03 Dec The Market for CBD: An Overview
CBD is well on its way to becoming a household word, with the market on track to do over $1 billion in sales by the end of 2019.
Over recent years, CBD has evolved from a subset of cannabis into an industry of its own. You’ve likely seen a huge amount of public and media attention on cannabidiol (CBD) products and watched as CBD conquered industry after industry. Despite its quick growth, the CBD market is still very much in its infancy.
In this overview of the CBD market, find out how much the CBD industry is worth, whether it’s growing, and what to expect for CBD in the coming years.
Market Size: How Much is the CBD Market Worth?
Needless to say, the CBD market is booming. The demand for CBD is particularly visible in the United States, where recent hemp legalization and a growing understanding of CBD’s benefits have led to a surge in demand. The U.S. market accounted for more than 78% of the global CBD market in 2018, followed by Europe at 12%.
A recent market research report by Hemp Industry Daily shows that retail sales of hemp-derived CBD products are on track to reach over $1 billion by the end of 2019 in the United States alone, which marks a 133% increase over the year prior.
Thanks to the gradual increase in the availability of CBD products over the last five to 10 years, the use of CBD has quickly become widespread. According to a market analysis by Cowen & Co., nearly 7% of Americans currently use hemp-derived CBD products, and that number is expected to grow to 10% by 2025.
Is the CBD Industry Growing?
The CBD industry shows no signs of slowing, as rising demand for CBD oil products is projected to bolster the market growth. CBD sales are growing at double-digit rates, with still much potential for more growth.
Hemp Industry Daily projects that the CBD market will grow to $10.3 billion by 2024, a five-year compound annual growth rate (CAGR) or 54%.
Other market research firms also project that rising consumer enthusiasm for and awareness of CBD will lead to higher sales over the coming years. BDS Analytics’ projections suggest that the CBD market (including both marijuana and hemp-derived CBD) will reach somewhere close to $20 billion in sales by the year 2024, with a CAGR of around 49%. Cowen & Co.’s calculations of a $16 billion market by 2025 are slightly more conservative.
Current CBD Laws and Regulations: Where is CBD Legal?
CBD derived from hemp is legal at the federal level in the United States. The legislation that clarified the legality of hemp-derived CBD oil products — the bipartisan 2018 Farm Bill — opened the door for interstate transportation and transacting with CBD.
The 2018 Farm Bill, enacted last December, removed hemp from the Controlled Substances Act. With the law’s passage, hemp products containing less than 0.3% tetrahydrocannabinol (THC), the intoxicating compound in cannabis, are legal at the federal level. This includes hemp-derived CBD oil products.
Individual states can implement their own laws governing hemp-derived CBD. This may affect the types of CBD products that are available when purchasing CBD online or in stores.
Uses of CBD
Hardly a month passes without new exciting findings pointing to CBD’s natural wellness properties. A look at the number of Google searches for CBD in the United States makes it clear that consumers are currently fascinated by the natural benefits of CBD, a compound present in cannabis that naturally promotes wellness by supporting the body’s endocannabinoid system, a series of receptors found throughout the body that work to keep functions balanced.
Hemp CBD products are used to promote wellness and come in the form of a variety of products, including CBD oil concentrate, CBD oil capsules, CBD oil tinctures, CBD vape oil, topical CBD body care products, and more.
By positively affecting the endocannabinoid system, CBD promotes overall health and wellness in people young and old. Some pet owners have even found giving their cats and dogs hemp oil with CBD to be beneficial.
CBD is non-intoxicating, so hemp-derived CBD products allow people who have no interest in the sensation of intoxication to still enjoy the natural health benefits of cannabinoids.
With 2019 coming to a close, it is rational to look at the most pronounced trends for CBD.
Who Buys CBD Products
If there is one trend that cannot be overlooked, it’s the widespread acceptance of CBD. Both men and women appear to be interested in CBD equally. Market research from BDS Analytics found that CBD consumers have nearly a 1:1 gender ratio, with women using CBD slightly more than men.
