CBD Trends

CBD Outlook Is Cautiously Optimistic

Trends include industry expansion, consolidation and evolving consumer preferences

By Nora Caley

Even the CBD category needed some stress relief during the pandemic. While the industry attracted new consumers seeking innovative wellness products, cannabidiol sales growth was hampered by industry consolidation, lack of regulatory clarity and limited consumer education about product benefits. As manufacturers adapt to meet these challenges, retailers must keep up with the latest trends, formats and ingredients to remain competitive.

The Food and Drug Administration still has not yet released regulatory guidance related to CBD, but that has not stopped companies from entering the space. According to Brightfield Group’s “2021 U.S. Mid-Year CBD Report,” in 2019 thousands of brands flooded the CBD market. The research firm noted that the category is so fragmented that the top five brands’ combined share totaled just under 10%. The number of brands became unsustainable during the pandemic, and many dropped out of the market.

Companies said the shakeout was inevitable but also beneficial. As lower-quality brands disappear, the brands that remain will be the ones that demonstrate quality, expertise, strong testing and marketing support. “This really is good for the industry,” said Eric Martin, senior vice president of sales and marketing at Contract Pharmacal. “It gives consumers confidence that the brands that remain are safe and efficacious.” The Hauppauge, N.Y.-based company makes the Uleva line of hemp-based supplements.

The shakeout could help the industry gain favor among consumers and retailers. “We are currently in a massive CBD extinction and consolidation phase,” said Jay Hartenbach, CEO of Irvine, Calif.-based Medterra. “With 1,400-plus CBD brands currently in the space, the industry is extremely competitive, and brands that are looking for quick, short-term gains will not be successful.”

While several brands liquidated, others were acquired. The past year saw Newport Beach, Calif.-based Kadenwood acquiring CBD materials and formulations company EcoGen Labs, hemp processing and extraction company General Processing, and wellness brand Social CBD. The deals helped Kadenwood expand distribution and gave it a cost-of-goods advantage because it controls its supply chain “That allows us to drop retail price points and bring more consumers to the category,” said Doug Weekes, Kadenwood co-founder and COO.

Recent purchases point to another trend, Hartenbach said, which is that the CBD and cannabis industries will become more intertwined. Medterra partnered with Acreage Holdings, a multistate operator of cannabis cultivation and retailing facilities.

Ingredients Are Key

Another way manufacturers are bringing more consumers into the CBD category is by highlighting other ingredients. One of the biggest trends right now, Weekes said, is plant-based solutions. As an extension of consumers’ desire for nonmeat proteins in their diets, they are also looking for plantbased products for pain, sleep and anxiety, which Weekes noted are the three top segments for CBD products.

In response, brands are combining CBD with plant-based ingredients to maximize the wellness benefits. “The market for plant-based wellness products is booming, and we are finding that more consumers are open to adding CBD to their wellness routines,” said Joseph Dowling, CEO of CV Sciences. “CBD continues to be an exciting ingredient that is opening up new possibilities for optimizing wellness.”

The San Diego-based company recently launched PlusCBD Calm and Sleep Gummies, which combine CBD with such plant compounds as magnolia and lemon bark, which the company said work synergistically to support the endocannabinoid system and overall health.

Synergistic ingredients are another trend as manufacturers find benefits in combining CBD with established supplement ingredients. For example, Michael Law, chief commercial officer at Eagle Labs, said brands are

combining CBD with melatonin for a sleep solution and L-Theanine with CBD to promote a sense of calm. Also, 2020 saw a big increase in immunity products, and some CBD brands offer products that also contain immunity-related ingredients.

Another ingredient innovation is the use of minor cannabinoids cannabigerol, or CBG, and cannabinol, or CBN. Law said CBG is being researched for potential to help in appetite, sleep and immune function, and is thought to help reduce skin inflammation. CBN may have anti-inflammatory properties, may help as an appetite stimulant and may support pain relief. “What’s clear is that the research needs to continue to help support both potential claims and a regulatory path to being able to use them in compliance with the FDA,” he said. “At the moment, consumers are using and trying many different types of CBD and making their own assessment regarding benefits versus expectations.” The St. Petersburg, Fla.-based company manufactures the impirica CBD brand.

Manufacturers are looking at the entire plant for wellness solutions. “I see the trend really looking at the hemp plant and all of its capabilities with the minor cannabinoids, not just CBD but CBN, CBG and CBC,” said Ashlee Foy, vice president of sales and marketing at Arise Bioscience. The Boca Raton, Fla.-based company’s brands include Original Hemp products, which feature different cannabinoids blended with supplement ingredients, such as turmeric, Boswellia and willow bark.

Another lesser-known cannabinoid is Delta-8, another part of the cannabis plant. The Agriculture Improvement Act of 2018, which authorized the production of hemp, mentioned the psychoactive compound Delta-9, but not Delta-8, so there is legal ambiguity about the substance. “The Farm Bill left it open,” said Carlos Bengoa, president of CB Distributors in Beloit, Wis., which includes Hemp Bombs among its products. “Delta-8 is a different animal.”

Formats and Need States

Ingredients are important in topical products too. Denver-based HempFusion introduced a line of over-the-counter topicals that are druglisted with the FDA. The products are able to be marketed and sold for relief of pain, eczema and acne, as well as wound care. They contain such ingredients as aloe vera, shea butter, hemp-derived omegas and CBD, as well as other skin conditioners. The company recently acquired cannabis body care and topical company Apothecanna and Sagely Enterprises, maker of female-founded CBD wellness brand Sagely Naturals.

