CHICAGO — The year 2020 was certainly different than any other in the short history of hemp and cannabidiol (CBD) products at mainstream retail. The category grew 560% between 2018 to 2020, according to data from the Chicago-based cannabis research firm Brightfield Group. Between 2020 and 2021, the category grew just 14%.
The next two years will be crucial for the CBD industry, said Rick Maturo, associate director of client services for Nielsen's cannabis practice. Nielsen anticipates sales growth will exceed 80% this year and 65% next year.
“That said, much of the growth is contingent on forces outside of our control,” Maturo said during the Hemp Industry Daily conference last fall.
Here are five of those “forces” Maturo and others are watching in 2021 ...
New leadership in Washington
Time and time again, CBD manufacturers, retailers and lawyers have cited the lack of clarity in regulation of ingestible CBD products as the single biggest obstacle facing the industry. So one issue at the top of mind for many is whether the new leadership in the White House and the Senate will bring new urgency to hemp and CBD regulations.
“With a new administration coming in, it will bring a fresh air of opportunity to do business,” Lance Robertson, president of Santa Fe-based AmeriGreen Organics, told Hemp Industry Daily.
Others are less confident. In a recent column, attorney Jonathan Havens noted that a top candidate for the new U.S. Food and Drug Administration (FDA) commissioner is Dr. Amy Abernethy, who currently leads the agency’s CBD Working Group.
“Assuming Biden nominates Dr. Abernethy,” wrote Havens, partner at Saul Ewing Arnstein & Lehr LLP, Baltimore, “we might expect a continuation of FDA’s deliberate and protracted review of CBD.”
When (and how) will the FDA act?
There are numerous ways in which the FDA could provide clarity on ingestible CBD products. The agency could issue an official rule, it could issue an enforcement policy on how it would treat ingestible CBD products between now and when it issues its official rules (a draft of which has been sitting with the Office of Management and Budget for review since July), or Congress could step in and force the agency’s hand.
While opinions are divided on the “how,” numerous industry experts agreed the “when” would be sometime in 2021.
“[I] don’t expect to see any hemp regulatory action in the first half of 2021 as recourse will likely be allocation to focusing on COVID relief/vaccine distribution,” Asa Waldstein, founder of the Supplement Advisory Group, Boulder, Colo., told Hemp Industry Daily. “My prediction is very late 2021, we’ll see hemp/CBD regulation enacted, treating it as a new dietary ingredient but not as a food.”
“We will get more regulatory certainty for hemp, especially for CBD, at the federal level" in 2021, agreed Rob Richard, president of the Madison, Wis.-based Wisconsin Hemp Alliance.
The return of brick and mortar
As a new segment at brick and mortar, CBD products were particularly hard hit during the COVID-19 pandemic. Nielsen estimates that 60% of CBD sales this past spring were e-commerce/direct-to-consumer orders.
Brightfield Group’s managing director Bethan Gomez expressed confidence that CBD shoppers will eventually return to brick-and-mortar retailers, it’s just a question of when and how strong brick and mortar will be compared to online.
“As economies reopened, we saw consumers go back to stores,” Gomez said during the 2020 MJBizCon in December, noting that 41% of consumers purchased CBD in physical stores in second-quarter 2020 and 45% in the third quarter. “It’s a slight increase but a very good sign. Brick and mortar is starting to rebound, albeit not to pre-pandemic levels yet. It’s a strong indication that brick and mortar will have a place.”
Another phenomenon Brightfield Group is watching is the price of hemp and CBD products. Gomez reported many CBD brands had implemented price cuts of 20%-40% before the pandemic hit. “Fall of 2019 saw a very large bumper crop of hemp crops,” she said. “Oversupply really contributed to falling prices. This was something that was very much needed. Products were historically priced much higher than what was accessible in a mass market way.”
It’s important to note the markdowns Gomez referred to were on CBD brand websites, not necessarily at retail. In fact, several retailers attending Winsight’s December CBD in Retail forum reported they had not seen the price of CBD products drop beyond limited time promotions.
If CBD is going to take off in 2021—both at brick-and-mortar retail and overall—Nielsen projects CBD products need to be a max of 1.5 times the price of a comparable CPG product positioned to satisfy a similar need. “Currently some products are upwards of five times the cost,” Matura said.
Emerging brand leaders
Much like the early days of electronic cigarettes, there is no clear CBD brand leader across all channels. As of July 28, Brightfield Group showed the top 20 CBD companies make up over 17% of the total U.S. CBD market. The top companies were Charlotte's Web, Medterra, Green Roads, CBD American Shaman and CBDfx.
By comparison, only Medterra showed up as a top 10 brand in IRI’s multi-outlet plus convenience channels data ending May 17, where it was the ninth-best performer with 2% of sales year-over-year. And none of Brightfield’s top CBD brands showed up in IRI’s top-selling convenience channel brands: Hemp Bombs, Reliva, Bolt CBD, Just CBD and CBD Living Water.
FDA action could speed—or slow—CBD brands from rising to the top, according to Brightfield’s 2020 wrap up.
“Consumer packaged goods behemoths such as Coca-Cola, Anheuser-Busch InBev and Unilever have been circling the industry … and are eager to establish a name for themselves early,” Brightfield said. “These companies are ready to join the competition as soon as a pathway has been cleared by the FDA, especially when it comes to food additives and dietary supplements.”