While Americans of all ages are using CBD, the data shows that it’s most popular in adults between the ages of 21 to 35 years. However, baby boomers, those aged 56 years and older have become a driving force behind one of the fastest-growing market sectors for CBD products.
A study from CBD Marketing in Chicago looked at U.S. social media posts and other public comments over a year period and found that baby boomers and millennials each generated 41% of posts. Gen Xers represented 18%.
Where CBD is Being Sold
CBD products are now found in a wide range of major retailers, from health and wellness stores to dispensaries and even apparel and accessory shops.
This year, chain retailers account for 57% of CBD sales, followed by online retailers at 22%, and natural food stores at 8%.
Moving forward, BDS Analytics predicts that most sales of CBD products will take place in general retail stores — such as cafes, grocery stores, and mass merchants — rather than cannabis dispensaries.
Most Popular CBD Products
Even as new types of CBD products are introduced to market, consumers continue to lean toward products they’re most familiar with, like CBD tinctures, CBD capsules, and topical CBD products like creams, balms, and salves, and even hemp oil products for dogs.
Cowen & Co. found that tinctures account for 44% of CBD use, followed by topicals at 26%, capsules at 22%, and beverages at 19%. According to Grand View Research, vaping CBD products are becoming increasingly popular in European markets.
Market research from Grand View Research also suggests that topical CBD products, including moisturizers, creams, cleansers, serums, oils, and sunscreens, are expected to drive up demand for CBD body care products.
Demand is also growing for pet hemp oil products containing CBD. Sales of hemp oil products containing CBD quadrupled last year to $32 million from $8 million in 2017, according to a report from the cannabis research firm Brightfield Group. The group believes that by 2022 the pet hemp market could grow to $1.16 billion in the U.S. alone.
Cashless Payments for CBD Purchases
Despite widespread legalization of CBD, banks and payment processors have been hesitant to service CBD- and hemp-related companies and brands because of the decades-old stigma of cannabis being a high-risk industry. Earlier this year, the largest domestic CBD payment processor, Elevon, dropped its existing CBD clients, citing that the “evolving federal and state regulatory framework makes it extremely difficult to validate the qualifications required to operate within this industry.”
While the hurdle has forced many CBD companies and brands to accept only cash, checks, and money orders, new developments suggest the banking and payment processing situation for CBD companies could evolve quickly.
In September, the U.S. House approved the bipartisan SAFE Banking Act, which will allow companies dealing in hemp-derived CBD products to use financial institutions that are part of the Federal Deposit Insurance Corporation (FDIC). In October, well-known mobile payment company Square Inc. announced that it was officially opening up payment-processing capabilities to CBD sellers.
Looking Ahead: Upcoming Regulatory Guidelines from the FDA
Outside of anticipated market growth, the CBD industry will soon be faced with more rigorous oversight by the Food and Drug Administration (FDA).
The FDA is still working on guidelines to regulate the manufacturing, testing, and distribution of hemp CBD products. Regulators in the meantime have been cracking down on some CBD companies for marketing their products as having therapeutic benefits.
The FDA had said it would issue its formal enforcement direction guidance for CBD products by the end of summer or early fall 2019, but they have yet to finalize and implement a regulatory framework.
CBD companies and brands will need to be ready to respond to the rules once they’re released. The CBD industry has been plagued with mislabeling and quality issues and efficient quality control will ensure that the highest quality products succeed in the market. The success of CBD products, according to BDS Analytics predictions, will depend on CBD education and a more thorough understanding on the part of the consumer, clear and safe suggested serving sizes, and labels that are consistent.
In the end, however, clarity from the FDA will not only provide clarity to companies, retailers, and consumers, but it will also likely help further lift lingering social stigmas around CBD use as well as concerns about products’ safety and legality.
Learn More About CBD
Get more information on how to navigate the current CBD market by reading through the HempMeds blog and by talking with your HempMeds® representative.