As top CBD producers continue to add minor cannabinoids to their product portfolios, many are also combining functional ingredients with CBD to bolster health claims commonly associated with the compound, according to new analysis from researcher Brightfield Group.
Growth in the launching of CBN and CBG lines that started in the second half of 2020 is continuing as “CBN found its place as a sleep aid, while CBG’s main appeal was its ‘newness’ to the market,” Brightfield said in its 2021 U.S. Mid-Year CBD Report.
Mixing approved functional ingredients in CBD products lets producers make claims that also apply to CBD without suggesting the compound has those health effects. “A brand cannot say CBD helps with sleep; it can say melatonin plus CBD helps with sleep,” Brightfield noted.
‘Industry or ingredient’?
CBD brands are mixing in common wellness product ingredients such as mushrooms, botanicals, and adaptogens with CBD in formulations for dietary supplements; beauty products makers are also turning out variations that combine CBD with popular skincare ingredients, Brightfield observed.
“These additives further blur the line between whether CBD is an industry or ingredient,” the analysis notes. “New consumers introduced to CBD in this context could come to see non-psychoactive cannabinoids the same as other plant-based wellness ingredients.”
Once rules for CBD are established, the compound is most likely to find application primarily as an ingredient in the cannabis and wellness industries, Brightfield said. Reflecting that observation, Brightfield noted the U.S. CBD sector has attracted the attention of major Canadian cannabis producers looking to diversify their portfolios.
1,000 brands disappear
Brightfield reported in May that the number of U.S. CBD brands is contracting as failures and mergers continue apace. At the time, Brightfield estimated 1,000 CBD brands had disappeared during the previous 12 months, blaming coronavirus-related market disruptions which brought store closures, a shift in consumer priorities, and pricing cuts.
Nonetheless, CBD sales are expected to rise 15% this year, to $5.5 billion, Brightfield said, driven by strong growth in ingestibles, cosmetics and CBD-infused beverages. The CBD beverage sector is projected to grow by 71% in 2021; sales of gummies are on pace to increase by 44%, according to Brightfield.
Rules still missing
With the overall industry expected to remain strong – despite the fact that “CBD discovery is stunted, and there is still no federally-supported regulatory structure for ingestible products” – the researcher estimated the U.S. CBD market will reach $16 billion by 2026. That’s wildly off an estimate Brightfield made in 2015, when it was predicting that the market would hit $22 billion by 2022.
As in-store retail sales slowed last year, growth in CBD came to be driven by e-commerce, according to Brightfield, with marketers shifting budgets to online sales initiatives. High-profile brands and those already strong in e-sales benefitted most in the unstable environment, said Brightfield, which projects online sales will pass $2 billion this year, and rise to 38% of the total sales.
Small players suffer
Smaller players suffered: “It has become increasingly difficult for smaller CBD brands to enter the space and find growth opportunities in what has become a very crowded marketplace,” Brightfield’s mid-year analysis of the sector suggests.
The May report had recorded that while smaller companies and brands have failed, many major players were also wiped out. GenCanna, Pyxus International, Myaderm, United Cannabis Corp., and Atalo Holdings were notable failures while other well-known brands and small boutiques entered mergers our were bought out by stronger competitors.
“The sheer number of brands became unsustainable during the pandemic, and those that could not compete were forced to drop out of the market,” Brightfield said.
In other key observations from the mid-year report, Brightfield said:
- Millennials and Gen Xers account for 71% of CBD users, with word-of-mouth mainly driving CBD awareness among both groups.
- Gen Xers get their CBD information from doctors, television or print ads while Millennials learn about CBD mainly from social media, in-store browsing, or from a budtender.
- CBD brands should continue to expand their product offerings to increase growth potential within and outside of CBD products and channels.