Consumer Products Market Sizing (Azer)

COWEN COLLABORATIVE INSIGHTS February 25, 2019 Consumer Products Market Sizing (Azer) In our proprietary Cowen consumer survey (~2,500, 18+ respondents), we found that in January 2019 close to 7% of respondents indicated that they use CBD as a supplement. While this is only the first month’s reading of the data (which can fluctuate from month to month), this initial response piqued our interest considerably, as it was much higher than we would have suspected. Indeed, to put the 6.9% incidence rate in context, that compares to JUUL use of 4.2%, and 19.6% of consumers that consider themselves a current tobacco user, per our survey. From a user perspective, category engagement not surprisingly skews younger, with use among 18-24 and 25-34 year olds at over 9%, while it is below 4% for consumers 55+. Figure 1 CBD Use Over-Indexes to Consumers Aged 18-34 Do You Use CBD as a Supplement? 10.0% 9.2% 9.5% 7.8% 8.0% 9 — 6.4% 6.0% 4.0% 3.7% . co} 2.0% | 0.0% Total 18-24 25-34 35-44 45-54 55+ Source: Cowen Survey, n=~2500, January 2019 While the category remains nascent (with revenue estimates ranging from $600 mm to S2 bn in 2018) it seems clear that the abundance of choice, which we discuss in more detail herein, has been a key driver of that consumer engagement. In particular, we were surprised to see that beverages already account for close to 20% of reported form factor use, given that this segment is among the newer offerings in the market place. Meanwhile, tinctures, which were arguably one of the original delivery systems, has a dominant 44% share. Figure 2 Tinctures Are the Most Popular Delivery Mechanism CBD Form Factor Use Other, 20.9% __ Beverages, 19.2% Capsules, 22.1% Tinctures, 43.6% Topicals, 26.2% —-—~ Source: Cowen Survey, n=~2500, January 2019 Note: Users had the option to choose multiple form factors COWEN.COM HOUSE_OVERSIGHT_024824