It’s a sad time to be working in the CBD hemp industry.
Sales continue to decline. Jobs have been cut. And intoxicating products, including delta-8 THC, have overshadowed the CBD health and wellness movement as US brands operating on tight budgets try to keep up with an ever-changing patchwork of rules from one state to another.
Amidst these challenges and potential opportunities, companies must come to grips with their current identities and decide who they want to become.
Should they continue to position themselves as marketers in the supplement health and wellness space, for example? Or is smart money a game to sell delta-8 THC and other intoxicating products? Or should CBD hemp brands expand into other markets, including pharmaceutical investments?
The once booming industry faces an existential crisis or identity crisis to some extent, said Bethany Gomez, chief executive officer of Brightfield Group, a market research firm focused on the CBD, cannabis and cannabis industries. well being. Where do we fit?
Contraction of the hemp CBD market
Based on recent years’ sales and projections for 2023, it’s hard to get excited about the hemp CBD business in the United States. The market contracted in 2022 by more than 6% to $4.4 billion and, excluding drug sales, fell 8% to $3.8 billion during a year of record inflation, Gomez said.
[T]It’s been quite a painful year in terms of the actual decline in the market, he said in an interview.
Just this week, Cronos Group Inc. announced plans to shut down and exit its U.S. hemp-derived CBD operations by the end of the second quarter of 2023. The global cannabinoid company said it had realized the decision to improve cash flow in the near term and position itself to enter the US THC market directly when necessary changes in US regulatory conditions occur.
Claire Morton, Senior Manager of Data and Insights at Nutrition Business Journal, said she has answered few questions in recent years regarding the CBD category of hemp.
The market has evolved from a sensation within our industry and other industries into just another herbal ingredient that we monitor, he said in an interview. Now, I spend as much time on CBD as I do on elderberry or echinacea. Real supplement companies aren’t that focused on it.
Last year sales in the hemp CBD market plummeted nearly 23% to $396 million, according to NBJ, which researches the CBD supplement space in a substantially smaller category than the overall hemp CBD market tracked from Brightfield Group. NBJ expects the CBD supplement category to shrink 13.6% in 2023 to $342 million.
Based on forecasts from Brightfield Group, the outlook for the broader hemp CBD market isn’t so dire. Excluding pharmaceutical sales, the Chicago-based market research firm expects sales of hemp-derived CBD to drop 3% in 2023, shared Gomez, who added that the industry is being squeezed from all angles in this moment.
With more than 1,500 brands on the market, companies are facing price compression and weakening consumer demand due to the economy, he said. Gomez also said consumers are buying cheaper form factors, such as gummies instead of tinctures.
Meanwhile, state legislatures and regulators are taking various approaches to police the market for hemp-derived cannabinoids, including intoxicants like delta-8 THC. As described in this USA Today article, some states have banned delta-8 THC, while others have opted to regulate its production and sale.
It’s difficult for brands to strategically know what they should do with delta-8 and what they should do with hemp-derived THC as well, Gomez said.
Brands have fewer employees these days to think through and solve these challenges. In an effort to reduce expenses, many companies have reduced headcount. Though Gomez cautioned that he didn’t have specific numbers to fall back on, he estimated that the number of jobs on the market has been cut at least in half over the past two years, with many full management levels exiting the companies.
Many people who have struggled in the CBD market need a break from the space and have no interest in returning to it, he said. It has been a very challenging industry to work in over the last few years with the ever changing market.
There is absolutely an identity crisis, Gomez said. Is it part of the cannabis industry and is this just a sub-segment of that? Is it part of the supplement industry? As many of the form factors have transitioned to gummies and capsules, we see many CBD brands moving beyond CBD and moving into adaptogens, nootropics, functional mushrooms, or other types of functional ingredients.
Who we are? the market researcher then asked in the interview. And I think that’s what industries are trying to grapple with right now.
Rend Al-Mondhiry, a lawyer in the nation’s capital who advises CBD hemp brands and is an expert on dietary supplement regulations, said she, too, is aware of the identity crisis facing the industry.
The day she was interviewed by Natural Products Insider, she said she had attended a previous call where the issue arose due to the fact that these intoxicating products seem to generate a lot of revenue and CBD not so much.
Some people believe that to survive, the industry needs to embrace potentially intoxicating products and get them regulated, while others believe these products are hurting the industry’s reputation, Al-Mondhiry said.
He described the market as 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 go back to focusing on traditional type CBD products. Al-Mondhiry asked.
CBD brands are used to change.
The market has completely reinvented itself almost every year in terms of what’s important [and] what isn’t, Gomez noted.
For example, he referred to a focus on different distribution channels including e-commerce and physical stores from one year to the next.
AND [the market] THC-free aimed at older consumers? she asked. Is it THC and going back to smoke and vape shops?
Promise of 2023 Farm Bill
There is still no clear consensus on the direction of the sector, but that could happen later in the year, Al-Mondhiry said. He added the 2023 Farm Bill, considered a piece of legislation to be passed every five years, which could provide federal guidance for the CBD hemp market.
In January, the FDA denied citizen petitions asking the agency to create a legal market for CBD in dietary supplements through regulation. But the agency said it was committed to working with Congress on a new regulatory pathway.
The absence of a federal regulatory framework has limited distribution channels and hampered investment in the CBD market, according to analysts and others.
Last week, an FDA official outlined a harm reduction framework for CBD, noting a new regulatory pathway it really is in the hands of Congress.
Hopefully on Capitol Hill, the Farm Bill could pave the way for CBD hemp brands to leave the gloom and doom of recent years behind them and perhaps even thrive.
One way or another, we should get some level of federal guidance on this kind of limbo state that the industry has been in for the past nearly 5 years, Gomez said. We predict that if we get CBD regulated, it would bring the market to about $10 billion by 2028. If we don’t, that $5 billion won’t be freed up.
A lot hangs in the balance on that 2023 Farm Bill.
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