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The CBD Boom is Coming – Here’s What You Can Expect

With the passing of the 2018 Farm Bill, industrial hemp was legalized in the United States, which means we’ll see a boom in the hemp-derived CBD products market in 2019. According to a report by Brightfield Group, the CBD market is expected to reach $591 million in 2018 (80% growth over 2017), and could grow to $22 billion (that’s 40 times larger) by 2022.

Bethany Gomez, Director of Research for Brightfield Group, says, “CBD really started taking off in the past 18 months. That’s when we conducted our first research of the CBD market, and at that time, most people weren’t aware of it. The early adopters were primarily marijuana users who wanted the non-psychoactive benefits of CBD.”

Just a couple of years ago, CBD products could only be found in vape shops and online, and most providers were offering tinctures. Today, CBD products can be found everywhere and are available in tinctures, topicals, pills, edibles, and more.

“The CBD industry was driven by word-of-mouth,” says Bethany. “In 2018, most players are small. There are no large companies in the industry yet. We’ve seen massive growth through retail channels, but sellers and stores are still mostly independent with small marketing budgets. The big brands and big box stores aren’t here yet.” But they’re coming and bringing big marketing budgets with them.

The current CBD market includes more than 400 brands with additional brands launching every day. The market is very fragmented, but the top-tier brands are starting to break away from the pack. Bethany explains, “A year ago, one-third of the market came from the top 20 companies. Today, two-thirds of the market comes from the top 20 companies. Soon, the smaller companies are going to have trouble moving products.”

The reason all of these brands entered the CBD market is simple. The numbers show this is a skyrocketing market with few barriers to entry. “A company can white label a product, put up a website, and be in business quickly,” says Bethany, “but the next 18 months are crucial for small CBD companies. They have a window before big consumer packaged goods companies enter the market. The smaller players have to build their brand names and distribution in order to develop into acquisition targets, and they have to do it as quickly as possible. When the big companies enter the space, it will be easier for them to pick up a successful brand than build their own from scratch.”

What’s Coming in the CBD Boom

With the passing of the 2018 Farm Bill, hemp-derived CBD products are no longer illegal, and it’s just a matter of time until large companies start producing them and selling them. While it’s essential for small CBD brands to position themselves as acquisition targets if they want to survive, the top-tier CBD companies have to scale their portfolios to remain competitive.

“Top tier companies need to invest in research and quality testing, and they need to develop sophisticated products to stay viable and to be attractive to big box retailers in the battle for shelf space,” explains Bethany. These top-tier companies will continue to break away from the pack until the larger consumer packaged goods companies enter the CBD market. Coca-Cola is already looking at the market, and more consumer packaged goods companies are already developing strategies. It’s just a matter of time until they enter the space.”

The CBD boom will lead to extensive product differentiation, which could present opportunities to smaller and mid-size brands to gain footholds before big companies enter the market. For example, the top-tier CBD companies are still focused on tinctures and topicals. Brightfield Group sees potential in tangential product types.

“There has been an explosion of innovation for CBD in soap, beauty, anti-aging, smart water, pet, and sport and fitness products,” shares Bethany. “Innovation is just taking off, and product differentiation will really drive growth and competition in the industry in the future. CBD aligns with so many product portfolios and global trends which practically future-proofs it.”

What Does the CBD Boom Mean for the Cannabis Industry?

While many people believe legalization of industrial hemp paves the way for cannabis legalization, it’s possible that the growing accessibility of CBD products could have the opposite effect. Bethany explains, “CBD provides an alternative that more people are comfortable with, which could give conservative politicians a way to argue that there is no reason to legalize cannabis since CBD works. It remains to be seen whether hemp/CBD legalization will propel the medical marijuana legalization movement or suck the wind out of it.”

We’ll have to wait and see if demand for cannabis decreases when CBD is available at the local grocery store. One thing we do know is that the CBD market is more scalable than the cannabis market.

“With marijuana, businesses have to do everything in one state, and if they want to expand later, they have to essentially recreate the supply chain,” says Bethany. “As a result, growth moves slowly. That’s not the case for CBD with the passing of the 2018 Farm Bill. A company could cultivate in Kentucky, process in Texas, and sell across the country. They can leverage economies of scale and an international supply chain. You can expect the CBD industry to grow very fast because it’s a more scalable business model. We’re already seeing some cannabis companies pivot to CBD, and we’ll see more of that because the opportunity is so scalable while cannabis is a longer-play investment.”

In other words, the CBD boom is definitely coming. It will be interesting to see which brands are still operating a year from now and which brands are dominating the market. Will it be big consumer packaged goods brands or will some of today’s CBD brands survive? Only time will tell.

Image: Pixabay

Susan Gunelius

Susan Gunelius

Susan Gunelius is President & CEO of KeySplash Creative, Inc. (KeySplashCreative.com), a marketing communications company established in 2008 offering, copywriting, content marketing, email marketing, social media marketing, and SEO services. Susan has been working with clients in the cannabis industry since 2015. She spent the first half of her 27-year marketing career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as businesses of all sizes around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, and The Ultimate Guide to Email Marketing. She is also a Certified Career and Business Coach and Founder and Editor in Chief of Women on Business (WomenOnBusiness.com), an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.

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