Brightfield Group Sizes Up the US CBD Market in New Report
U.S. sales of CBD are expected to grow 14% and reach $4.7 billion in sales in 2020, according to a new report from the Brightfield Group.
However, growth in the CBD sector has been stunted by industry headwinds and other coronavirus-induced challenges.
According to the Chicago-based cannabis research firm, which this week published a white paper on the U.S. CBD sector entitled “Navigating Seismic Shifts,” retail sales of CBD are “not expected to reach levels anticipated prior due to the emergence of COVID-19 pandemic.”
Brightfield Group, pointing to a June unemployment rate of 11.1% and other “economic pressures” facing consumers who no longer enjoy the unencumbered access to retail stores, has revised a more bullish CBD forecast that it presented last fall.
“A major challenge is the loss of revenue from store closures as many retailers selling CBD products have either closed temporarily during the crisis or are only offering curbside pickup and delivery,” Brightfield Group wrote in its report.
Before the COVID-19 pandemic, the research firm had said hemp-based CBD sales could approach $10 billion in the U.S. this year. It had also forecast that CBD sales would eclipse $23 billion by 2023.
Now, however, Brightfield Group has a much more modest outlook: Sales will only reach $12.4 billion by 2023 and $16.8 billion by 2025.
Those figures are more in line with projections made by BDSA, A Colorado-based research firm that analyzes cannabis trends and offers forecasts on the market. Last September, BDSA said 2020 CBD sales would reach $6.5 billion in 2020. By 2023, BDSA believes U.S. spending on CBD products will approach $16 billion.
Despite the challenges facing CBD brands, opportunities remain for companies focused on sharpening their e-commerce strategies and increasing direct-to-consumer (DTC) sales.
According to Brightfield, 45% of CBD consumers surveyed in June had moved their purchases online as a result of stay-at-home orders and a reduced ability to shop in-person due to COVID-19.
Meanwhile, 54% of millennial shoppers have switched to online ordering, and increased spending on CBD products, Brightfield found.
“In addition to having DTC capabilities, CBD companies with a well-recognized brand and a strong digital marketing strategy are expected to fare best in this challenging environment,” the firm wrote.
Moreover, companies that spend time building a database of e-newsletter subscribers, and have large social media followings, are in a better position to capitalize on the current shopping environment, Brightfield said.
“CBD brands can maintain a direct connection with consumers and provide education about CBD through emails, blogs and social media,” they wrote.
In terms of form factors, 88% more CBD consumers used gummies and candies in the second quarter of 2020 versus the first quarter, while the number of consumers using CBD daily increased 6%.
Brightfield also noted that CBD companies are beginning to formulate offerings with ingredients such as elderberry, echinacea, and vitamin C to give people a product with immunity-boosting benefits.
In an effort to capture consumers looking for offerings intended to improve overall health and wellness, cannabis firms and CPG companies alike are increasingly infusing CBD into food and beverage items.
However, the FDA does not currently permit companies to add CBD to food or beverages for sale at mainstream retail outlets, even though hemp-derived CBD is no longer considered a controlled substance following the passage of the 2018 Farm Bill.
As of mid-April, only 16 states explicitly allowed CBD to be infused into food and beverage products. But federal permission to include CBD in those items could be forthcoming.
According to Marijuana Moment, White House officials are currently meeting with hemp industry stakeholders to discuss future policies and regulations surrounding hemp and hemp-derived compounds such as CBD.
Jonathan Miller, general counsel for the U.S. Hemp Roundtable, told Marijuana Moment that he was “cautiously excited” that substantive change could be on the way.
“We want to create a clear and legal place for companies that are doing everything they can to comply with FDA regulation to sell their products,” he told the outlet.
Uncertainties notwithstanding, major marijuana industry players like Canada’s Aurora Cannabis and Colorado’s Charlotte’s Web Holdings are betting on strong consumer interest and continued growth opportunities in CBD.
In June, Charlotte’s Web completed its purchase of Abacus Health products, makers of the CBDMedic line of CBD products endorsed by NFL star Rob Gronkowski.
Meanwhile, Aurora Cannabis announced in May that it would trade $40 million in stock to acquired Massachusetts-based Reliva, LLC.
Earlier this month, Canada’s Future Farm technologies closed its acquisition of Massachusetts-based CBD manufacturer High Purity Natural Products.
According to Brightfield Group, the CBD space has undergone a round of consolidation in 2020. The top players include Charlotte’s Web, Medterra and Green Roads.