cultivation, processing and the manufacturing of a diverse range of traditional CBD products including oils, tinctures, balms, and vape-ready products. Heavenly Rx will also own and operate its own retail locations along with health & wellness related studios where it will generate a repetitive captive audience with a desire for Heavenly Rx’s products to be part of its customers’ daily routine. It is expected that Heavenly Rx’s portfolio will include several proprietary brands across numerous consumer product group verticals such as cosmetics and beauty products, bath and body products, and infused foods.”
Best case scenario, Mr. Norman would want to grow HeavenlyRx into the Kellogg’s of the CBD industry. It’s an interesting strategy, it makes sense on many levels but I have to wonder how many great deals are out there in the CBD space right now. On the one hand, it’s a nascent industry so there are many small brands out there that have a lot of potential and can probably be acquired at a seemingly low price. But how many of these companies will survive for the long haul? How reasonable are the prices considering the fact that just about everyone in the space, including Mr. Norman, think that the industry will grow dramatically over the next few years?
There will surely be brands that are mega winners in this space but there will also be losers. HeavenlyRx is making a portfolio bet here that their winners will more than make up for the losers that they acquire. It’s analogous to the bets that venture capitalists make: Invest in dozens or hundreds of startups with the hopes that the winners will have such outsized returns that it will give their portfolios a high return on their investment. Again, my only concern here would be that there may not be enough “deals” out there for this kind of portfolio bet (a year or two ago would have had better deals available).