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COWEN COLLABORATIVE INSIGHTS February 25, 2019 _ Nutraceuticals Given robust consumer interest in CBD products, we estimate that over the next two years, the nutraceuticals category (which includes tinctures, capsules, gummy vitamins, etc.) can generate revenues of $2.4 bn. Uncertainty around the timing of this revenue ramp reflects a lack of clarity on how quickly retailers, in particular mass market retailers, will begin to stock the products following the passage of the 2018 Farm Bill. Figure 28 We Estimate CBD Nutraceuticals Can Generate ~$2.4 BN in Sales Going Forward $3,000 U.S. CBD Nutraceutical Sales ($ in mm) 62.500 $2,400 $2,000 $1,500 $1,000 $500 $O 2018 I 2019E 2020E Source: Cowen and Company Our $2.4 bn estimate is benchmarked against the herbal supplement market in the U.S. According to the American Botanical Council, herbal supplement retail sales were $6.4 bn in 2014, posting the 11° year of consecutive growth. Between 2004-2014, the herbal supplement category grew its revenues at a ~4.2% CAGR. Extrapolating that growth out to 2019 would imply a total herbal supplement market of ~$8 bn over the next two years. Our $2.4 bn estimate for the CBD market would imply almost a 30% share of this market by 2020. The importance of retail adoption is reflected in the category makeup of the herbal supplement market, where we can see that over 17% of sales come from mass market retailers. Figure 29 Mass Market Makes Up ~17% of Herb Retail Sales Figure 30 Herb Retail Sales To Exceed ~$8 BN Assuming 4.2% CAGR U.S Herb Retail Sales by Channel (2014) U.S. Herb Retail Sales (All Channels, $ in mm) gazes Mass $8,500 $7,894, Market $8,000 17% ‘ $7,500 / $7,000 $6,500 $6,441 $6,000 Direct Sales $5,500 49% $5,000 $4,500 Natural & J $4,000 Health See es ese ssagnusags as Lo A a I od N Foods NANUNANNNNNNNN NNN ee 34% Source: American Botanical Council and Cowen and Company Source: American Botanical Council and Cowen and Company 28 COWEN.COM HOUSE_OVERSIGHT_024844