These are tough times to work in the hemp CBD field.
Sales are still on the decline. Employment was drastically reduced. And intoxicating products containing delta-8 THC are joining the CBD health and wellness movement as U.S. brands operating on tight budgets try to navigate a patchwork of ever-changing regulations from state to state. casting a shadow.
Amid these challenges and potential opportunities, companies must consider their current identities and decide what kind of companies they want to become.
For example, should they continue to be marketers in the supplement health and wellness space? Or is it a smart money play to sell delta-8 THC and other addictive products? ? Or should hemp CBD brands expand into other markets, including pharmaceutical investments?
Bethany Gomez, managing director of Brightfield Group, a market research firm focused on the CBD, cannabis and wellness industries, said the once-booming sector is “going through some degree of an existential crisis or an identity crisis. He commented that he was facing “. “Where does it fit?”
Shrinking hemp CBD market
Based on recent sales figures and projections for 2023, it's hard to get excited about the U.S. hemp CBD business. Gomez's report said the market shrank by more than 6% to $4.4 billion in 2022, and excluding drug sales, it fell 8% to $3.8 billion in a year of record inflation. .
“It's been a pretty tough year in terms of actual market declines,” she said in an interview.
Just this week, Cronos Group, Inc. announced plans to wind down and exit its U.S. hemp-derived CBD-focused business by the end of the second quarter of 2023. The global cannabinoid company said it had “made the decision to improve its cash flow.” In the short term, we are in a position to directly enter the U.S. THC market should the necessary changes in U.S. regulatory conditions occur. ”
Claire Morton, senior manager of data and insights at Nutrition Business Journal, said she has fielded few questions about the hemp CBD category in recent years.
The market has “evolved from a sensation within our industry and other industries to just herbal ingredients that we track,” she said in an interview. “Now we spend as much time on CBD as we do elderberry and echinacea. Real supplement companies don't focus on that much.”
Sales in the hemp CBD market plummeted nearly 23% last year to $396 million, according to NBJ, which tracks the CBD supplement space. NBJ studies the CBD supplement space, which is a much smaller category than the overall hemp CBD market tracked by Brightfield Group. NBJ predicts the CBD supplement category will shrink 13.6% to $342 million in 2023.
Based on Brightfield Group's forecasts, the outlook for the broader hemp CBD market is less dire. Excluding pharmaceutical sales, the Chicago-based market research firm expects hemp-derived CBD sales to decline 3.5 percent in 2023, Gomez shared, adding that the sector is “currently under threat from all angles.” He added that he was under pressure.
With more than 1,500 brands on the market, companies are facing not only a slowdown in consumer demand due to the economy, but also “price compression,” he said. Gomez also said consumers are purchasing cheaper “form factors” such as gummies instead of tinctures.
Meanwhile, state legislatures and regulators are taking different approaches to overseeing the hemp-derived cannabinoid market, including intoxicating cannabinoids like delta-8 THC. As profiled in this USA Today article, some states have banned Delta-8 THC, while others have chosen to regulate its production and sale.
“It's hard for brands to know from a strategic standpoint what to do about delta-8 and also what to do about hemp-derived THC,” Gomez said.
Brands these days have fewer employees who can think through and solve these challenges. In an effort to cut costs, many companies are cutting staff. Gomez cautioned that he didn't have specific numbers on hand to refer to, but estimated that the number of jobs in the market has fallen by at least half over the past two years. companies. ”
Many people who encounter “difficulties” in the CBD market “need to leave the field and are not interested in returning to it,” she says. “This has been a very difficult industry to work in over the last few years because the market is constantly changing.”
“Identity Crisis”
“There's a complete identity crisis,” Gomez said. “Is this part of the cannabis industry and just kind of a sub-segment of it? Is this part of the supplement industry? As many form factors move to gummies and capsules, many CBD brands We see them moving beyond CBD into adaptogens, nootropics, functional mushrooms, or other types of functional ingredients.”
“Who are we?” the market researcher asked in a subsequent interview. “And I think that’s what the industry is trying to address right now.”
Rend Al Mondily, a lawyer in the capital who advises hemp CBD brands and is an expert in dietary supplement regulation, said he also recognizes the “identity crisis” facing the industry.
On the day she was interviewed by Natural Products Insider, she said in an earlier call that “the fact that these addictive products seem to be generating a tremendous amount of revenue, while CBD is not, is causing problems.” said that it had occurred.
Some believe that products that can cause intoxication need to be accepted and regulated in order for the industry to survive, while others believe that these products are damaging the industry's reputation, Al Mondily said. Some people say they feel the same way.
She said the market was at a “crossroads”.
“Where do we want to be? Do we want to embrace these delta-8 THC type products and push for regulation…or do we want to focus on traditional type CBD products…” Al -Mondily asked.
CBD brands are used to change.
“The market completely reinvents itself almost every year in terms of what matters (and what doesn't),” Gomez said.
For example, she mentioned focusing on different distribution channels from year to year, such as e-commerce and brick-and-mortar stores.
“Is[the market]THC-free targeting older consumers?” she asked. “Is it THC and going back to smoking and vaping stores?”
The Promise of the 2023 Farm Bill
Al Mondily said there was “no clear consensus yet” on the direction of the industry, but that could become the case as the year progresses. She added that the 2023 Farm Bill, considered a bill that must be passed every five years, could provide federal guidance for the hemp CBD market.
In January, the FDA denied a citizen petition to create a legal market for CBD in dietary supplements through rulemaking. But the agency said it is committed to working with Congress on new regulatory paths.
Analysts and others say the lack of a federal regulatory framework limits distribution channels and hinders investment in the CBD market.
Last week, FDA officials outlined a “harm reduction” framework for CBD while saying the new regulatory path “really lies in the hands of Congress.”
If all goes well on Capitol Hill, the Farm Bill could pave the way for hemp CBD brands to emerge from the gloom and doom of the past few years and perhaps even thrive.
“Somehow we need to get some federal guidance on this type of impasse that the industry has been in for almost the last five years,” Gomez said. “If CBD is regulated, we expect the market to be around $10 billion by 2028. If we can't regulate it, we won't get to the $5 billion mark.”
“A lot is in the balance of the 2023 Farm Bill.”
