The CBD market is one of the booming markets in the global scene today. The reason for this is not far-fetched.
Several factors have influenced this geometric growth, as the demand for the products doesn’t seem to be on the decline.
The signs are promising for CBD’s market that many people in business have begun investing heavily in the industry.
In this piece, we’ll take you through everything you need to know about Cannabidiol – from its market opportunity to its growth on social media, potential, and trends over the last few decades.
Why is the market for CBD growing?
The CBD market is tipped to be worth $20 billion by 2024, and many experts feel this is an understatement.
When the products sold through dispensaries, pharmacies, smoke shops, cafes, and grocery stores are considered, it is easy to agree with the experts. But why is the market growing at a mind-blowing pace?
The most significant factor pushing the market to the top of the economic scene is that more people have started using the products.
As one of the non-psychoactive compounds found in cannabis, CBD is widely consumed because it is reported to provide health and therapeutic benefits to its users.
Studies have shown that it is useful in treating inflammatory illness, acne, anxiety, arthritis, depression, inflammatory pain, and sleep disorders. To add to this, more research has shown that it helps treat body pains.
However, a decent number of the 14% of Americans that use Cannabidiol take it for recreational purposes. Several shops and businesses have opened up to cater for this increase in the demand for CBD products.
Are regulatory bodies affecting the growth of the industry?
That the CBD industry is growing doesn’t mean it doesn’t have its fair share of challenges, and legalization has been a major concern.
In many states in developed countries like the US, it is legal to use CBD products following the Farm Bill of 2018 that paved the way for the substance’s market expansion.
The law puts CBD regulation into the hands of the Food and Drug Administration. But, the agency has restricted the market’s growth as there are no clearcut regulations on CBD’s use as a supplement or food additive.
With no guidance from the regulatory body, coupled with the fear of breaking the laws, many companies have restricted themselves to produce only CBD topicals.
But customers need more than just topicals when other product types like tinctures and edibles are available. Unmoved by the pressure, the FDA has stated that it is continuing its regulatory evaluation for CBD products.
The market potential of CBD
From one leading research body’s standpoint, CBD’s global market is expected to grow at the compound annual rate of 125.5% within the forecast period, which is the next five to six years. This projection has caused several people to examine the segments of the market to understand its potential.
Here are insights on some of the global market’s classifications:
- Source Insights: The source segment highlights where CBD is gotten from. CBD accounts for one of the largest shares in the US, due to its legalization and acceptance of its products. One of the significant factors that have affected this large share is the efficacy of the substance that’s derived from marijuana. Although CBD products are available in pharmacies and stores, most products are sold from dispensaries. It has found applications in not only the health sector but also cosmetics, food and beverage, and personal care sectors. There are endless sources for CBD products, and that number is projected to increase by more than 21% in the coming years.
- User Insights: As we mentioned earlier, most people use CBD products to treat and manage health conditions, which is fuelling the market’s growth.
- Distribution Channel Insights: The CBD market is categorized into Business to Customer (B2C) and Business to Business (B2B) based on the distribution channels. The B2C segment accounts for the highest shares in the last two years and is projected that this growth will continue at a sporadic rate over the five-year forecast period. For many experts, as long as people keep adopting CBD tinctures and oils for medical and personal use, there are lots of barriers that can prevent this distribution channel from growing.
- Regional Insights: From the 2018 and 2019 reports, North America has kept the leading position for CBD users in the market. The growth of the shares in this region is due to its legalization in states and acceptance for personal use among Americans. For Canada, the legalization of businesses to produce and sell medical CBD and THC products has been one of the most contributing factors.
Nevertheless, even with the booming CBD market in these regions, it is projected that the cannabis market in the Asia Pacific will witness the most significant growth in the coming years.
The justification for this prediction is that China is one of the largest cultivators of hemp in Asia, and the country exports over 90% of its products to Germany, Netherlands, Japan, and the US.
Therefore, the focus of CBD manufacturers and legalization in these countries are some of the significant factors that are driving the market’s growth.
CBD Market Opportunity from some of the Top Players in the Industry
BDS Analytics, Brightfield Group, and Cannacord Genuity are currently the key players in the global market.
Here’s a breakdown of the market opportunity they see for cannabis and its products:
BDS Analytics and ArcView Market Research on CBD Market Opportunity
In the summer of 2019, BDS Analytics and Arcview Market Research both released a market report on the opportunity of the CBD market.
From the seventh edition of the report, there was an increase in the global sales rate of CBD in 2018, and the value is projected to break at least $40 billion by 2024.
Taking a first step in the right direction, the annual report from these joint bodies covered the Total Cannabinoid Market (TCM) in the US. It surprisingly states that the double-digit increase in CBD sales would be hitting the roof onwards, and 2018 was the slowest year in terms of expansion since 2014.
Another inciteful piece of information from the report was the forecast and quantification of the TCM past 2024. It states that the regulations and tax rates enforced by the regulatory agencies are affecting the legal market from competing with the illicit market.
But on the bright side, there is hope that CBD use will be legal in all fifty states of the US, with twenty of these states allowing for adult-use sales by the period.
Brightfield Group Research on CBD Market Opportunity
Another key player in the CBD industry released its market opportunity and analysis in 2019.
The most inciteful information from the report is that Cannabidiol sales are expected to grow by $23.7 billion by 2023. This is one of the highest estimates for the CBD market as the figure amounts to a 107% compound annual increase from the time the report was made.
The report aligns with that of the leading researches that have tipped the market to grow by 706% yearly until it reaches the $5 billion target.
Canaccord Genuity Research on CBD Market Opportunity
This CBD company has high hopes for the CBD market, tipping it to grow by a compound annual rate of 45% from 2018 to 2024. This implies a growth of the market’s size from $1.9billion to $18.4 billion within the forecast period.
