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January 17, 2024
Once the star child of the wellness space, CBD exploded onto the wellness scene in 2019 as the fastest-growing natural product. CBD sales grew by more than 562% that year, reaching distribution through more than 100,000 outlets nationwide and a total market size of more than $4 billion, according to our proprietary research at Brightfield Group.
This wellness ingredient sanitized itself from its cannabis roots — removing all pot leaves from the logo — and set out to target both retailers and consumers that wouldn't touch cannabis with a 10-foot pole, convincing them CBD was hemp and not marijuana.
CBD appealed to consumers of nearly every generation and segment of the market with no end in sight.
But the industry has faced persistent headwinds since 2020, with little indication of relief coming anytime soon. Consider the following:
Heavy price compression has cut the average retail price of products almost in half over the past three years.
The space has been oversaturated; at its peak, there were more than 3,500 brands in a market of only $3 billion in sales.
Lack of regulation from the Food and Drug Administration means that mainstream retail channels are still not selling ingestible products.
The absence of testing or safety requirements has left the market flooded with products of questionable quality — and offered few incentives for unscrupulous brands to prioritize product quality and consumer safety.
The industry has long been waiting for clear regulation from FDA that would give CBD a clear path forward. However, things are just as murky as ever.
In early 2023, after four years of review, FDA kicked this decision to Congress. The expectation was CBD would be handled in the 2023 Farm Bill, but a new Farm Bill was delayed until 2024.
Some speculation surrounds whether CBD regulation may be addressed as part of rescheduling of cannabis, which is theoretically on the horizon. But it may be many months or years before Congress passes a bill that decriminalizes marijuana and removes it from the list of Schedule I controlled substances under the Controlled Substances Act (CSA).
Brands have now accepted that their knight in shining armor will likely never come, and if it does, that may be too late to save them. Four years without regulatory guidance has sucked the wind out of the sails of the CBD industry, and even if regulatory relief comes now, it will not be enough to bring CBD back to its former glory.
Behind the backdrop of all of these changes, the industry has had to shift to survive. Brands have moved in one of two directions, with some leaning into the cannabis-adjacent positioning, and others pushing into the plant-based wellness space.
Shortly after the 2018 Farm Bill passed, most brands were quick to explain to customers that CBD would not get them high, and brands minimized or even removed the products' THC content altogether.
However, as sales of nonpsychoactive products stagnated, brands started to reverse course, seeking to maximize the THC content and promote the psychoactive effects. This has given rise to the hemp-derived THC industry — a new generation of hemp products whose THC content mimics that of products sold in marijuana dispensaries though created from hemp.
Even the CBD companies that initially refused to enter the delta-8 THC space have started reversing course and are looking to maximize the THC content available within their products. These products are now competing with legal cannabis, while not having to abide by the same product testing requirements or pay the same tax burden as regulated cannabis companies.
For other brands, the inability to sell CBD products through mainstream retail channels has led to a diversification into other functional ingredients, including functional mushrooms and adaptogens. Brands initially thought of their non-CBD lines as a pathway into mainstream retail outlets that put them in a favorable position when those channels embraced CBD.
However, many saw sales of their non-CBD lines far eclipse CBD revenues. They no longer think of themselves as a CBD company; CBD is just another functional ingredient as part of their overall wellness portfolio.
CBD now faces an existential crisis. The industry's hopes for regulatory resolution have been continuously deferred. With the rise of hemp-derived THC products and a shift away from mainstream retail reliance, CBD is no longer the stand-alone industry it once was. This reality has prompted brands to redefine themselves beyond CBD or contemplate exiting the transformed landscape.
Co-founder and managing director , Brightfield Group
Bethany Gomez has established herself as a trailblazer in market research of emerging categories, with a focus on wellness, CBD and cannabis. As the managing director and co-founder of Brightfield Group, she has cemented the company's position as an industry leader by emphasizing data-driven insights and compelling narratives.
Through her leadership, Brightfield Group has developed AI-driven consumer insights to support innovation, strategy and marketing in emerging industries. The company has played a significant role in the development of nascent industries like cannabis, CBD, and other innovative CPG categories.
Bethany has been featured and quoted in numerous media outlets, including The New York Times, Wall Street Journal, CNN, Bloomberg and Yahoo! Finance.
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