Cannabidiol, or CBD, has become a buzzword in the health and wellness industry in recent years. Found in cannabis and hemp plants, CBD is touted for its potential therapeutic benefits, ranging from pain relief to reducing anxiety and depression. Yet, the history of CBD and its journey to becoming a mainstream product is long and complex.
The Past: From Stigma to Legitimacy
CBD’s story begins with the controversial history of cannabis. In the United States, cannabis use was banned in 1937 and it wasn’t until 1996 that California became the first state to legalize medical marijuana. In 2014, the Farm Bill allowed for the cultivation and research of industrial hemp, which contains high amounts of CBD.
The stigma surrounding cannabis and its association with recreational drug use made it difficult for CBD to gain traction in the early days. In 2013, CNN aired a documentary featuring a young girl with a rare form of epilepsy whose seizures were successfully treated with CBD oil. This was a turning point for CBD and the compound gained wider acceptance among consumers and the medical community.
Legalization of medical and recreational marijuana in some states in the US contributed to the growth of the CBD market. In 2018, the US Farm Bill was passed, legalizing the cultivation, production, and sale of hemp and hemp-derived products, including CBD. This legislation removed CBD from the list of controlled substances, making it easier to access and sell. Following this, the CBD market experienced explosive growth, with sales reaching $4.2 billion in 2019.
Despite the growth, the industry faced challenges such as limited regulation, lack of education, and the prevalence of untested and mislabeled products. As a result, consumers had difficulty finding high-quality and effective products, which hindered the growth of the market. The passage of the Farm Bill marked a turning point in the industry, setting the stage for significant growth and development in the years to come.
The Present: A Booming Industry
Today, the CBD market is a thriving industry. According to a report by Grand View Research, the global CBD market size was valued at USD 2.8 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 21.2% from 2021 to 2028. In the US, the market is projected to reach USD 13.4 billion by 2028. The CBD market has continued to grow, and according to the Brightfield Group, a cannabis market research firm, the US CBD market size is expected to reach $16.8 billion by 2025. One trend that has emerged in the CBD market is the rise of online sales. With the COVID-19 pandemic, many consumers have shifted to online shopping, and the CBD market is no exception. In 2020, online CBD sales increased by 57%, according to data from cannabis analytics firm Headset.
Another trend is the increasing popularity of CBD-infused products in the beauty and skincare industry. The market for CBD-infused skincare products is expected to reach $1.7 billion by 2025, according to a report by Prohibition Partners. CBD is known for its anti-inflammatory properties, which make it a popular ingredient in skincare products that aim to reduce redness, inflammation, and acne.
CBD is now available in various forms, including oils, capsules, gummies, topicals, and even pet products. It’s sold in health food stores, dispensaries, and online retailers. The market has also expanded to include CBD-infused food and beverages, such as coffee, tea, and even beer.
The Future: Opportunities and Challenges
As the CBD market continues to evolve, it is clear companies that focus on innovation & science, compliance & regulation, and online marketing will succeed in the long run. Innovation and science will be key in developing new and improved products, while compliance and regulation will ensure that companies are meeting the ever-changing legal requirements in the industry.
Innovation & Science: There is a growing demand for CBD products backed by scientific research and innovation. Companies are investing in research to understand the potential health benefits of CBD better and to develop new and innovative products. For example, companies are exploring the use of nanotechnology to increase the bioavailability of CBD and enhance its therapeutic effects. In addition, new methods of extraction and processing are being developed to improve the purity and consistency of CBD products.
Compliance & Regulation: As the CBD market continues to grow, there is increasing scrutiny from regulators and consumers alike. Companies prioritizing compliance and regulatory adherence are more likely to succeed long-term. This includes adhering to FDA guidelines for labeling and marketing, ensuring that products are free from contaminants, and complying with state-level regulations.
Online Marketing: With the rise of e-commerce, online marketing is a crucial part of the CBD industry. Companies that can market their products online effectively and more likely to reach a wider audience and generate higher sales. This includes using social media, influencer marketing, and search engine optimization (SEO) to drive traffic to their websites and increase brand awareness.
Another trend expected to continue is the increase in M&A activity. As larger companies solve the challenges and opportunities presented by the CBD market by acquiring companies that have solved them, they will be able to gain access to new markets and technologies while streamlining operations and maximizing profits. In addition, larger companies are acquiring smaller companies to gain access to new technology, intellectual property, and distribution channels. This trend will likely continue as companies seek to solve the challenges and opportunities in the CBD market.
As the industry matures and competition increases, it is also predicted that the focus will shift from CBD as a standalone product to a more holistic approach that includes other cannabinoids and terpenes found in the hemp plant. This shift towards a more comprehensive approach will enable companies to differentiate themselves and offer a broader range of benefits to consumers.
The CBD market has come a long way since its humble beginnings. It is poised for continued growth and evolution in the future. Companies that can navigate the challenges of compliance and regulation while also investing in innovation and online marketing will be the ones that emerge as leaders in the industry.
Partner at 2GO Advisory Group, Don Hawley is a seasoned finance professional with extensive experience in the cannabis, hemp-CBD, and agricultural business industries.