Cannabis and professional sports have been making quite a few headlines lately. Last week, the merging of the worlds continued.
On Tuesday, May 21, 2019, a major partnership was announced between the mixed-martial-arts (MMA) league Ultimate Fighting Championship (UFC) and Edmonton-based Aurora Cannabis Inc. (TSX: ACB) (NYSE: ACB). The multi-year, multi-million dollar partnership is primarily a research-based collaboration that will explore the role that hemp-derived cannabidiol (CBD) products could potentially play in the areas of mental health, pain management, and athlete recovery.
“We’re looking for hard and true evidence that this is going to be beneficial or not,” says Jason Dyck, who holds multiple qualifications, including as an independent director on the board of Aurora Cannabis, a professor in the Department of Pediatrics at the University of Alberta, and a Canada Research Chair in molecular medicine. “This is an Aurora-led partnership. It is not related to my affiliation with the University of Alberta. In my role as an independent director, I will provide general oversight to the research that’s planned with the UFC.”
“Since the day we opened the Performance Institute, our primary goal was to offer UFC athletes the best possible training, nutrition, and recovery services,” stated UFC President Dana White. “This partnership with Aurora is an extension of that goal, and we’re looking forward to collaborating with Aurora to find new ways to improve the health and safety of athletes who compete in UFC.”
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MMA Fighters Already Relying on CBD
In a league known for its athletes openly endorsing performance-enhancing supplements, it came as little surprise to Dyck to learn that MMA fighters have already been praising the benefits of topical and oral CBD products. In fact, the use of CBD among fighters was part of what triggered the UFC to launch the study with Aurora.
“[The UFC] felt they needed a strong research component to validate the efficacy of that,” says Dyck. “They wanted us to partner with them and investigate how hemp derived CBD helps athletes in a variety of areas. Every person’s biology is different, and so reactions to any medicines are going to be diverse. We don’t anticipate any [negative side effects] but again … maybe it enhances anxiety in certain individuals or maybe it has no effect at all.”
Dyck’s research team will examine a range of ways that CBD impacts athletes, including helping to reduce inflammation, improving performance, enhancing training, managing pain, speeding up recovery, and affecting mental health. The research team — which will be based out of the UFC’s Performance Institute in Las Vegas, Nevada — is also tasked with exploring any potentially adverse effects of CBD on athletes.
Brand Visibility as a Value-Add
While the partnership is primarily a research initiative, there’s also a great deal of brand value that comes with it. The UFC may not need the added exposure, but for Aurora to partner with a brand as high profile as the UFC is a differentiator in an increasingly crowded cannabis market. And while the UFC may not evoke the warm and inspirational feelings of some other sports, it’s still a clever way for Aurora to hitch themselves to athletics.
Additionally, the partnership opens the door for future endorsements, brand mentions, or Aurora-branded products. Therefore, on its surface, this partnership represents a PR win for Aurora in terms of the investment in scientific research, as well as a brand win in terms of potential visibility.
High-Margin Category is the Focus
Last but not least, the new partnership represents a win for Aurora in terms of product category. Despite dried flowers being the most recognizable cannabis product, they’re actually among the least profitable category. In terms of profit, pre-rolled joints and CBD products are the most lucrative.
Therefore, the partnership’s focus on CBD represents the best opportunity for Aurora to maximize profit. If the research outcomes lead to the creation and promotion of new CBD products, it could spell good fortune for Aurora and their shareholders. This should come as a relief to Aurora shareholders, who have been watching anxiously as the company struggles to sustain profits despite growing revenue substantially.
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