Weâ€™ve just entered a new decade, but will this be the start of a new â€śRoaring 20â€™sâ€ť era for the cannabis and hemp industries? What is the prognosis for growers, retailers and other businesses invested in the two sectors?
On the heels of the Agricultural Act of 2014, which created a framework for the cultivation of industrial hemp via pilot growing programs, the passage of the 2018 Farm Bill moved the cannabis industry another step forward by legalizing the commercial cultivation of hemp and paved the way for businesses to begin selling a variety of hemp-derived CBD products.
The 2018 Farm Bill decriminalized industrial hemp â€” defined as Cannabis sativa plants containing less than 0.3 percent THC â€” and opened up business opportunities across the food, beverage, health and beauty landscapes. As a result, a growing number of companies have begun adding hemp-derived CBD to their food and beverage offerings.
However, current legal guidelines remain unclear and are subject to interpretation, and many CBD products exist in somewhat of a gray area.Â
Language in the 2018 Farm Bill preserved the U.S. Food & Drug Administrationâ€™s (FDA) authority to regulate products containing cannabis or cannabis-derived compounds. To date, the FDA has not approved any over-the-counter products containing CBD.
The agency has warned numerous companies that are marketing various CBD products as a quasi-panacea for ailments such as anxiety, stress, difficulty sleeping and depression. But that hasnâ€™t stopped companies like Weller, Vybes, or Recess, among others, from positioning their CBD-infused beverages to consumers as â€śwellnessâ€ť products, selling them online and at select non-dispensary retail locations across the country.
The accuracy of therapeutic claims and the efficacy of specific products present a long-term challenge for the CBD industry as both local and federal agencies have stepped in to prevent companies from showcasing the non-psychoactive cannabinoid as a cure-all. Last November, the FDA sent warning letters to 15 companies that it said were marketing CBD products illegally.
Nevertheless, consumers have embraced CBD and cited pain relief, as well as improving quality of life, as the main reasons for purchasing both hemp- and cannabis-derived products.
Meanwhile, the FDA contends that CBD has the potential to cause liver injury, drowsiness, diarrhea, and changes in mood. The agency has also outlined concerns about taking CBD alongside other drugs.
So where is the CBD market headed amid these challenges, and what does the current consumer appetite for CBD look like?
BDS Analytics, a Colorado-based research firm that tracks cannabis sales in the U.S., recently sized up the CBD market as part of an intelligence briefing created in partnership with Arcview Market Research, which produces regular reports on the industry.
The two firms believe that increased legalization of CBD will accelerate product development and open up new distribution channels. Although sales of CBD-infused products totaled about $1.9 billion in 2018, the market is expected to reach $20 billion by 2024, largely fueled by a proliferation of new products and greater accessibility.
According to the firms, CBD sales at cannabis dispensaries totaled $1.2 billion in 2018, compared to $624 million at mainstream retailers. They also noted that CBD pharmaceuticals was a â€śvery smallâ€ť contributor to overall sales.Â
However, if the FDA approves hemp-based CBD as a food additive in general retail products, sales would grow and the market mix would shift to $5.3 billion for dispensaries, $12.6 billion for general retail and $2.2 billion for pharmaceuticals by 2024, the firms projected.
The loosening of restrictions on hemp-based CBD offerings would trigger explosive growth in the broader retail market, resulting in a hemp-growing boom. However, there are still obstacles the industry must overcome in addition to the legal ones, such as consumer confusion.Â
While consumers are interested in the potential of CBD, many remain in need of further education. Consumers are generally confused about the benefits of CBD, how it differs from THC and often are not confident in the products available. Credible product testing, customer relationship building and consumer education can help the industry diminish these challenges.Â
Research conducted by the firms revealed that 47% of U.S. adults surveyed in fully legal states didnâ€™t know the difference between CBD and THC. Meanwhile, 52% of respondents believe that hemp products would cause a high or lead to feelings of relaxation and sleepiness.Â
â€śReaching $20 billion in CBD product sales by 2024 will require extremely rapid adoption by a broad consumer base,â€ť the firms wrote.
To date, inhalables and sublinguals have been the biggest product categories in the cannabis market. But consumers are moving away from inhalables and vaping products and toward ingestibles including food, confections and beverages. Those products, along with tinctures, will become the larger part of the CBD set, the firms noted.Â
Prescription medications containing CBD will also grow as the FDA continues to approve more drugs. Meanwhile, wellness, beauty products and vitamins are other significant categories to watch.Â
Among hemp-derived products, ingestibles are by far the most consumed category of products, followed by topicals and to a much smaller extent, inhalables.Â
Want to learn more? Obtain the full report from Arcview and BDS Analytics here.