CBD Category - Distribution Channels
CBD products are usually available through five main distribution channels. These include dispensary and delivery services, online, smoke shops, health food stores, and doctors’ offices. The details of our findings are outlined below.
OVERVIEW OF THE US CBD MARKET
- CBD products represent one of the fastest growing segments in the cannabis market as well as the US$4 trillion health and wellness industry.
- Top cannabis researchers BDS Analytics and ArcView Market Research, estimate CBD sales will be at $20 billion in the US by 2024.
- By removing hemp from the federal list of controlled substances, the farm bill that President Trump signed in December 2018 made hemp-derived CBD legal in all 50 states. CBD products are expanding their footprint into eCommerce sites, dispensaries, specialty retail, department stores and mass merchandisers, among others.
- For now, CBD-infused topicals are the main product type making their way onto retail shelves, because the US Food and Drug Administration (FDA) has not yet approved adding CBD into food, drinks or dietary supplements.
- Manufacturers and investors that are planning a market move should formulate a game plan. This should include forging relationships with national retailers, arming consumers with information about CBD and proactively creating an Amazon strategy.
- According to BDS Analytics and ArcView Market Research, the US CBD market consisting of cannabis- and hemp-derived CBD products is predicted to surge from $1.9 billion in 2018 to $20 billion by 2024. This represents a compound annual growth rate of 49%.
- When combined with THC products, the CBD market will create a total market of $45 billion for cannabinoids by 2024.
- CBD products are typically sold through five main distribution channels — dispensary and delivery services, online, smoke shops, health food stores, and doctors’ offices. Of these channels, online provides the highest profit margin because it cuts out the middleman.
- There are different CBD market analysis figures to consider: hemp-derived CBD products only and CBD products derived from weed. The total CBD sales in the United States will exceed $2.1 billion by 2020. Approximately $450 million of this figure comprised of hemp-derived CBD sales and the hemp-derived CBD market growth will see an incredible 55% per annum growth over the next five years.
- The US market for food and beverages featuring hemp-based CBD from relaxation drinks to gummies could be worth $2.5billion by 2023 or 10.5% of an estimated $23.7billion market for CBD product (Spanning everything from pharmaceuticals to pet food).
- Currently, tinctures dominate the indigestible market, but will change as more foods and beverages hit the market. The importance of tinctures in the overall market is fading, in 2018, they made up over 34% of the market and in 2019 that number will drop to 25%.
- The market for CBD-infused beverages is set to generate $191 in sales in 2019, over 17 times its 2018 figure. CBD infused drinks will see a 63% CAGR between 2019 and 2023.
ONLINE OR DIRECT TO CONSUMER
- E-commerce site- online or direct-to-consumer has traditionally been the distribution channel of choice. Today, most CBD products are sold through specialty direct-to- consumer e-retailers such as Eaze and Leafly.
- Online orders of products that are hemp-derived CBD products can be considered the primary sales driver. Companies are able to ship their CBD products anywhere in the U.S. This is so as long as the plant source meets that legal definition of industrial hemp and includes less than 0.3-percent THC.
- Approximately 20 businesses are now hosting two-thirds of hemp-derived CBD sales.
- According to the Brightfield report, the evolution of the market has made room for these distributors to spread the word, develop their reputations, and grow their consumer bases tremendously. This is so despite the barriers presented by the current regulatory system.
- In legal states, many medical dispensaries offer hemp-based CBD products that do not require physician certification for purchase. The company, 1993 Industries Inc. has CBD-only dispensaries, health and wellness and smoke and vape stores throughout the 46 US states.
- CBD product sales in dispensaries since 2014 have grown at an even faster rate than overall sales in dispensaries. CBD sales in dispensaries are a leading indicator of the direction of where the general hemp-derived CBD product market is headed. Within the dispensary channel, the share of high-CBD (as opposed to high-THC) product sales has been increasing rapidly.
- Dispensary sales of CBD accounted for 11% of total sales in 2018—a considerable increase from just 5% in 2017.
- In the world of CBD products, being able to interact directly with your customer base is uniquely important because they’re likely to be repeat customers. CBD consumers are extremely brand loyal with 23% always purchasing the same brand, 29% purchasing the same brand 75% of the time, and another 23% purchasing the same brand 50% of the time.
- In 2019, a number of major US brick and mortar retailers began to carry CBD products.
- In March, CVS Pharmacy introduced CBD topicals, including creams, sprays, roll-ons, lotions and salves. These were sent to over 800 stores from 8 states. Walgreen followed suit a week later, proclaiming that it will begin selling CBD infused creams, patches and sprays in nearly 1,500 stores across nine states.
- In June 2019, Fox Business News reported that grocery chain Kroger joined the growing ranks of CBD retailers, offering topical products in 945 stores across 17 states. Offering customers a highly-curated selection of topical products like lotions, balms, oils and creams that are infused with hemp-derived CBD
- Sephora began offering CBD beauty brands in 2018. Large nutrition and supplements store chains such as the vitamin shoppe.
- GNC Holdings, in April 2019, started offering CBD-infused topicals in select retail locations and online in 23 states and the District of Columbia.
