Markets

Ready for a CBD Hamburger?

As public acceptance continues to grow, the investment gains keep coming — and why if you haven’t invested yet, it’s not too late

CBD’s popularity is reaching almost comical levels.

Yesterday brought news that the fast-food restaurant,  at one of its Denver locations … for one day only. Can you guess which day?

Yes, April 20.

(For anyone unaware, “4/20” is an homage to the marijuana culture, allegedly dating back to a group of high school students in the ’70s who would meet at 4:20 to hunt for a rumored, abandoned stash of marijuana.)

And in case you felt the dead horse required just a tad more beating, can you guess the price of the burger?

Correct again. For just $4.20, you can buy two beef patties, jalapenos, pepper jack cheese — and about 5 milligrams of hemp-derived CBD extract.

***Why is Carl’s Jr. willing to take the risk of selling CBD given all the gray area around federal legalization of CBD-infused products?

In answering this, let’s first make sure everyone’s on the same page.

As to CBD itself, here’s how our own Matt McCall, editor of , describes it:

CBD is shorthand for cannabidiol, which is one of more than 400 chemical compounds found in a cannabis plant. Of those 400, over 60 are unique to the cannabis plant, and they are referred to as cannabinoids.

CBD is what’s called a non-psychoactive compound found in both the cannabis and hemp plants. That’s a fancy way of saying CBD will not get you “high.”

It’s actually been used by wellness and medical professionals for years as an alternative to traditional pharmaceuticals to treat everything from anxiety and depression to chronic pain to the reduction of inflammation to childhood epilepsy. If it were a drug, we would call it a wonder drug.

CBD made from hemp is now legal thanks to the 2018 Farm Bill. However, CBD made from marijuana is still illegal. That’s because marijuana remains a controlled substance.

Confusion around this topic, as well as the lack of formal guidance from the FDA has led state and local officials around the nation to shut down the sale of certain CBD-infused foods and beverages for fear of being in violation of federal law.

For instance, in February,  began going after restaurants selling CBD. Starting this coming October, they’ll officially begin issuing fines — even potentially lowering a restaurant’s health letter grade.

On the other hand, retailers are taking more risks with CBD-infused lotions and creams. For example, Walgreens, Rite Aid, and CVS have all announced they’re selling CBD-infused topicals. The idea seems to be there’s less danger of complications if the CBD is applied externally versus ingested.

But given the public demand for CBD-infused foods and beverages, politicians and the public have been pushing the FDA for more formal guidance. Given this, the FDA is holding its first public hearing on whether to allow CBD to be legally used as a food-and-drink ingredient on May 31.

***Back to Carl’s Jr. now …

Yes, the fast-food company is taking a risk in selling the CBD-burger. The FDA is clear about this. :

9. Can THC or CBD products be sold as dietary supplements?

A. No. Based on available evidence, FDA has concluded that THC and CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act [21 U.S.C. § 321(ff)(3)(B)] …

FDA is not aware of any evidence that would call into question its current conclusions that THC and CBD products are excluded from the dietary supplement definition …

That said, Carl’s Jr. has developed an irreverent brand, so this is in line with its public image. Plus, the company is privately held, so there’s less fear of an uproar from investors.

But Carl’s Jr. is hardly the only food/beverage company willing to take this risk. As  recently reported, the Beverage Trade Network is hosting its first Cannabis Drinks Expo this summer. The focus will be on canna-beverages, which last year had a market size of $89 million. But by 2023, that number is expected to clock in at $1.4 billion.

Now, how is an industry going to go from $89 million in sales to $1.4 billion in just four years when its product is illegal?

Well, it’s going to do that by ignoring the enforcing body which, as of now, isn’t doing much enforcing.

The reality is it’s the state governing bodies that have been cracking down on restaurants, not the FDA. In fact, the FDA hasn’t done much of anything in terms of prosecuting companies in violation of CBD guidelines. The “crackdowns” have generally consisted of  sent to companies making misleading marketing claims. To my knowledge, we haven’t seen the FDA go after a specific restaurant or vendor selling CBD-infused food or beverages.

So, as more restaurants and food/beverage distributors get in on the action — and the FDA doesn’t truly prosecute — the agency runs the risk of becoming something of a paper tiger.

***The root issue is that marijuana policies appear to be outdated relative to collective public sentiment

Recent  reveal that a majority of American’s now support marijuana legalization.

The latest finding, from the recently released General Social Survey by NORC at the University of Chicago, shows that 61 percent of people supported marijuana legalization in 2018. That’s up from 57 percent in 2016 and 31 percent in 2000 — a rapid shift in public opinion in less than two decades.

A Gallup poll shows support for marijuana legalization at 66% in 2018, and Pew puts it at 62%.

 

If you , 54% of Republicans support legalization, while that number climbs to 76% for Democrats.

Plus, the outcry is even coming from politicians. For example, nearly every declared 2020 democratic presidential hopeful has come out in favor of some form of marijuana legalization.

***Coming full circle, federal reform is on the way — it’s just a matter of when, and in what shape

And as we’ve discussed in the Digest, that means that the biggest investment gains from legalized marijuana are still ahead of us.

If you’ve been watching from the sidelines so far, we’re still in the early stages of investment gains, despite the huge returns that have been made so far.

But I’ll give you an example …

As mentioned earlier, Matt McCall is our resident marijuana expert. As I write, since recommending Charlotte’s Web, the stock has climbed 77%. IIPR has enjoyed 140% gains, and Ellixinol has soared 155%. But these gains have played out over the past several months.

Is it too late for the rest of us?

First, no — as mentioned a moment ago, marijuana isn’t legal yet on the federal level. That means the majority of national demand hasn’t begun to be serviced.

But even on a micro, investment-specific level, it’s not too late. For instance, in , Matt recommends small marijuana stocks that are “jumping” to major U.S. exchanges. It’s like going from the minor leagues to the majors. This is will not only allow more individual investors to buy marijuana stocks, but it will also allow the multi-trillion-dollar mutual fund industry to buy them as well.

On February 20, Matt introduced Jumper Stocks to his Early Stage Investor readers. As part of it, he recommended one new stock to his portfolio. It’s a Toronto-based cannabis producer.

As I write, this jumper stock has soared over 60% in not even two months.

Does that look like the gains are going away?

But if you’d to hear directly from Matt on this, I can do you one better …

Matt recently sat down with Managing Editor Dave Gilbert and addressed the biggest questions and concerns that many readers have about cannabis stocks and the industry as a whole.

He even walked Dave through his Jumper Stock system step by step. You can watch the short Q&A by going .

There’s no hype, or high-pressure selling … it’s all education without the fluff.

You’ll walk away with a deeper understanding of this incredible opportunity and how Matt’s system really works.

Plus, he reveals a special development our publisher has agreed to for anyone who wants to dip their toes in the water.

Again, you can watch this short, informative Q&A by going .

In the meantime, if any of our Denver readers want to give us the review on the Carl’s Jr. CBD-burger this Saturday, we’d love to hear from you.

Have a good evening,

Jeff Remsburg

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.