The cannabinol market in 2023
Despite the challenges of navigating a complex and often gray legal landscape, the cannabidiol (CBD) market experienced significant growth since the passage of the 2018 Farm Bill. The bill removed hemp and hemp seeds from the DEA schedule of controlled substances, effectively legalizing hemp CBD for use in non-food items at the federal level.
This legalization of CBD — a non-psychoactive compound with potential health benefits — and pandemic-induced health consciousness led to a surge in demand for CBD-infused products, from personal care items to vitamins, supplements, household products, and more.
CBD vs. THC
Cannabidiol (CBD) is the second most prevalent active compound in a cannabis plant. It helps the brain and body by interacting with the endocannabinoid system and neurotransmitters that impact inflammation, pain, mood regulation and stress response. CBD can be extracted from the leaves and flowers of hemp or marijuana plants but does not have the psychoactive effects of THC (the main active ingredient in cannabis) when consumed.
In 2023, inflation appears to be taking a toll on CBD sales in traditional retail channels. During the latest 52 weeks ending March 11, 2023, sales of hemp CBD products declined 10% across the US (in drug, food, mass, and dollar outlets). NIQ data shows that hemp CBD products are often sold for over twice the price of non-hemp CBD products.
With the price of essential grocery items still uncomfortably high, consumers might be making fewer purchases or trading out of traditional retail channels to purchase certain CBD products. Across traditional outlets, hemp CBD vitamins and supplements — which account for nearly 50% of total Hemp CBD sales — had a 9.5% dip in sales. In fact, all 9 hemp CBD segments (super-categories) tracked by NIQ posted steep sales declines, except for beverages.
The pockets of growth for hemp-infused products came mainly from dog food categories and beverage categories: soft drinks, seltzers, and sparkling water spiked by over 50% during the latest 52 weeks.
We expect to see more innovation with strategic expansion in certain categories. For example, in the beauty and personal care department, supplements and body products saw a surge of new CBD-infused products on shelves.
What’s next for CBD and CPG manufacturers
Incorporating CBD into CPG products currently requires careful consideration of a range of factors, including regulatory compliance, safety and quality standards, and effective branding and marketing strategies to promote the potential benefits of CBD to consumers. Manufacturers should be aware that
- CBD products cannot be rolled out nationally
- Many marketing methodologies are currently prohibited
- Distribution is limited within traditional retail categories
- There are still many potential legal issues
As the cannabidiol market market evolves, so does the potential for growth and innovation in the coming years. CPG companies must remain agile and adaptable, continually working to differentiate themselves from competitors and promote the potential benefits of CBD to consumers. In preparation, CPG companies should:
- Take steps to understand the current market.
- Stay informed on new updated rules and regulations for CBD. Reports indicate that the FDA will release recommendations for how to regulate CBD in food and supplements in 2023.
- Satisfy consumer interest in CBD with an alternative — hemp oil. Hemp oil comes from industrial hemp: it is considered Generally Recognized as Safe (GRAS) and fully legal. Thanks to a high concentration of unsaturated fatty acids, hemp oil, like CBD, can aid with pain support, heart, muscle, and brain health, inflammation, and more. It’s currently used in food and beverages, dietary supplements, topicals and cosmetics, and industrial products.
As the market continues to evolve, companies must remain agile and adaptable, continually working to differentiate themselves from competitors and promote the potential benefits of CBD to consumers.
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