5 Big Changes Are Coming to the CBD Market
September 23, 2019 by Susan Gunelius
1. Shifts in Sales Channels and Consumer Preferences
According to research by The Arcview Group, 65% of CBD sales happen in licensed dispensaries in states that have legal cannabis programs. However, online sales are climbing and more retailers are giving shelf space to CBD brands every day. It is expected that general retail stores (food, drug, big box, and so on) will account for 63% of CBD sales in 2024.
CBD product sales in the United States hit $1.9 billion in 2019 and are expected to grow to $20 billion by 2024. Clearly, general retail stores have a lot to gain by making shelf space available to CBD brands.
2. U.S. Department of Agriculture Hemp Rules
The U.S. Department of Agriculture (USDA) is responsible for developing rules that will be at the foundation of the country’s hemp industry. The USDA sent draft rules for industrial hemp cultivation to the White House Office of Management and Budget for approval this month. When the rules are finalized (which should be in time for the 2020 growing season), you can bet there will be changes across the industry as businesses and stakeholders scramble to get in compliance.
However, these rules could have far-reaching effects beyond industrial hemp cultivation. They could directly and indirectly affect transportation, banking, insurance, marketing, and more. Hemp growers and businesses across the CBD supply chain may have to modify operations, which could increase their costs.
3. Food and Drug Administration Rules
While the USDA is actively drafting rules for the hemp industry, the Food and Drug Administration (FDA) has given no indication when its own rules related to CBD products will be developed. So far, the FDA has publicly stated it has the authority to regulate CBD products and that CBD is not allowed in food. The agency has also stated that CBD brands may not make health claims about their products’ effects. But that’s as far as the FDA seems to have gone to date.
When the FDA finally releases regulations related to the use of CBD in food and drug products, there will definitely be changes in the industry. This month, Senate Majority Leader Mitch MicConnell (R, KY) began efforts to speed up the FDA’s CBD rules. However, there is still no date for when those rules might be drafted.
4. Digital Marketing and Online Sales
While it can be challenging for CBD brands to leverage digital marketing channels like Facebook, Instagram, and Google to promote products, they can be used to promote change. This year, the Hemp Industry Association launched the “Hemp is Legal” marketing campaign and website to advocate for Facebook to modify its CBD product advertising policies, among other things. As a result, Facebook revised its advertising policy and began allowing some CBD ads in June.
These types of campaigns (both online and offline) can have a powerful impact that will affect the CBD industry going forward.
Another area where CBD companies have faced obstacles is online sales, but things are changing. Ecommerce platform BigCommerce launched tools specifically for CBD brands this summer that include payment processing, checkout systems, and shipping and fulfillment using vetted merchants that don’t charge higher fees to CBD brands.
In September, ecommerce platform Shopify announced that it would start allowing CBD products on its platform as well. However, CBD merchants will need to find their own payment processor that is willing to work with a CBD brand.
These changes are important, but once the USDA and FDA release federal regulations, we’ll likely see even more opportunities for digital marketing and online sales to open up to CBD brands.
5. Innovation and Intellectual Property
As the CBD market gets saturated with brands and products in the future, only the strongest will survive, which means companies will need to focus on innovation to stand out in the crowded marketplace. Research and development will be a priority to develop the best products, and strategic marketing will be critical to differentiate brands in consumers’ minds.
Intellectual property will become particularly important. Companies will need to build strong brands and protect them to ensure they have the ability to gain value as intangible assets. Trade secrets and patents will become valuable quickly. To date, CW Hemp, the company behind the market leading Charlotte’s Web CBD brand, is the only company to secure a hemp strain patent, which will protect its innovation for years to come.
Innovation and intellectual property investments will bring important changes to the CBD industry in the coming years, and today’s market leaders might not be in the same positions a few years from now.
Key Takeaways for the CBD Industry
It’s important to point out that once federal rules are released related to CBD products, states can still create their own rules, which could be stricter than federal regulations. That means there could be even more changes coming to the CBD market, and those changes could come in waves.
