Growing demand for CBD products is leading to increased competition in the marketplace, a report found. Consumers – who are saving money and seeing a wider selection of available products – are among the main beneficiaries.
Matt Aaron, co-founder of cbd.mg, said the data reflects positive momentum for both businesses and consumers, though he noted that the crowded marketplace presents some challenges.
“It’s really tough to start a CBD company right now because they’re selling very similar products, if not sometimes the same exact thing, using the same extraction method,” he said.
Compounding the issue is that some stores – including some that sell only CBD products – reported that the most common question they get from customers is, “What is CBD?”
This shows that companies need to take a lead in stepping up education efforts, Aaron said.
The report reached its conclusions after analyzing 150 CBD products, all independently lab tested, from 47 different brands. The products included tinctures, capsules and gummies.
It also looked at the differences in consumer behaviors regarding products that are considered full spectrum, broad spectrum and isolate. Full spectrum refers to those that contain all the natural compounds found in the source plant. Broad spectrum products contain many of the natural compounds, but without THC. Isolate refers to CBD products in which all other plant compounds and cannabinoids have been removed.
The report notes that broad spectrum products typically cost more, likely due to the extraction process being more labor intensive. They also carry less regulatory risk than full spectrum products, which must not contain more than 0.3% THC, which is a violation of the Controlled Substances Act.
Full spectrum products are more popular, the report found, but it noted that retail will be led by broad spectrum “in the foreseeable future” thanks to its lack of THC.
“Even low amounts of THC found in Full Spectrum scares and confuses some consumers,” the report states. “Of course, Full Spectrum is not ideal for those who are subject to drug testing.”
Grocery and drug stores, the top brick-and-mortar CBD sellers, are often limited to topical products due to regulatory uncertainty surrounding edibles, the report notes. It suggests more regulatory clarity is needed for more products to make it to traditional stores, which could lead to an overall increase in sales and consumer knowledge.
The report noted an “encouraging” trend of companies offering a variety of discounts on products. The most common discount was for military veterans, followed by subscription-based savings, then breaks for first-time customers.
It suggested those discounts were “indicative of steep competition, lower costs of CBD, and efforts to build brand loyalty in the e-commerce space.”
The report’s authors said they intend to track other types of discounts going forward, like those for nurses, seniors, teachers or the disabled.
Aaron said he’d be interested to see if the pandemic, which popularized the “essential” worker title, will impact the types of deals offered going forward. Many of the professions considered “essential” are also high-stress, which could make for compelling future analysis, Aaron said.
CBD is frequently touted as a remedy for many ailments, including anxiety and physical pain, though clinical research into the products is limited. And companies that make unproven health claims about its properties risk attracting unwanted attention from the U.S. Food and Drug Administration.
The report concludes by noting that consumer tastes are still evolving and states that brands are “making an overall fantastic effort trying to find the right product mix.”
The U.S. CBD market is expected to reach $20B in sales by 2024, according to several separate reports by industry analysts. That marks a sharp increase from just two years ago, when sales were estimated around $1.9B.
Aaron, who compiled the cbd.mg data, said he too was bullish on the industry’s future.
“It seems very likely that more states are going to start growing hemp, and that can only be a good thing for the industry,” he said. “Not just consumers, but the people in the business as well.”
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