The cannabinoid products market continues to represent one of the most dramatic growth opportunities of any market theme over the next 5 years. That has been the conclusion of scores of analysts and researchers in recent years. And it continues to be the dominant view in the analyst community today, with new research released in May 2020 by Industryresearch.biz.
The new report calls for the worldwide market for Cannabidiol (CBD) to grow at a CAGR of roughly 32.0% over the next five years, to reach over $1.25 billion by 2024, up from $311.8 million in 2019.
The engine behind this move is the mainstreaming dynamic of a small niche market gradually becoming a mainstream household product category. This type of growth is augmented by increasing presence in high-traffic consumer areas, more marketing and media penetration, and an rising appreciation of the health and wellness benefits that are increasingly understood as part of the equation with CBD-based products.
But, for investors, not all names in the space are created equal. Two major characteristics should be valued above all others when evaluating stocks in the space.
First, in any emerging industry, strong R&D that leads to valuable IP is an inevitable advantage over the long run. And the market will almost certainly come to key in on the eventual long-run winners as worthy of higher valuations once they are identified. In other words, the early sales leaders will eventually be overtaken by the companies that manage to build a platform of IP edge.
Second, branding and marketing execution is a necessary piece of the puzzle. IP is only valuable to the extent that it finds an end-market.
In each, we argue here that MCTC Holdings Inc (OTCMKTS:MCTC), now doing business as Cannabis Global, Inc. (OTCMKTS:MCTC), may currently represent an interesting opportunity because the company is a clear leader in the IP and R&D department and we have recently seen signs that it is beginning to work toward establishing itself as a force on the branding and marketing side of the equation. This stands in stark contrast to the dirt-cheap pricing of shares at present.
R&D Plus IP Equals Potential Leadership
Cannabis Global, Inc. (OTCMKTS:MCTC) has a clear edge in terms of R&D and the development of fresh IP relative to other names in the CBD space.
This is also unusual for companies in the cannabis patch. The lack of IP development is remarkable. Most CBD and cannabis names seem to inevitably give up on trying to lay an IP foundation in favor of just becoming another commodity producer or distributor, rather than investing in R&D and developing strong intellectual property.
To wit: MCTC has over a half-dozen strong provisional patent applications now in process with the USPTO and all signs suggest that number will continue to grow.
A good example of how this can become a game-changer is the company’s recent announcement of a breakthrough in THCV production (THCV is an exotic cannabinoid that could hold huge market potential). MCTC has developed the means to produce it at commercial scale.
According to the company, “Cannabis Global has integrated three internally developed technologies into the unique manufacturing process for the industry’s first THCV beverages. The first of these is the process developed by the Company to produce 70%+ loaded THCV, controlled release, nanoparticles utilizing laboratory-based, pharmaceutical-grade production equipment. The Company is also utilizing both its internally developed powerization and one step dosing system, ensuring precise dosing and significantly faster production. The Company has filed provisional patents on all three technologies.”
If the company can commercialize this successfully, and also prove that their technology represents a solution that can make exotic cannabinoid production cost-effective at commercial scale, and they have strong IP protection in place, then the upside here is potentially enormous because the sales of the THCV beverages would represent just the tip of the iceberg, with a far larger market in technology licensing potentially ready to blossom for MCTC shareholders.
Branding and Marketing
One reason that MCTC shares have remained cheap is likely because the company hasn’t yet proven its place in the market as a commercial play. But that may be about to change, suggesting the stock is worth a fresh look.
According to the company’s most recent press release, initial product development of the Hemp You Can Feel™ product lines has been completed, and the company is now moving toward the launch of the next phase of its operations, which will focus on bringing the product to market.
According to the release, over the coming weeks, Cannabis Global will be launching several new product marketing initiatives designed to move its innovative hemp extract and rare cannabinoid products into the marketplace.
“It has been approximately one year since we reorganized the Company, which today is known as Cannabis Global, Inc. During the first year, we concentrated on designing products that are distinct from the competition with established advantageous barriers,” commented CEO Arman Tabatabaei. “We are very pleased with the results in that we not only have a unique product set, but also one based on both quality ingredients and solid intellectual property.”
This may be the last obstacle preventing a rerating of shares to the upside to finally begin to price in its IP advantage. Given the growth curve in front of this industry, surmounting this obstacle could unleash a lot of pent-up value and dramatically change the way MCTC shares trade.