While most food, beverage, and dietary supplement companies saw sales growth in a tumultuous 2020, the pandemic wasn’t as kind to the CBD market. But increased competition and persistent regulatory uncertainty both played a part in putting a drag on sales.
Multiple CBD companies reported dramatic revenue losses in 2020, with some reporting sales drops as high as 66%. On the other hand, Charlotte’s Web Holdings Inc., the CBD market leader that recently faced FDA pushback on a new product launch, saw small revenue growth in 2020.
According to BDS Analytics, despite these brutal headwinds, hemp-based CBD sales grew 48% to $2.2 billion in 2020 through general retail, including e-commerce. Furthermore, BDS Analytics anticipates the CBD market will grow to $6.8 billion in 2021 and climb as high as $56 billion over the next five years.
Market Optimism Meets Consumer Confusion
It’s clear that despite the 2020 speed bump, the CBD market remains poised for explosive growth, domestically and globally. But a recent Consumer Brands Association (CBA) survey shows that American consumers remain uninformed about CBD. On a scale of 1 to 10, consumers rated their CBD comprehension at an average of only 3.3. To make matters worse, nearly three-quarters of those CBA surveyed either erroneously assume CBD is federally regulated or have no idea if it’s regulated at all.
Since the 2018 Farm Bill removed hemp from the controlled substances list, industry stakeholders have demanded more regulation.
Despite the lack of federal guidance, CBD manufacturers, suppliers, and retailers have little choice but to plan for a more regulated marketplace, whether it’s this year or next. And it’s not just a piecemeal collection of competing state laws that dictate the space in the absence of federal leadership that threatens consumer safety – it’s a glaring lack of meticulous testing and safety requirements. And it will probably get worse before it gets better: CBA reports that 135 CBD bills are working their way through 38 state legislatures this year.
But it’s only a matter of time before Congress or the U.S. Food and Drug Administration (FDA) steps up. Once that federal guidance emerges, industry stakeholders must be ready to adjust accordingly, especially when managing label claims. In addition, companies must prepare today for tomorrow’s regulations by maintaining good manufacturing processes (GMPs), supporting robust quality processes, and building a transparent supply chain.
You don’t want to miss our on-demand webinar with Maggie Cowee, economist, author, and cannabis consultant at Cowee Consulting, as she walked us through the ambiguous CBD regulatory landscape. She offered insight on realistic regulatory timelines, tips on navigating the hemp supply chain, and highlight risk considerations for food, beverage, and dietary supplement companies trying to capitalize on this growing trend. Check it out here.