IAt a time when people spend more time at home, they also spend a lot more time with their pets. And with more time to interact with furry coworkers, people become more attuned to the behavior and health needs of their pets. This is where cannabidiol (CBD) comes in. CBD, the second most common ingredient in cannabis (after tetrahydrocannabinol or THC), is gaining attention as a potential treatment for many human best friend problems, including anxiety, arthritis, and pain.
Earlier this year Canopy Growth Corporation (NASDAQ: CGC) began offering CBD oils and soft chews that can help calm your pet’s behavior and treat other health conditions. But does the revolutionary product make the stock a buy?
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In January of this year, Canopy Animal Health, a subsidiary of Canopy Growth, announced that it would further expand its partnership with Martha Stewart by introducing a range of cannabidiol (CBD) products for pets. By working with Stewart, Canopy definitely has an edge in its corner – brand name recognition. Canopy Growth has made its own progress in building brand awareness through in-house development and mergers and acquisitions (M&A). It has also attracted attention through collaborations with other celebrities like Snoop Dogg and Seth Rogen.
While Stewart is the only celebrity currently collaborating on pet products, it’s easy to see how the many followers of such high-profile and cannabis-familiar celebrities could easily become customers of the pet line. And Canopy also makes the products easy to buy. The Martha Stewart line and Canopy Animal Health line of SurityPro products are currently available online. The SurityPro line focuses on a product that offers the most CBD per body weight on the market. Canopy views pet stores and the veterinary channel as a powerful vehicle for growing sales on the line.
Canopy is also in discussions with a number of multi-chain stores and e-retailers interested in stocking their pet products and expects to announce retail partners in the near future.
A big yard to play with
While being available online through a few select websites will help generate revenue, there’s no denying that partnering with leading pet dealers such as Petco (NASDAQ: WOOF) or PetSmart, and building relationships with veterinary groups could play a critical role. There are over 3,100 stores between the two retailers in North America. And in the past fiscal year, the two kings of the pet trade had sales of $ 10 billion. Imagine if Canopy could find its way into some of those sales by only selling to a portion of households with dogs.
According to Grandview Research, the global CBD pet products market is projected to expand sharply, reaching an average annual growth rate (CAGR) of 40% between 2020 and 2027, which is in excess of $ 400 million. The high level of awareness among pet owners and the benefits of CBD products are seen as two of the main drivers of this growth.
There are currently over 75 million dogs in the United States, spread across 63.4 million households. By 2030, the number of dogs is projected to grow to an estimated 100 million, while the proportion of households that own a dog is projected to increase from 38% to 45%. If every current household has bought just one bag of CBD chews or an oil product from Canopy at an average price of $ 25 in an entire year, we see sales of $ 1.5 billion. Now let’s add veterinary statistics. Veterinarians are influencing how people increasingly view their pets as family members. In this way, the number of pet spa visits has also increased and is expected to increase by 6% by 2030. With the wellness exams come treatments; With increased treatments, Canopy will have the potential to sell its CBD products.
Too early to tell
All in all, it’s a little early to say if CBD pet products will add to Canopy Growth’s success. It’s already a crowded and competitive field. If you did an online search for the top CBD pet product companies, you probably wouldn’t find Canopy near the top.
However, Canopy’s advances are only just beginning to pay off. With $ 1.6 billion in cash on hand, the company could decide to invest more in this segment, depending on how the Martha Stewart and SurityPro rollouts went. We should take a look at these numbers on the next earnings call, which is expected to arrive in June 4. Remember that Canopy is already solid in Canada and studies are showing the first signs of success in using CBD in pets to treat Show health conditions such as pain, arthritis, seizures, cancer, and even anxiety. And the number of households with pets is definitely there for future growth.
But for now, with an unproven line of products, a stock price that was common across the board, and too many unknowns about the pet products market, I’m going to hold my inventory but not expand my position. Hopefully we’ll see more evidence that Canopy is a real force to reckon with in June.
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Jeff Little owns shares in Canopy Growth Corporation. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.