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COWEN COLLABORATIVE INSIGHTS February 25, 2019 Growing Application For Hemp And CBD Within The Apparel & Footwear Market (Kernan) With the changing tide on marijuana legalization and hemp cultivation, the use case for and interest in CBD applications are rapidly expanding. We think there lies within this fervor potential for greater utilization of hemp derived textiles in apparel, footwear and accessories after largely being relegated to specialist brands with a few exceptions. The Western Producer, a Western Canada weekly agriculture publication, commented that “industrial hemp could reach whole crop utilization” in an article published on 1/10/19 “Revenue Streams Expand For Hemp Growers.” We think this compliments the sustainability movement that is gaining ground in global apparel and footwear production and among Millennial and Gen Z consumers. Western Producer quotes Jan Slaski, senior researcher for InnoTech Alberta, that “textile applications have brought [about] the development of hemp-based uniforms, socks, underwear and other apparel...” as its properties, which Patagonia describes as “linen-like,” provide a “quality suitable for fine textiles.” Approximately $820MM worth of legal hemp products were sold in the U.S. in 2017 and roughly 13% of those hemp-based products are textiles according to Entrepreneur's 9/4/18 article, “The Hemp Business ls Booming.” The article’s author Rose Leadem cites a history of the crop dating back “to the 1600s when growing hemp was encouraged for use in sails, ropes and clothing.” This period was followed by years of back and forth regulation that alternately banned and unbanned hemp cultivation in the U.S. While the 2014 U.S. Farm Bill allowed for heavily restricted industrial hemp cultivation, the more recent 2018 U.S. Farm Bill, as described by the Brookings Instituted, offers a more “expansive” cultivation of hemp. Figure 115 Textiles Have Low Penetration Among Legal U.S. Hemp Products (2017) a : Textiles, 13% : oe ee es a Non Textiles, 87% Source: Cowen and Company; Western Producer To frame the market opportunity for greater hemp utilization as a textile in apparel and footwear from what is likely a nascent penetration currently, the U.S. clothing and accessories market reached store sales of $262 billion in 2017 as reported by the U.S. government, with potential to grow to $275B in 2018. We note that there are some global brands that offer hemp fiber, mostly but not all on a limited basis, in their clothing and footwear assortment. These brands include Patagonia, Columbia Sportswear’s prAna brand, Orvis, Thought Clothing, Toad&Co, Jungmaven, Eartheasy, Sanuk, Toms, 70 COWEN.COM HOUSE_OVERSIGHT_024886