Company Analysis: Charlotte's Web

Goals

To obtain a company analysis for Charlotte’s Web in the U.S. including: the company’s type of clients/customers; the sales and sales structure to different types of customer/partner bases (such as B2B, distributors); and details on where most sales are realized.

Early Findings

Overview

  • Charlotte's Web is the market leader in whole-plant CBD hemp extract products market.
  • The company's product categories include human ingestible (tinctures, capsules, and gummies), topicals, and pet products.
  • In quarter 2, 2020, the company's revenues were $99.8 million. As at the end of 2019 the revenues for Charlotte's Web were $94.6 million, up from $69.5 million in 2018.

Insights on Charlotte's Web Sales Process

  • The company's products are distributed through its e-commerce website, third party e-commerce websites, select distributors and a variety of brick and mortar retailers such as small specialty health food stores, regional pharmacy and grocery chains.
  • The company’s partners sell and provide customer support by stocking and displaying products and explaining product attributes and health benefits.
  • In 2018, Charlotte's Web's distribution ecosystem surpassed 3,000 retail locations across the U.S.
  • Current estimates put the distribution ecosystem at more than 21,000 retail locations including national retailers, with recent additions of 1,100 new drug stores, more than 700 pet stores.
  • The recent acquisition of Abacus Health Products, Inc. a leader in over-the-counter topical products combining active pharmaceutical ingredients with hemp extract, has added 5,000 more locations.
  • Some examples of third party distributors/partners include:

Charlotte's Web Sales By Channel

Sales Through Direct-to-Consumer (DTC) Ecommerce Channel

  • DTC sales were $53.8 million in 2019 up from $38.7 million in 2018, accounting for 57% and 56% of total sales, respectively on a year-on-year basis.
  • The rise in annual sales for the segment were attributed to "expanded marketing programs, increased industry awareness of the Company’s products, social media and word of mouth advertising."

Sales Through B2B Channel

  • B2B sales were $40.9 million up from $30.8 million in 2018, accounting for 43% and 44% of total sales, respectively, on a year-on-year basis.
  • The decrease in year-over-year B2B revenue in 2019 "was driven primarily by sales decline in the natural health channel due to competitive crowding and resulting saturation, causing consumer confusion due to inconsistencies in product formulations and quality."

Sales By Product Category

  • In 2019, the gross sales from each product category was: human ingestibles, 87%; topicals, 9%; and pet products,4%.
  • In 2018, the gross sales from each product category was: human ingestibles, 92%; topicals, 4%; and pet product, 4%.

Summary of Findings

In this preliminary hour of research, we provided information on Charlotte's Web type of customer: direct consumers (DTC) and third party distributors/retailers (B2B). We also provided a snapshot on the sales performance of these broad categories, with the DTC channel appearing to have more sales, at 57% market share in 2019; as well as the sales performance of each product category, with human ingestibles having more sales. We also found two examples of B2B companies that Charlotte's Web partners with.

Proposed next steps:

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