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COWEN COLLABORATIVE INSIGHTS February 25, 2019 Competition From AMZN Private Label Could Be A LT Concern, Offset By CBD’s Established Brands Should the market for CBD products expand rapidly over the next several years, one source for increased competition could be Amazon's own first party (private label) business. Amazon offers private label goods across the gamut of product verticals, including consumables and vitamins. Per industry participants that have discussed AMZN’s private label business with us, Amazon's approach is similar across most new product lines, most notably that the company is now focusing less on heavy discounting to take share from competition. By contrast, we believe that while any foray into CBD could start with a big push by AMZN to gain share, if sales and reviews aren't working, AMZN would likely reduce resources quickly. Additionally, Amazon Private Label tends to replicate top sellers for goods that are high replenishment, commodity-type products with undifferentiated branding, then add secondary brands over time. Amazon private label has in some cases captured huge market share early (anywhere from 25-40% market share by SKU within the first six months). AMZN also tends to have the most success in verticals where branding is less important (a fact that could provide an advantage to more established CBD companies). The widespread availability and acceptance by a retailer such as Amazon could also help to drive mainstream adoption of CBD products and thus provide a benefit for the industry as a whole. Other Potential Platforms: EBAY Has The Reach To Make An Impact There are other platforms that may be easier to break into than Amazon that would also provide an avenue to reach a wide array of consumers. Ebay could be an alternative for CBD companies to tap into. EBAY has been losing share in eCommerce over the last several years, and developing a leading marketplace in a new product vertical such as CBD products could be an incentive to become an early adopter. Ebay currently has 179MM active buyers on the platform worldwide, and the company generated over S90BN in GMV in 2018. Our survey indicates that unlike Amazon, EBAY has had less success in driving consistent purchasing in areas like personal care and beauty as well as in vitamins and supplements. Our data suggests that unlike Amazon, these two key verticals are purchased at about the same rate as any other category, which suggests that there is an opportunity for these verticals to grow meaningfully, in our view. Figure 113 EBAY Purchaser % By Vertical, 2Q17-4Q18 10% 8% 6% 4% 2% 0% 2017 3Q17 4Q17 1018 2Q18 3Q18 4018 Personal Care Products mVitamins & Supplements Average Across All Categories Source: Cowen proprietary Consumer Internet Survey, n=~2500, Dec ‘18 68 COWEN.COM HOUSE_OVERSIGHT_024884