Saturday, September 30th 2023

Love Hemp Group PLC

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Time to fall in love with Love Hemp


“…The company is also taking its first steps into the Asian market, that will allow it to establish a presence on Hong Kong and South East Asian retail channels and later expand into India and Japan…”


Rapidly growing demand for retail cannabinoid (CBD) products is generating a huge new global market that some estimates forecast will grow by more than 600pc over the next three years, and its value to more than $20bn. 

But new opportunities generate new competition: those wanting to win have to act now to establish their brand in what is becoming an increasingly busy retail space. CBD and hemp supplier Love Hemp (AQSE:LIFE), currently listed on the Aquis Exchange and the US Venture Market (OTCQB:WRHLF), and preparing to list on the LSE Main Market, has spent 2021 working to position itself ahead of the pack, investing in its brand and the expansion of its high street and online sales channels.

The company offers more than 40 CBD wellness products that facilitate physical and mental health, including oils, oral drops and sprays, capsules and edibles – CBD infused jellies, chocolates and sweets. Many are designed to provide a month’s intake, based on a daily dose of around 70mg in accordance with Food Standards Agency recommendations.

Mindful of lingering popular misconceptions about cannabis products, Love Hemp presents itself as a ‘high quality, perfectly pure CBD brand’. It was one of the first British CBD companies to subject its products to testing by certified third-party laboratories. CBD is one of more than a hundred naturally occurring compounds – called cannabinoids – found in hemp, a strain of the cannabis plant. The extract engages positively with the body’s receptors to provide pain relief and treat conditions such as insomnia, anxiety, epilepsy, skin irritations, and stress disorders. Crucially, CBD doe not produce the psychoactive states with which cannabis is popularly associated, which are stimulated by another of the plant’s chemicals, tetrahydrocannabinol (THC). Love Hemp continues to emphasise and take action to demonstrate the purity of its products, which in August received BSCG Certified approval from the Banned Substances Control Group, a leading third-party certification and testing provider of dietary supplements and natural products.

The gradual opening of the CBD market


The slow but sure liberalisation of the CBD market is gradually overcoming the stubborn association of cannabis in the minds of the public and policymakers with ‘getting high’. The UK legalised medicinal cannabis in 2018, allowing doctors to prescribe it for medical use, and the Financial Conduct Authority gave the green light for licensed UK-based CBD companies to list on markets last autumn. The ruling led to a surge in companies applying to go public, and, of course, in investor interest: retail investors poured more than £300m into cannabis stocks earlier this year after several high profile IPOs.

The UK market is still in the process of opening up. It remains illegal to grow cannabis in the UK: even British-based CBD companies must import the extract. And health specialists were only recently authorised to prescribe CBD for medicinal purposes: NHS general practitioners still cannot prescribe medicinal cannabis as an everyday treatment.

But further liberalisation seems on the horizon. A report published earlier this year, backed by an all-party parliamentary group and forwarded to Parliament for consideration, noted that less restrictive rules on how cannabis can be grown, imported and used has the potential to generate a £2bn UK industry. The wider European CBD market, which some forecasts estimate will be worth more than €13.6bn by 2025, is also gradually opening up: 13 countries allow or are currently discussing liberalisation. And the huge North American market is growing. The relatively liberal Canadian CBD market is expected to be worth CAD$2.35bn dollars in the next five years, up from CAD$600m in 2017. In the US sales reached $17.5bn last year, 46pc up from 2019. The industry hopes the current Democrat ascendancy on Capitol Hill will facilitate further change. The Biden administration has promised to legalise medicinal cannabis at federal level; indeed Vice President Kamala Harris was the lead sponsor of a 2019 bill that sought to end federal prohibition of marijuana.

It all augers well for companies able to take the opportunity establish themselves in a growing market. Love Hemp, which in the words of co-founder and CEO Tony Calamita aspires ‘to become the most recognisable and sought-after CBD brand in the world’, signalled its ambitions earlier this spring, announcing its intention to join the LSE Main Market in Q4 2021 to gain wider access to capital markets and opportunities to further enhance its profile.

Expanding high street and online channels


The company’s preparations to list have been accompanied by a significant expansion of its retail channels. Late last year the company extended its commercial reach in UK and Ireland, launching a new product line across 880 Holland & Barrett outlets and some 200 Boots stores. The Love Hemp brand is now available in more than 2,000 UK shops. Other distributors include Ocado, Alliance Healthcare Distribution Ltd and CLF Distribution.

