Reading those wildly differing CBD market projections in the U.S.

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With projections for the growth of the U.S. CBD market diverging wildly, what’s an investor to do?

On the far-out upside, Tampa, Florida-based research firm Brightfield Group, recently told Rolling Stone it expects U.S. CBD sales to hit $22 billion by 2022.

Other forecasters beg to differ. Statista, a highly regarded statistical portal among blue-chip companies including fast-moving consumer goods producers, is projecting CBD sales will gradually grow to $1.8 billion by 2022. That’s in line with cannabis industry research specialist New Frontier Data’s Hemp Business Journal, which in 2016 projected the market would hit $2.1 billion by 2022.

Farm Bill would mean tectonic shift

While U.S. hemp stakeholders anticipate the real opening of the domestic market with the passage of this year’s Farm Bill – a tectonic shift for sure – some industry veterans say Brightfield’s outlook is nonetheless over the top.

“Twenty-two billion seems very high, especially if you compare it with other numbers,” said veteran industry consultant Daniel Kruse of Dusseldorf, Germany-based HempConsult GmbH. Kruse noted, for example, that the entire U.S. dietary supplements market is projected to generate only $57 billion by 2024 – up from $31.7 billion in 2016, according to Statista.

“It´s true that more and more people turn away from pharmaceuticals and look for natural remedies, and this is indeed a huge potential for CBD,” Kruse said.

Regulatory environment is barrier

“But regulations are still the biggest roadblock,” said Kruse, pointing to uneven direction from federal officials, occasional state and local legal flareups, and continuing isolated crackdowns by the U.S. Food & Drug Administration (FDA) as hindrances.

Boaz Wachtel, Chairman at nutraceuticals maker Creso Pharma, agreed Brightfield’s figures are over the top: “It’s 40 times the current size of the market in 3 years,” Wachtel said of the Brightfield forecast for the USA. “It’s an exaggeration for sure. Maybe a 10-times multiple makes more sense.”

‘Explosion’ in the market

Brightfield told Rolling Stone its forecast is based on what it called an “explosion” in the market for health & beauty products incorporating CBD, and noted a fast-growing trend among consumers using CBD-infused products in sports, and for such conditions as PMS and arthritis – maladies commonly addressed with over-the-counter synthetic remedies.

“I’ve been doing market research for years and covered everything,” Bethany Gomez, director of research for the Brightfield Group told the magazine. “This is definitely the craziest market I’ve ever covered.”

Will CBD go big box?

Brightfield said it expects growth in sales of CBD-infused products in several sectors, and tantalizingly suggests big retail chains could play a huge role in fueling the market.

U.S. consultant Richard Rose, who is also a long-time hemp product developer, is not terribly skeptical about the Brightfield numbers.

“A lot of times these numbers understate because they don’t foresee new markets,” Rose said. He agrees with Brightfield that if CBD gets into the consumer mainstream via major retailers, sales could explode.

“Their logic is good: big box retailers driving it,” Rose said of the Brightfield Group’s forecast.

“Elixinol is aware of conversations with CVS, Walgreens and Coca-Cola with the CBD industry. These conversations can indeed lead to truly significant growth over what is already a fast growing industry,” Paul Benhaim, CEO at Elixinol Global, told HempToday. “We are taking cautious steps towards this future growth and recommend a close watch on the reality and trading figures announced by companies to ascertain how accurate such projections are. To date, the numbers seem on track.”

Look for nimble, global players

There’s a CBD explosion out there. That’s for sure. But how big it will be is anybody’s guess. What’s an investor to do?

First, as always, probe the hype.

Then look to companies that have international reach and won’t be fatally stricken if developments in the U.S. are for any reason slowed.

Look for well-managed companies that can turn on a dime. As a wave of consolidation is already under way in the sector, only the nimble will thrive.

(This analysis was updated 27/09/2018 to add comments from Paul Benhaim, CEO, Elixinol Global Ltd.)

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