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5 Factors Driving the CBD Market

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Consumer and distribution trends are having a significant impact on the CBD market according to data from Brightfield Group’s CBD: Industry or Ingredient? 2021 Mid-Year US CBD Report. In fact, the ongoing effects of the COVID-19 pandemic are forcing brands to change their strategies in order to succeed in the future.

The research shows five factors are driving the CBD market in mid-2021, and these factors will continue to influence consumer behaviors and brand opportunities in the latter half of the year and beyond.

1. Ecommerce Distribution Dominance

A key finding in Brightfield Group’s research is brands that focused their attention on ecommerce during 2020 were the most successful. Overall growth in the CBD market was driven by ecommerce in 2020, which positioned brands that already prioritized ecommerce for quick wins and left brick-and-mortar focused brands in catch-up mode.

To get customers to their websites, CBD brands used a mix of email marketing, strategic online advertising, money-driven incentives, and subscription models. Ultimately, the businesses with highest customer loyalty also had the most traffic to their websites, which typically led to more product sales.

2. Millennials and Gen X Buying Dominance

Key to success in 2020 and beyond is understanding the current and future CBD consumer audiences. In 2020, Brightfield Group found that 71% of CBD users are Millennials and Generation Xers. Furthermore, the data shows Millennials are more frequent users (i.e., taking multiple doses per day) than other age-based demographic groups.

A key to future success for CBD brands will be acquiring and retaining consumers from these two valuable segments.

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Currently, word-of-mouth marketing is the most common way that Millennial and Gen X consumers initially learn about CBD, so focusing marketing investments to reach these audiences in the right channels to build awareness, recognition, and loyalty should be top priorities in the near future.

For Millennials, these channels include word-of-mouth via social media, in-store browsing, and budtenders, while for Gen Xers, doctors, news/TV, and print ads are currently the most common places to generate word-of-mouth for CBD products.

3. Consolidation and Brand Dominance

While 2020 started with thousands of CBD brands, many were forced to exit the market throughout the year. In the fourth quarter of 2020, the top five CBD companies based on U.S. market share were Charlotte’s Web (3.6%), Medterra (1.7%), cbdMD (1.6%), CBDfx (1.5%), and CBDistillery (1.2%). In other words, no single brand dominates in 2021.

Brightfield Group reports that no CBD brands experienced significant increases in sales between the fourth quarter of 2020 and the first quarter of 2021. Instead, loyalty stagnated. The only notable exception in the research is Charlotte’s Web, which increased aided brand awareness and purchase consideration thanks to its marketing and promotion investments. For the same reason, cbdMD was the only top brand to experience quarter over quarter brand share growth in 2020.

Bottom-line, consolidation seems like the next natural step in the CBD market.

4. Additional Functional Ingredients and Innovation Dominance

Dominance in the CBD market of the future may depend on innovation. Already, Brightfield Group reports growing interest in CBD products that offer a variety of minor cannabinoids, terpenes, and other functional ingredients. In other words, products that offer health and wellness support in multiple ways are the ones consumers will be looking for in the future.

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This trend is happening across the CBD industry – from dietary supplements to skincare products, beauty products, and more. Adding more functional ingredients also helps brands use health claims in their advertising that they may not be allowed to use for a cannabinoid-only product.

5. Pharmaceutical and Consumer Packaged Goods Dominance

Thus far, the pharmaceutical industry has played a small role in the CBD industry, but this is expected to change very soon. Brightfield Group reports CBD pharmaceutical sales of $0.22 billion in 2019. In 2020, CBD pharmaceutical sales doubled to $0.47 billion, and by 2026, sales are forecasted to reach $2.05 billion.

With those kinds of projections, pharmaceutical brands will most certainly want to claim a space. Large pharmaceutical companies bring deeper pockets for lobbying to the CBD industry, which could affect the regulatory environment as well as drug approvals. CBD brands that are already in the industry need to prepare for this inevitable change.

The same can be said for consumer packaged goods companies. As regulations around CBD products loosen and when the U.S. Food and Drug Administration (FDA) creates and releases a framework for review and approval of CBD products, large consumer packaged goods companies will undoubtedly want to enter the market with edibles and more.

Brightfield Group reports that in the first six months of 2021, 45% of ingestible CBD product sales were for gummies, 45% for tinctures, 24% for capsules, and 14% for drinks. In a market that is expected to grow exponentially in the next five years, the doors are wide open for consumer packaged goods companies to enter with their own deep pockets and extensive reach.

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Key Takeaways about the CBD Market in 2021 and Beyond

The U.S. CBD market has changed significantly in the past year, but it’s poised to change even more in the near future. With these five key factors driving those changes that will shape the market environment in the years to come, existing CBD brands and those looking to enter the market need to position themselves to withstand the next phase and beyond.

The post 5 Factors Driving the CBD Market appeared first on Cannabis Business Executive – Cannabis and Marijuana industry news.

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