The company also showed from its report that the dispensary formulation’s share sales expanded from 2.5% in 2014 to over 11% at the time the report was made.
The new type of CBD user
CBD enthusiasts are quite different from any other cannabis fan you’ll find. They turn to the substance to help their cognitive functions, relax, and treat health conditions.
The flexibility of the substance has contributed to the crop of CBD users it is attracting, and they have found a wide of range of products to use, which include:
- Coffee-infused CBD: This is said to counter the side effects of caffeine on the body.
- CBD bath bombs: The product has gained much attention because it is said to cure muscular pains in the body.
- CBD for pets: The products are said to provide outstanding benefits to pets as they offer to human beings.
Apart from the new wave of products that are being introduced into the market to cater to the needs of customers, there are also suggestions that popular beverage companies could start making CBD beverages.
And one of the contributing factors to this growth is the attention cannabis is getting on social media platforms.
CBD’s Growth on Social Media
The majority of CBD businesses use social media platforms to get their message across. Based on the research results from Google trends, there has been a substantial increase in CBD related queries in the last two years.
Based on the forecast of the next five years, searches relating to this substance will be on the high side. For example, Reddit has stated that its CBD community has 66 thousand subscribers where users ask for advice, deliver testimonies, and discuss CBD producers.
On Facebook, Instagram, and Twitter, more of the same can be seen, with the platforms reporting that CBD products appeal to both genders and older users.
Tips for businesses looking to break into the expanding CBD Market from Recent Trends
Any exploding market, like CBD’s, is sure to attract a handful of entrepreneurs looking to enter and start making a profit from selling CBD products. However, with stiff competition at every corner one turns to, most startups fizzle out before they can even begin the race.
Here are a couple of tips to help businesses that have been impressed by the industry’s high growth rate and are willing to join the industry:
1) Find New Customers
According to studies, over 40% of people aged 21 years and above have indicated that they will try out CBD products. This astonishing number is said to increase with the total population, leading to expanded market size.
However, most companies have their eyes fixed on the same users when there are many others out there. For small startups that cannot fight their competitors, this is a common way to get out of business.
Therefore, CBD businesses must look for new customers by marketing and advertising in alternate digital channels and producing products that other companies and dispensaries do not provide.
For example, not many businesses in the US produce CBD creams for users. Given the latest trends in the market, a business can capitalize on this demand, thereby finding new customers in the process.
2) Make your brand unique
One thing businesses haven’t fully grasped from the happenings in the industry and market is that CBD users often mistake similar brands.
One too many companies use the marijuana image on their product, and for CBD users that only care about the product and not the brand, the brand name is of little importance.
Therefore, just like the key players in the CBD market today, businesses must find ways to stand out and differentiate themselves from others.
One way to do this is to create educative videos and content that will keep CBD users informed.
3) Retain customers
With time, CBD customers become loyal to a brand. For example, one in seven Americans who say they use CBD products claim that they stick to one or two brands.
So, you must retain your customers because they are the sustaining component for businesses in the competitive CBD market.
Apart from creating profits for businesses, CBD users that are loyal to a brand help to attract more customers to it.
In the US, about 30% of the people aged 21 and above who claim to use CBD products report that they were introduced to the recreation, health, or therapeutic use by a friend or family.
Frequently asked questions
Q1. Do the reports from various researches and analyses imply that there are no negatives to the CBD Market?
There are many positives to take from the reports on the market potential and opportunities of the cannabis market. However, it has some negatives in both its retail and medical markets.
As we mentioned earlier, the FDA has only approved one CBD drug because there are still a lot of things that remain unknown about the substance. It has listed diarrhea, drowsiness, mood fluctuations, and liver injury as some of the adverse effects of CBD consumption.
Q2. Does the FDA’s refusal to approve CBD-related products mean it is an illegal market?
No. It is not illegal to sell or buy CBD products. However, there’s a way to go about it that will imply a business has broken the law.
According to the FDA, how the product is used, labeled, and marketed will depend if it is legal to sell the products on the market or not. For example, it clearly states that CBD products should not be sold as dietary supplements because it does not fit the definition for one.
All the reports and figures in this article are based on the legal CBD market standpoint.
Q3. Does the FDA affect stocks in the CBD Market?
In 2019, when the FDA sent warning letters to 15 companies for marketing CBD drugs, selling the substance as dietary supplements, and adding CBD to food, the stocks of those companies fell by 0.3% to 4.5 USD within hours. This shows that many users and investors take the statements of the agency seriously.
Eric Assaraf of Cowen and Co’s Research Group said that “Members of Congress, CBD companies and consumer groups have become frustrated with the FDA’s lack of guidance.
It is even more alarming that even with laws making marijuana legal, cannabis products must still be sent for approval before companies can get involved in interstate selling.”
To sum it all up
CBD’s rise has given a lot of brands plenty to think of like activated charcoal.
In the last decade, the benefits of activated charcoal as a cleansing agent had been so impressive that many businesses entered its market.
Apart from its cleaning features, more users and businesses began finding new ways to use the product to treat weight loss, chronic kidney diseases, and stomach bugs.
But when CBD products came along as the new substance for wellness and recreation, the surge and buzz affected the popularity of activated charcoal.
The fate of CBD’s market is projected to differ from that of activated charcoal. The reason for this is that there is currently no better substance that redefines the concepts about marijuana while providing health benefits like Cannabidiol. So, it is not too late for any business to get into the market as there are loads of lucrative opportunities in it.
In this article, we’ve highlighted several reports about the potential, growth rate, and opportunities in the CBD market. This information should help any business owner, or investor make a better decision on whether or not to get into the market.