The company also continues to expand its online reach. Last month it announced it had passed the compliance process necessary to launch a dedicated store on Amazon. It has received its initial order from the retail giant and expects to roll out its full product range as the authorisation process continues. The company is also taking its first steps into the Asian market, signing a distribution partnership with eCargo Holdings Limited that will allow it to establish a presence on Hong Kong and South East Asian retail channels and later expand into India and Japan.

Anthony Joshua joins the team


As well as strengthening its sales channels the company has invested heavily to promote Love Hemp as a physical and mental health brand. It made waves in June with the signing of a three-year endorsement agreement with two-time heavyweight boxing world champion and Olympic gold medallist, Anthony Joshua. Joshua, who becomes a key shareholder in payment for his services, will promote the potential that Love Hemp’s products offer athletes for faster muscle recovery, effective pain management and reduced inflammation. He will also collaborate with the company on the development of a range of CBD products specifically designed for the sporting world. 

Another significant athletic endorsement is a five year global partnership with the martial arts organisation UFC (Ultimate Fighting Championship), the largest pay-per-view event provider in the world, which allows Love Hemp to access UFC’s physical and digital assets and use UFC trademarks, logos and brand, enhancing the Group’s international visibility. UFC has more than 625 million fans, broadcasting to over 170 countries and territories. Like Joshua current UFC Welterweight Champion Kamaru Usman is a brand ambassador.

The company has also promoted CBD’s capacity to help ease mental health issues, entering into a partnership with Togetherall, an online mental health and wellbeing support service used across education systems in the UK and North America, and by organisations such as the NHS and Armed Forces. Subscribers to the Love Hemp newsletter will receive free access to the platform with its community of supportive peers and team of trained mental health professionals.

Love Hemp beefed up its marketing team this summer, appointing James Martin as Chief Operating Officer, formerly of Shell, Vodafone, GlaxoSmithKline, and PwC; Anna Legge as Chief Communications Officer, previously Director of Communications of London and Toronto listed SolGold plc; and Martin Healy as Chief Growth Officer, previously Head of Advertising Sales and Partnerships at The Walt Disney Group and, prior to that, Commercial Director for ESPN in the Middle East.

Strong sales


 The company’s most recent trading update, for the year ended 30 June 2021, confirmed the significant sales growth secured through the expansion of its channels. Full year revenue for 2021 was £4.31 million, up 60pc on the previous year, with 188,865 units sold, a 244pc increase on the previous period. The main driver of higher revenues was the distribution agreement with Boots and Holland & Barrett. Retail now accounted for 41pc of revenue, up from 20pc for the previous year. Though the company’s principal online channels – its own site and the CBD Oils market – accounted for a decreased share of 59pc, down from 80pc for the previous year, online revenue was still up 17pc absolute terms, with the number of consumer accounts increasing 106pc to 36,975. Love Hemp expects the balance to shift back to online somewhat as sales through new online channel partners, such as Amazon, open up in Q1 2022, and through the rollout of a subscription based online model.

The company raised over £10 million in equity over the period, which will be invested in targeting new geographies including the United States, Europe, and Japan and brand expansion through partnerships with Anthony Joshua and the Ultimate Fighting Championship. It will launch its first major marketing campaign ahead of Christmas in partnership with Joshua.

Love Hemp’s prospects


Love Hemp’s ambitious strategy is designed, in Tony Calamita’s words, to put it ‘on a trajectory to at least double our revenue in FY22.’ The company has done much over the past year to gear itself in anticipation of an expanding CBD market.

Big challenges remain. As TMS has reported this several times this year – in common with the wider investor press – the CBD space is becoming increasingly competitive. Regulatory and reputational inhibitions to growth remain. And CBD products are still relatively expensive, making them something of a luxury good: expect to pay around £50 for a month’s worth of CBD capsules.

But the trends towards liberalisation and improved public understanding is clear. With its ambitions to list on larger bourse, its investment in its commercial channels, and endorsements from big names like Joshua, Love Hemp is evolving an implementing an impressive strategy to take advantage. Investors seeking exposure to one of the most exciting new global markets should look closely at Love Hemp in advance of its move to the Main Market later this quarter.