Key Stats: Cornbread Hemp on Wefunder
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The Cornbread Hemp team has been selected as a “Deal to Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10%-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology, please reach out to firstname.lastname@example.org.
When Congress passed the Farm Bill in 2018, the hemp and cannabidiol industry exploded overnight. The bill legalized the production and sale of hemp, including its extract, cannabidiol (CBD). Due to these regulatory changes, the CBD market in the US is projected to reach $23.7 billion by 2023.
The legalization of CBD coincides with the proliferation of anxiety disorders in the United States. There are 40 million adults suffering from anxiety, making it the most common mental illness in America. Anxiety is only increasing in America: more than a third of respondents to a survey by the American Psychiatry Association felt more anxious in 2018 than they had a year prior. The coronavirus pandemic is likely to cause even more anxiety among the American public.
While research into the precise impact of CBD on mental illness is ongoing, CBD is a popular remedy for anxiety sufferers. Cannabidiol is most popular among millennial buyers between 26 and 35 years old, and 80% of those who purchase CBD use it at least once per week. The average consumer spends between $20 and $80 per month on CBD products, a $600 year-long value for just one customer.
The CBD market is large and still lacks a widely-known name brand. The anticipated recession caused by COVID-19 may present an opportunity for a new hemp company to provide CBD products to anxious Americans.
Cornbread Hemp is a Kentucky-based hemp company offering CBD-infused oils, capsules, and lotions for sale online and in retail stores nationwide. Cornbread was founded in April 2019 as the first carefully-branded, USDA Organic-certified hemp brand in Kentucky.
The company’s name was derived from co-founder Jim Higdon’s non-fiction book The Cornbread Mafia, which details the story of Kentucky black-market marijuana growers in the 1980s. The selection of the company’s name is coherent with Cornbread’s broader focus on creating a unique, compelling brand in line with the brand and marketing models of leading Kentucky bourbon companies. Cornbread focuses on generating press mentions to drive traffic to its website, leveraging that traffic to create lookalike audiences for efficient paid advertising spend on social media.
Cornbread Hemp is one of the few companies that has achieved certification as USDA Organic, indicating the company’s commitment to purchasing inventory from wholesome Kentucky farmers. Cornbread’s organic CBD products are positively reviewed by consumers, with over 250 five star ratings across the product suite.
About half of Cornbread’s products are sold direct-to-consumer through the Cornbread website, with the other half of sales coming from in-store retail. Cornbread products can be found in 100 retailers across 10 states, mostly pharmacies and grocery stores around Kentucky. The company has thought carefully about cultivating productive retail partnerships and offers a “retail support program,” co-branded advertisements and PR campaigns, and distributor partnerships to maintain lucrative arrangements with sellers.
Cornbread Hemp generated $250,000 in revenue in its first fiscal year. The company reports 52% revenue growth from 2019 to 2020, though it has only one month (April) so far to compare year-over-year.
Cornbread Hemp was co-founded by Eric Zipperle and Jim Higdon. Zipperle, the company’s CEO, holds a BA in accounting and an MBA from Bellarmine University in Kentucky. Since graduating in 2016, he has reportedly helped to launch two e-commerce companies. Higdon, Cornbread’s COO, is a published writer with experience covering the marijuana industry for outlets like POLITICO and The Washington Post. He earned a BA from Centre College, and later an MFA from Brown University and a Master’s in book writing and reporting from Columbia.
Zipperle and Higdon are clear about their goal for Cornbread Hemp: become the leading nationwide brand for CBD products. The co-founders intend to use their crowdfund raise to fund three growth initiatives: better-funded marketing campaigns, inventory expansion, and hiring. For the remainder of 2020, Cornbread Hemp intends to focus on launching an affiliate program, open a new 50+ store retail account, and launch new products to supplement its existing set of SKUs.
Why We Like it
- Unique focus on brand authenticity: Cornbread Hemp recognizes the lack of a branded name in CBD products and is strategically crafting brand and marketing initiatives to emulate successful bourbon marketing strategies from the company’s home state of Kentucky. CBD is a fractured market, with products often sold by scrappy solopreneurs and local dispensaries. There is clear room for a well-branded startup to leverage professional marketing tactics to build a loyal customer base.
- Traction and profitability in year one: Cornbread Hemp is barely a year old, and the company has already generated a quarter of a million dollars in revenue off of a $100,000 initial investment. The company even achieved profitability in this short period, despite spending on paid social advertisements which can run up expenses. While the company is young and lacks a long operating history, it sends positive signals of long-term success through its initial traction.
- Growth in the CBD market (potentially supercharged by coronavirus): The CBD market is expanding rapidly, and analysts frequently release higher market size projections for the next five years and beyond. By focusing on building a strong brand and reliable sales channels, Cornbread Hemp is well-positioned to capture a sizable portion of that market growth. Moreover, the coronavirus pandemic may well increase demand for CBD products that relieve anxiety, and Cornbread already reports increased sales since the pandemic began.
Cornbread Hemp’s co-founders are building a carefully-branded CBD company with distinctive USDA Organic certification and marketing tactics reminiscent of Kentucky bourbon giants. Cornbread Hemp is not simply the latest in a long line of CBD companies. Its founders are approaching the market with a unique focus on strategies that build a competitive moat.
While many of Cornbread Hemp’s characteristics are attractive for potential investors, there are risks inherent to investing in a CBD brand. Marijuana and cannabis have existed in a regulatory gray area since the Farm Bill’s 2018 passage, and the FDA is due to issue more precise regulations on the use of CBD (specifically as it pertains to the compound’s use in food, drink, and drugs, but products outside of those categories are still wary of updated guidance). The coronavirus pandemic has most likely distracted the government from such concerns, so it may be some time before cannabis founders can rest easy knowing that their businesses are safe from regulatory obstacles. Moreover, Cornbread Hemp is a very young company. While financial reports from its first fiscal year seem strong, any young company with two unproven co-founders is a risky investment.
As for exit potential, most acquisition speculation is contingent on FDA regulations and broader cultural approval of CBD. It is very possible that CBD products enter the true American mainstream within the next several years, which could cause major CPG conglomerates to explore acquiring CBD brands. We’ve already seen signals that CBD-infused food products can provoke acquisition, such as the sale of Amplify Snack Brands (makers of SkinnyPop) to Hershey for $1.6 billion, and Rxbar to Kellogg for $600 million.
While investing in young private companies is inherently risky, investing in cannabis-related companies only furthers the potential of downfall via regulatory changes. However, Cornbread Hemp has laid the groundwork to become a household name in CBD products (a very valuable market) through multi-channel sales and strong brand marketing. The recent coronavirus pandemic will likely increase the demand for CBD products, which Cornbread Hemp is poised to satisfy. Therefore, Cornbread Hemp is a Deal to Watch.
About: Katy dolan
Katy is a marketing and research consultant to startups (including VC-backed companies, small businesses, and advocacy movements). With experience in tech, venture capital, politics, and non-profits, Katy partners with clients to strategize and execute compelling campaigns focused on user experience and empathetic narrative. Katy graduated cum laude from Harvard College with an AB in Sociology.