The US CBD industry has been in regulatory limbo since the 2018 Farm Bill legalized CBD without clearly defining how merchants can sell it. In previous years' forecasts, Brightfield Group anticipated Food and Drug Administration (FDA) guidance on the near horizon, but this much-needed CBD regulation has yet to manifest.
Brightfield Group's latest forecast for the US hemp-derived CBD industry maps out two scenarios: one where the FDA provides regulatory guidance and another where it does not.
In 2022, the US hemp-derived CBD market is expected to reach $5.0 billion in retail sales. CBD is currently not formally permitted as a dietary supplement and food additive. Should this change, it would have an enormous impact on future years' revenue.
If these federal reforms are implemented by 2024, sales are expected to reach $11.0 billion by 2027. In this scenario, we'll see the accelerated growth of ingestible product categories, including capsules and gummies, and increased acceptance by mainstream retailers.
Without FDA guidance, CBD retail sales are expected to remain decidedly lower. Sales in 2027 are forecast to be $4 billion greater if regulatory reform occurs by 2024.
CBD's safety as a food additive is still an open question to the federal government. The FDA has not ruled either way, not deeming it safe nor unsafe. As the agency works this out, brands and retailers selling ingestible products like CBD gummies, tinctures, drinks, and capsules must balance the risks and opportunities of selling CBD products without that clear stamp of approval.
According to Brightfield's US CBD Consumer Insights, CBD gummies and tinctures are the two most-used CBD product types. Capsules and drinks have massive potential as well.
However, until the federal government clarifies the rules around CBD as a food additive or dietary supplement, these popular product types are too risky for mass merchandisers and large grocery store chains to carry.
Consumers of ingestible CBD cannot purchase their favorite products in the stores where they do the rest of their regular shopping. Instead, they must go to less risk-averse specialty merchants or buy online.
Full regulatory approval allowing CBD to be sold alongside traditional products would remove the hesitancy mass merchandisers have about stocking CBD ingestibles. It would make it easier for current consumers to access CBD and introduce a new crowd of shoppers to the cannabinoid.
While waiting for increased oversight, companies have sought to define CBD's place in the broader wellness landscape and connect it back to its cannabis roots. We see brands leaning into the historical associations with cannabis – especially as delta-8 has proliferated - while others focus on creating supplement-like products that address specific consumer need states.
After oversupply drove down the price of hemp, manufacturers used the excess biomass to create synthesized delta-8 THC, a psychoactive cannabinoid that has been added to vapes and edibles and even sprayed onto hemp. At first, brands selling hemp-derived THC were unassociated with CBD brands, but that has changed. CBD brands like Medterra and CBDfx seem comfortable selling hemp-derived THC as long as the THC percentage is under 0.3% by weight of the edible or vape oil.
At the same time, CBD brands have added other functional ingredients to formulations. This practice allows them to make claims about what the product can do. For example, adding melatonin to a CBD sleep gummy allows the brand to say its product is for sleep, as the FDA has evaluated melatonin. Positioning CBD products for need states like energy, immunity, or focus helps consumers understand what the product is for and angles CBD as a wellness ingredient among a roster of others.
Only time will tell what will happen to the US CBD market. Many factors went into our new forecast, with FDA guidance being the most deciding factor in the future success of CBD.
CBD brands that have made it to today should lean into their strengths and continue to innovate around who the consumer is and what they desire. Everyone is already operating under a fog of uncertainty, so it’s essential to control the aspects of product development and marketing that can be controlled. Until the FDA steps up and allows ingestibles to be shelved side-by-side with the rest of consumers’ shopping lists, brands must focus on making products that are worth an extra trip to specialty vendors.