A new report found that price was the second biggest factor for consumers when making CBD purchase decisions.
The passage of the 2018 Farm Bill legalizing hemp sparked a CBD rush with millions in sales and seemingly everyone starting a company using some form of hemp-derived cannabis oil. Last year’s BDSA and Arcview Market Research, industry report estimated that CBD sales in the U.S. would surpass $20 billion by 2024. New York-based investment bank Cowen & Co forecast that the market would hit $15 billion by 2025.
A new report from the Brightfield Group, “US CBD Market July 2020“, warns those numbers will be much lower as a result of the impact of COVID-19 on shoppers. Several reasons are behind the drop in sales from lockdowns causing brick and mortar store closures, to shifts in retailers making deliveries and even the job crisis that is hurting consumers’ wallets. The report stated that in 2020, the US hemp-derived CBD market is projected to reach $4.7 billion in sales, with 14% growth from 2019 sales of $4.1 billion. The market had been expected to grow by over 30%.
Stay At Home
One big problem for CBD shoppers was the request from states with big outbreaks to stay at home and only venture out if absolutely necessary. The report noted that there would be a loss of revenue from store closures as many retailers selling CBD products had either closed temporarily during the crisis or were only offering curbside pickup and delivery. “Even for CBD specialist retailers and smoke shops that remain open, they are experiencing steep declines in sales as social distancing guidelines and consumer worries about contracting the coronavirus keep shoppers at home.” That meant more online shopping, which worked well for established brands.
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Nearly half (45%) of CBD consumers surveyed in June 2020 by Brightfield said they moved their CBD purchases online because of the coronavirus crisis. “Millennial shoppers are the most likely to have switched to e-commerce for their CBD needs, with 54% reporting switching from brick and mortar stores to online as they also increase their
usage and spending during this stressful time. CBD market leaders have seen online sales increase dramatically in the first half of 2020 but are still making efforts to expand in brick and mortar retailers to set up for future success and broader brand awareness.”
Brightfield said well-known and trusted brands that already had a strong DTC (direct-to-consumer) model already established benefited from the online move. “New CBD companies though found it difficult to enter retail channels as in-person sales calls have been paused and major trade shows such as Natural Products Expo West and NoCo Hemp Expo had been canceled.”
No Job, No Money
Anyone who has purchased quality CBD products knows they don’t come cheap. “With Americans facing high unemployment levels (11.1% in June 2020 compared to 3.8% in February 2020) year 2020 retail sales are not expected to reach levels anticipated prior to the emergence of the COVID-19 pandemic.” Over 30 million Americans were receiving unemployment benefits as of July 14, 2020. The report also said that high unemployment rates and a reduction in disposable income are causing prices to fall in the US CBD industry sparking a domino effect felt at the beginning of the hemp chain. Hemp farmers have seen the price of their crops drop sharply due to the increase in supply. According to data from Hemp Benchmarks, the aggregate assessed price for hemp CBD biomass declined by 79% from April 2019 to April 2020, from $38.00 per pound to $8.10 per pound.
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Ultimately the prices will fall for consumers as producers adjust their models accordingly. Brightfield also found that price was the second biggest factor for consumers when making CBD purchase decisions. Consumers are really trying to make sure they can buy the most effective CBD product for the best price.
So Stressed
Without a doubt, this has been a stressful time for many. The pandemic, Black Lives Matter protests and continuing climate change worries are causing an increase in consumption of CBD. Heavy users have increased their consumption. “Anxiety is the number one ailment of CBD users, with 42% of them reporting it,” according to Brightfield Group’s consumer insights. “Depression and insomnia, which are likely to rise over the coming months, rank second and sixth.”
In a Brightfield Group survey of 5,000, CBD consumers fielded online from June 2 to 24, 2020, 39% stated that they are using more CBD as a result of the COVID-19 crisis. “This sentiment was even higher among Millennials and Gen Z consumers — 47% plan on using more CBD in the months to come. Younger consumers are more likely to increase their CBD usage in response to the COVID-19 pandemic. More than half of Millennials (51%) and 48% of Gen Z have upped their CBD usage frequency, compared to only 40% of Gen-X and 17% of Boomers.”
Consumers are choosing higher dosages and pivoting away from vapes and more towards edibles. COVID-19 has been especially hard on respiratory systems. While CBD companies can’t say their products should be used to fight COVID-19, many consumers want to boost their immunity and feel CBD is one way to accomplish this.
This article originally appeared on Green Market Report.
