In 2024, the US hemp-derived CBD market stands at a critical juncture. After the 2018 Farm Bill, the CBD industry experienced rapid growth, with companies infusing CBD into seemingly every product under the sun. However, CBD has been a less prevalent part of the public consciousness in recent years, sales hindered by stalled regulatory efforts that have limited investments and retail distribution. What does the coming year hold for CBD, and where is the market headed?
Managing Headwinds
CBD is certainly not immune to macroeconomic pressures. 2024 is expected to be another year of slowed sales, dropping to $3.4 billion from $3.8 billion in 2023, aligning with trends in consumer data indicating that some consumers are exiting the market rather than just reducing their purchases. Those who have continued using CBD have typically slowed their spending, opting for lower-priced formats like gummies. Achieving success in 2024 will likely involve streamlining operations, maintaining distribution, and preserving loyal customers, rather than focusing on absolute revenue growth.
Like in 2023, top brands are expected to gain share as smaller firms unable to weather the market wither scale back operations or exit the space. The CBD industry has consolidated significantly since its peak following the 2018 Farm Bill, with the number of active companies dropping from about 3,500 to less than 1,500, reflecting the “survival-of-the-fittest” state of today’s CBD market.
Competing Cannabinoids
One contributor to CBD’s difficulties has been the rise of hemp-derived THC products (Delta-8, HHC, THCA, etc.). Following the 2018 Farm Bill, the category initially thrived as businesses sought to distinguish hemp-derived CBD from THC-heavy cannabis, creating isolate products that fit well within the wider wellness, vitamin, and supplement markets. However, this distinction has blurred as psychoactive hemp-derived cannabinoids have gained prominence, competing for shelf space with CBD. In Q1 2024, over 40% of CBD consumers reported using hemp-derived THC in the past six months, and more than two-thirds had used cannabis, underscoring the significant overlap between these cannabinoid categories.
Despite efforts to distance CBD from THC, many CBD consumers are interested in cannabis but live in areas where legal, THC-heavy cannabis products are not easily accessible. Intoxicating hemp products have proliferated as companies exploit the 0.3% dry weight limit for THC and "loophole" cannabinoids not strictly covered by federal legislation. Many CBD companies have launched products advertising their Delta-9 contents to compete with this growing segment, often in low dosages appealing to consumers seeking a milder experience.
Paths Forward: Scenario Analysis
With challenging economic conditions and increased competition, the CBD market lacks the momentum it had a few years ago. If regulation had been implemented during the peak of interest and usage, the potential market size could be significantly higher. The future of CBD hinges primarily on whether Congress passes federal regulatory reforms allowing for CBD products to be sold as a supplement and food additive and how long it takes them to do so. To this end, Brightfield Group offers two forecasts for the CBD industry: one assuming Congress implements a regulatory framework by the end of 2024, and another wherein the status quo is maintained.
Ideal Scenario: Federal Reforms aths Forward: Scenario Analysis
With federal reforms, the landscape would change significantly. Despite the media blitz following the 2018 Farm Bill, many Americans have yet to try CBD. Regulation would enable sales through mainstream retail channels such as large grocery chains, mass merchandisers, and major e-commerce platforms like Amazon, reaching consumers who haven't yet purchased CBD. This growth in distribution would particularly advantage ingestible products like gummies and tinctures that have typically been perceived by retailers as riskier than topicals. In this scenario, the industry is expected to rebound from its 2024 low, driven by renewed consumer interest and increased retail adoption to reach annual sales of $4.5 billion by 2029.
Alternate Scenario: Status Quo
Without regulation, regaining consumers and attracting new ones will be challenging. In this scenario, the CBD industry will remain competitive as businesses vie for market share amid declining total sales. We anticipate that the sales will reach their lowest point in 2026 before returning to near-inflation growth through the end of the forecast period. In the status quo scenario, 2029 sales are expected to be worth $3.5 billion, similar to the scale of the market today.
In conclusion, the US hemp-derived CBD market is in a transitional period in 2024 as companies grapple with difficult market conditions and continued regulatory hurdles. However, despite the recent slowdown, the enduring positive effects that CBD has lin the lives of many consumers mean that the category is here to stay.
Updated: 06/17/2024
