NEW ORLEANS — 2020 marked the first time that cannabidiol (CBD) products had their own category track at CSP’s Convenience Retailing University. Over two days, leading regulatory and data authorities presented attendees with information on what BDS Analytics projects will be a $13 billion category by 2024.
Here are seven insights they shared …
1. A golden opportunity
Jessica Lukas, vice president of consumer insights for Denver-based BDS Analytics, and Larry Levin, executive vice president of Chicago-based IRI, predicted that legal U.S. marijuana sales will reach $31.1 billion by 2024, with an additional $13 billion in non-THC cannabinoid sales at mainstream retail—that is, nonspecialty shops. By comparison, beverages/alcohol are a $19.9 billion category for convenience.
“It’s too big to ignore,” said Levin. “This is a golden opportunity for CPG.”
2. There’s still work to be done
”Legal cannabis is mainstream in 2020,” said Lukas, pointing out thatroughly 80% of the population supports some form of legal cannabis. Meanwhile, BDS Analytics survey data shows 69% of consumers in legal cannabis markets describe themselves as consumers or acceptors of the substance.
“We’ve made progress,” Levin said. But there’s still a hill to climb, especially when it comes to education around THC and marijuana vs. CBD and hemp: Only 25% of U.S. adults know what cannabinoids are and can clearly articulate it.
3. Innovation in forms and function
With growing support in both recreational marijuana and non-THC hemp products, manufacturers are innovating across the board. “You name it, it’s being infused with cannabis,” Lukas said, listing nasal sprays, inhalers and even suppositories as examples.
With 69% of cannabis consumers using edibles and 30% preferring that form, there’s been a lot of attention paid to improving that experience. While edibles typically need more than an hour to take effect and then last several more, Lukas said innovation around the onset/offset timing has improved, with at least one company debuting “a five- to 15-minute onset ‘happy hour’ gummy.”
4. Owning the category
As CBD moves into the mainstream, Levin pondered which channel will emerge as the leader. Approximately 55% of all mainstream retail CBD sales happened at c-stores, with 42% of CBD growth coming from this channel last year (vs. 19% of all CPG sales occurring in convenience).
“We have the opportunity to own this category,” Levin said.
5. Pending regulation
Don’t expect regulations to come in the wake of increased public pressure, said attorney Jonathan Havens.
“The FDA [U.S. Food and Drug Administration] is not a public pressure agency; they're a public health agency,” said Havens, a partner and cannabis specialist with Philadelphia-based Saul Ewing Arnstein & Lehr. “They don’t care what you want to sell. Until Congress forces them to do something, I don’t think they will.”
6. Be wary of warning letters
While the sale and marketing of CBD products is still illegal in many areas of the United States, the FDA has (so far) limited its punitive actions to issuing warning letters to CBD manufacturers who have made health claims on their products. Havens said no retailer has yet received a warning letter and probably won’t as long as retailers aren’t making their own independent health claims on the products. But that doesn’t mean retailers won’t feel the sting, she said, pointing to the negative press CVS saw when its CBD partner, Curaleaf, received a warning.
“Getting a warning letter is really a death knell in this space,” he said. “The warnings are going to brands ... but have an effect on retailers.”
7. A state-by-state case
The Farm Bill of 2018 does not preempt state law, meaning states do not have to allow CBD sales in their state. The result has been a patchwork of regulations wherein some states have indicated they’ll follow FDA guidance, others have passed laws more permissive than the FDA statute, and some have passed stricter laws and beyond: Florida has a 12-point labeling guidance for all CBD products. “Anyone who says you can sell whatever you want in all 50 states is absolutely wrong,” Havens said. “Knowing what the laws are, being a compliance-focused company will be an advantage.”