The current trend, according to HempFusion co-founder and co-CEO Jason Mitchell, is a targeted approach to product development and product promotion. “CBD is no longer a one-size-fits-all supplement,” he said. “Consumers are looking for formulas and formats that best meet their individual needs, whether that’s a condition-specific formula for stress or sleep support, or a preferred format like gummies, topicals, tinctures or capsules. CBD sellers must meet their customers precisely where they are with the specific, targeted products they want.”

Mitchell said the challenge for both manufacturers and retailers is understanding exactly who their customers are. “CBD consumer demographics can vary considerably by geographic region and sales channel,” he said. “In a saturated market like CBD, understanding those demographic nuances is imperative for effectively reaching the right customers.”

The focus on need states points to a new way to think about the CBD category. Wellness-seeking shoppers want to know more than just that the product has hemp-derived CBD, according to Jen Palmer, director of education at Boulder, Colo.-based Charlotte’s Web. “Consumers want products that are personalized and easy to understand — products that meet their specific health needs.”

Palmer also said that minor cannabinoids and botanicals will play critical roles as more consumers seek products for a specific need state because products with these ingredients and full-spectrum hemp extract provide targeted benefits, including sleep support, recovery from exercise-induced inflammation or a sense of calm.

Also playing a critical role will be innovative formats. Gummies continue to be extremely popular, but consumers are also looking for other ways to get their CBD. “One of the biggest CBD trends we’re seeing is that consumers are looking for familiar formats,” said Tara Rozalowsky, vice president of beverages and edibles at Canopy Growth. “In addition to edibles, beverages are fueling growth in the CBD category as consumers seek out familiar, fast-acting product formats that fit seamlessly into their busy day and replace less healthy options.” Last year the Smiths Falls, Ontario-based company launched Quatreau CBD-infused sparkling water in Canada, and is now bringing the beverage to the United States.

Canopy Growth also launched the Martha Stewart CBD brand in the U.S. market last

year, a debut that Rozalowsky said introduced new consumers to CBD. And just as consumers want familiar formats for themselves, they are also seeking to give their pets CBD in a format they will like. The line includes a pet product portfolio, the Martha Stewart CBD for Pet, that features oil drops and soft-baked chews in three flavor combinations and formulas — Wellness, Calm and Mobility.

Pets are an attractive segment in the CBD category. “I think a lot of people spend more money on their pets than on themselves,” said Melissa Cromer, vice president of sales and marketing at Asterra Labs in Nashville, N.C. The company is developing beef- and peanut butter-flavored products for dogs, and also expanding its quickdissolving tablet lineup for consumers who prefer sublingual items.

As the CBD category matures and manufacturers succeed in navigating the various consumer trends, retailers are hoping to make their own name in the business. Cromer said that at one of the first post-pandemic trade shows, Asterra Labs fielded many requests from retailers for private label CBD products. “Stores are wanting their own brand with their own look,” she said. “They want to diversify their portfolio.”

Retailers

In the meantime, retailers need to boost their educational efforts around CBD. The products do not sell themselves just by being on the shelf, Cromer said. To help retailers build awareness, Asterra Labs offers brochures with information about the company’s pharmaceutical industry background and its third-party testing.

To help drive sales at retail, Charlotte’s Web is expanding its “Searching for Answers” YouTube series and offering lessons in bite-sized content on social channels. This spring, the company launched its online Learning Lab, a complementary educational series of five learning modules for retailers. Retail participants can receive a Charlotte’s Web certificate of completion for each module. “As a company, we will continue to push to be leaders in both CBD product innovation and education,” Palmer said. In addition, the CW family of brands, which consists of Charlotte’s Web, CBD Medic, CBD Clinic and Harmony Hemp, regularly engages with healthcare practitioners to provide education webinars and in-depth articles on such topics as the endocannabinoid system, cannabinoid research, and CBD safety and drug interactions.

Education is a critical element of driving sales at retail. Brightfield data shows that 18% of consumers who do not use CBD said they do not know enough about CBD products. Educating consumers about the products is especially important now, as the large number of items available can confuse consumers. “The trend should be trying to keep the message simple,” said Rochel Roland, CEO of Joyful Bath in North Bethesda, Md. “If the CBD trend is to grow mainstream, I think that’s the way it’s got to be. Consistency is the way to build trust. It’s not always about the latest and greatest.”

Data is crucial, as it helps retailers understand who their customers are and enables them to strategically tailor products and promotions. “That’s why it behooves retailers to work with a manufacturer that can provide them with reliable consumer data and insights,” said HempFusion’s Mitchell. Also, retailers should decrease the risk of having legal issues by carrying quality CBD brands that meet all regulatory standards.

Retailers need to reconsider how they merchandise CBD products, Kadenwood’s Weekes said. For example, consumers looking for pain relief products will go to the aisle that displays patches, sprays and analgesics. The CBD products that offer support for pain should be merchandised there, not in an all-encompassing CBD section or endcap.

When the FDA eventually develops regulatory guidance for CBD, there will likely be even more players in the category, said Contract Pharmacal’s Martin. Stores should prepare for that development. “Retailers need to continue to drive awareness of CBD, as well as cannabinoids CBG and CBN,” he said. “They are seen as experts.” dsn