Once the dust settles, which brands will be left standing? Only time will tell, but one thing is certain. To survive, CBD brands will need to be agile, compliant, innovative, and smart.
https://www.cannabisbusinessexecutive.com/201...arket/?utm
September 23, 2019 by Susan Gunelius
1. Shifts in Sales Channels and Consumer Preferences
According to research by The Arcview Group, 65% of CBD sales happen in licensed dispensaries in states that have legal cannabis programs. However, online sales are climbing and more retailers are giving shelf space to CBD brands every day. It is expected that general retail stores (food, drug, big box, and so on) will account for 63% of CBD sales in 2024.
CBD product sales in the United States hit $1.9 billion in 2019 and are expected to grow to $20 billion by 2024. Clearly, general retail stores have a lot to gain by making shelf space available to CBD brands.
2. U.S. Department of Agriculture Hemp Rules
The U.S. Department of Agriculture (USDA) is responsible for developing rules that will be at the foundation of the country’s hemp industry. The USDA sent draft rules for industrial hemp cultivation to the White House Office of Management and Budget for approval this month. When the rules are finalized (which should be in time for the 2020 growing season), you can bet there will be changes across the industry as businesses and stakeholders scramble to get in compliance.
However, these rules could have far-reaching effects beyond industrial hemp cultivation. They could directly and indirectly affect transportation, banking, insurance, marketing, and more. Hemp growers and businesses across the CBD supply chain may have to modify operations, which could increase their costs.
3. Food and Drug Administration Rules
While the USDA is actively drafting rules for the hemp industry, the Food and Drug Administration (FDA) has given no indication when its own rules related to CBD products will be developed. So far, the FDA has publicly stated it has the authority to regulate CBD products and that CBD is not allowed in food. The agency has also stated that CBD brands may not make health claims about their products’ effects. But that’s as far as the FDA seems to have gone to date.
When the FDA finally releases regulations related to the use of CBD in food and drug products, there will definitely be changes in the industry. This month, Senate Majority Leader Mitch MicConnell (R, KY) began efforts to speed up the FDA’s CBD rules. However, there is still no date for when those rules might be drafted.
4. Digital Marketing and Online Sales
While it can be challenging for CBD brands to leverage digital marketing channels like Facebook, Instagram, and Google to promote products, they can be used to promote change. This year, the Hemp Industry Association launched the “Hemp is Legal” marketing campaign and website to advocate for Facebook to modify its CBD product advertising policies, among other things. As a result, Facebook revised its advertising policy and began allowing some CBD ads in June.
These types of campaigns (both online and offline) can have a powerful impact that will affect the CBD industry going forward.
Another area where CBD companies have faced obstacles is online sales, but things are changing. Ecommerce platform BigCommerce launched tools specifically for CBD brands this summer that include payment processing, checkout systems, and shipping and fulfillment using vetted merchants that don’t charge higher fees to CBD brands.
In September, ecommerce platform Shopify announced that it would start allowing CBD products on its platform as well. However, CBD merchants will need to find their own payment processor that is willing to work with a CBD brand.
These changes are important, but once the USDA and FDA release federal regulations, we’ll likely see even more opportunities for digital marketing and online sales to open up to CBD brands.
5. Innovation and Intellectual Property
As the CBD market gets saturated with brands and products in the future, only the strongest will survive, which means companies will need to focus on innovation to stand out in the crowded marketplace. Research and development will be a priority to develop the best products, and strategic marketing will be critical to differentiate brands in consumers’ minds.
Intellectual property will become particularly important. Companies will need to build strong brands and protect them to ensure they have the ability to gain value as intangible assets. Trade secrets and patents will become valuable quickly. To date, CW Hemp, the company behind the market leading Charlotte’s Web CBD brand, is the only company to secure a hemp strain patent, which will protect its innovation for years to come.
Innovation and intellectual property investments will bring important changes to the CBD industry in the coming years, and today’s market leaders might not be in the same positions a few years from now.
Key Takeaways for the CBD Industry
It’s important to point out that once federal rules are released related to CBD products, states can still create their own rules, which could be stricter than federal regulations. That means there could be even more changes coming to the CBD market, and those changes could come in waves.
Once the dust settles, which brands will be left standing? Only time will tell, but one thing is certain. To survive, CBD brands will need to be agile, compliant, innovative, and smart.
https://www.cannabisbusinessexecutive.com/201...arket/?utm
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