Who Is Driving the CBD Market and Who Is Hitting the Brakes?

Following the cannabidiol (CBD) market’s modest growth between the 2019 “boom” year and the resulting “bust” of 2020, CBD sales are picking back up and on par to well exceed $5 billion in 2021, according to data from Brightfield Group. By 2026, that number could triple. Let’s look at who is driving the market and who is hitting the brakes on its growth.

Online Buying Drives the Market

E-commerce helped drive the CBD market in 2020, with 42% of CBD sales taking place online. Brands shifted strategy and competed for consumers online while brick-and-mortar sales slowed. Those already dominant in the channel had a leg up on other companies, but many CBD brands that pivoted to e-commerce achieved some success.

Others, however, failed in 2020. According to data from Brightfield Group, we estimate about 1,750 brands—just about 50% of the market—shuttered last year.

The brands that focused on boosting their e-commerce proved to be the most successful. Increased online sales make website visitors more important than ever, and it has become critical for brands to capture consumer awareness, purchases and loyalty all through their website. Brands with the highest consumer loyalty also have the highest site traffic. Strategic online advertising brings shoppers onto brand websites, while targeted email campaigns keep potential customers interested and primes them to buy. Subscription models help foster loyalty by offering convenient money-saving incentives for customers, and loyalty programs can increase customer retention and brand affinity.

Millennials & Gen X Drive the Market

Millennials and Gen Xers account for more than two-thirds (71%) of CBD users, according to Brightfield Group’s Q2 2021 CBD consumer survey of 5,000 respondents.

Knowing who these consumers are is imperative to market to them accurately. A plurality of both generations uses CBD daily, but millennials take more doses per day. Both generations are also more informed about the CBD doses they take—especially when compared to baby boomers. Knowledge and preference will only increase as millennials and Gen Xers become more experienced users. Gaining and retaining the loyalty of these groups will take innovative, unique offerings that deliver on product expectations.

Word of mouth is the most popular source for initial CBD awareness among both generations. Millennials are more likely to learn about CBD from social media, in-store browsing or a budtender. Gen Xers tend to learn about CBD from more traditional sources like doctors, the news/TV or print ads.

Where someone hears about CBD could make or break future purchase intent, as consumers not open to using CBD have gaps in their knowledge on the cannabinoid. Of the consumers not open to trying CBD, 17% report not desiring the psychoactive effects of CBD (which are mild and non-intoxicating), and another 16% don’t believe CBD is effective for a variety of different ailments.

Countering misconceptions with approachable information on CBD could help convert non-believers into potential users or prevent people from adopting incorrect beliefs altogether. Of the people not using CBD today, 18% openly admit they do not know enough about CBD products to make a purchase. Educating younger generations (as well as consumers across all ages) on product types and use cases is the key to increase usage, help with CBD penetration and increase spending over time.

COVID-19 Stifles Consumer Discovery

The shuttering of physical CBD retail locations, along with other types of stores, stunted product discovery in 2020. Consumers could previously come upon CBD products when browsing a beauty retailer or vitamin shop. Even with these channels reopened, consumers are not spending time in stores like they once were.

Consumers still report buying CBD at brick-and-mortar stores, with 50% of consumers saying they purchase online. Notable purchase increases are in pharmacies and specialized CBD retailers. These channels are specific, allowing shoppers to get in and out with what they need. CBD discovery will pick up in retail channels once consumers feel comfortable shopping in stores. Inevitably, end caps and store displays will introduce new people to CBD once again.

Slow Regulatory Rollout Prevents Ingestible CBD Growth

The CBD market still exists in a regulatory gray area more than two and a half years after the Agriculture Improvement Act of 2018 (the 2018 Farm Bill) took effect. The delay has been particularly detrimental for ingestible CBD products like edibles and tinctures.

The lack of regulation has largely kept mainstream consumer packaged goods companies from entering the market. Federal guidance is needed for these players to get involved without imposing significant risks to the rest of their business. The good news is that regulatory turbulence likely will not last forever. We expect the U.S. Food and Drug Administration (FDA) to administer guidance as soon as later this year, providing the framework companies need to have confidence in producing and selling ingestible CBD.

Madeline Obrzut is a content specialist for Brightfield Group.