HOUSE_OVERSIGHT_024881.jpg

COWEN COLLABORATIVE INSIGHTS February 25, 2019 eCommerce To Be A Key Consumer Distribution Channel Long Term (Blackledge) 2 A significant portion of the CBD products that are currently available fall into the Personal Care / Beauty Products or Vitamins and Food Supplements verticals, both of which are part of the larger Consumables category. Consumables continues to be a highly under-penetrated eCommerce vertical in the midst of a progressive shift online, and we see an opportunity for these CBD companies to expand online as secular tailwinds continue to drive eCommerce growth for the larger Consumables market. For context, we forecast overall US Consumables eCommerce sales of $51.BN in ’18, or 11% eCommerce penetration, rising to $111 BN in 23 or 19% eCommerce penetration. Longer term, Consumables eCommerce market share, led by Amazon, should rise well above our 19% penetration forecast in 23, as the sector favors eCommerce vs. Brick & Mortar, for multiple reasons, namely (1) changing consumption trends, particularly with younger demographics, who would prefer to “Skip the Trip” for these high replenishment factor goods; and (2) rising smart speaker penetration, like AMZN's popular Echo device, driving gains in high replenishment re-ordering. Figure 108 U.S. eCommerce Consumables Penetration ‘07-‘23E 25% 20% 19% 17% 16% 15% 14% 12% 11% 9 9% 10% 8% y 7% 5% o% ‘0 5% y 4% ‘0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021F 2022E 2023E Source: Cowen and Company; U.S. Census Bureau Due to the aforementioned macro factors, we view eCommerce as a major potential customer distribution channel for CBD longer term as consumers’ spending habits continue to shift, and purchasing of Personal Care Products, Vitamins & Food Supplements and other Consumable items moves online at an accelerated rate. We expect growth within the Consumables (Personal Care, HH Goods, etc) and Food & Beverage verticals to consistently outpace overall eCommerce growth '18-'23, resulting in an increased share of U.S. eCommerce sales. COWEN.COM 65 HOUSE_OVERSIGHT_024881