- According to a report by the New York Post, Walmart and Target are researching the potential upside to stocking their shelves with CBD infused products from topical creams to drinks.
- In January 2019, Neiman Marcus announced the roll out of its CBD collection in select stores. Barneys New York soon followed suit, revealing plans to offer Flora + Bast's line of CBD beauty products.
- With respect to retail channels, in 2019, chain retailers account for 57% of CBD sales. This was followed by online retailers at 22%, natural food stores at 8%, dispensaries and smoke shop at 4% with the remainder comprising independent pharmacy stores, multi-level marketers and pet stores.
- The company, 1993 Industries Inc., reached over 800 retail outlets with its premium Canna Hemp brand of wellness products. This was done using coast-to-coast distribution in the United States. The company is focused on brand expansion with a diverse and growing distribution footprint, that now includes licensed cannabis dispensaries, health and wellness, CBD-only dispensaries and smoke and vape stores across 46 states. Currently, approximately 200 outlets carry the Canna Hemp brand.
- CV Sciences, Inc., has also announced further expansion of its industry-dominating brand, PlusCBD Oil. Since March 31, 2019, branded products from PlusCBD Oil have been made available in over 3,308 retail stores.
- This represents a 48% increase from 2,238 retail stores in December 2018.
- The American Premium Water Corporation has recently made an announcement that its varicose vein cosmetic, Vanexxe is now available for sale on Amazon.
- An agreement was also reached with Incentibuys, one of Asia's fastest growing multi-level marketers to distribute the product through their network of distributors across China, Korea, Malaysia, Vietnam and Indonesia.
- Kona Gold Solutions, Inc., is looking to expand its distribution. This comes after they announced that it has partnered with 16 new distributors within the last thirty days. These new distributors are based in Idaho, Nevada, Wisconsin, California, Indiana, New Mexico, Kentucky, Louisiana, New York, Minnesota, Nevada, New Mexico, Texas, Oklahoma, Virginia, and Washington.
- The Company is continuing to grow its market share in the hemp and CBD infused beverage sector by adding new distribution partners. This is taking place through their Kona Gold Hemp Energy Drinks and HighDrate CBD Energy Waters.
We have leveraged a combination of leading publication on market insight and reports, industry database to curate the main distribution channels and market size of CBD products in the US.
To provide a detailed overview of the main distribution channels for the CBD category in the US, we have classified the path by which CBD products travel to arrive at the intended consume into online or direct to consumer, producer to retailer to consumer and manufacturer to wholesaler to retailer to consumer. Furthermore, we consulted leading publication like Bloomberg, market insider, investing news to provide an overview of the main distribution channels for CBD.
We found that CBD products are typically sold through five main distribution channels — dispensary and delivery services, online, smoke shops, health food stores, and doctors’ offices. Of these channels, online provides the highest profit margin because it cuts out the middleman. In addition, we found that the retail distribution channel is emerging because the passage of the US farm bill played a major role in the demand for CBD products. Meanwhile, the online or direct to customer distribution channels has already been established because direct-to-consumer, traditionally has been the distribution channel of choice. Moreover, in legal states, many medical dispensaries offer hemp-based CBD products that don't require physician certification for purchase. Again, we consulted market reports, to provide the market share and geographical scope of these distribution channels.
We also consulted leading publication to provide an overview of how manufacturers are trying to take advantage of the growing CBD product with an aggressive push for distribution agreements among key CBD product players. Strong global distribution channels will be essential in creating early consumer brand awareness and developing revenue streams for the time when CBD products will hit the market, especially with larger mainstream retailers. Moreover, rapid Growth of CBD Infused Products Market may Spur Consolidation of Distribution Channels. The key market players such as CV science, America premium water corporation, 1993 Industries Inc., Kona Gold Solution are preeminent supplier and manufacturers of CBD category product and are key players because they have higher market share and popular brands in the US CBD market.
From seed to sale, the company offers a unique approach to compliance and transparency. All Canna Hemp products undergo rigorous testing to ensure the purity and safety of its CBD. The CBD is lab tested by independent certified laboratories to ensure that it is THC-free and contains no harmful chemicals or pesticides.
Leafly, the world's largest cannabis information resource, named Canna Hemp CBD Relief Cream "Best Topical" in its list of Best in State. CBD Relief Cream is the Company's best-selling topical — a transdermal pain relief cream for fast-acting, targeted relief to areas of discomfort, combating inflammation, arthritis, joint pain, backaches, muscles spasms, strains, bruises, cramps, and headaches. For instance, the 1993 industries company's Canna Hemp X™ CBD sports recovery cream for athletes won "Best Topicals for Pain"
Furthermore, we consulted industry database, market analysis to provide an overview of the market size and growth for the CBD market. We found that the estimate made is based on the assumption that the FDA will create a legal pathway for the CBD market, which is currently not considered a legal dietary ingredient in food, beverages or supplement on a federal level, although several states explicitly permit sales. Clarity from FDA would give leading companies and retailers a green light to enter the market with the arrival of CBD-infused indigestible from blue chip brand in top-tier retailer would lift the social stigma surrounding CBD uses as well as concerns about product safety and legality.