CBD players must differentiate themselves in evolving market

The figure should silence the critics who feel CBD is nothing but hype: US$390 million. It represents 2018 revenues in the hemp-based CBD industry in the United States, according to Hemp Business Journal.

No doubt about it—the CBD market is growing like gangbusters. In 2018 alone, two prominent players whose shares are traded on foreign exchanges raised tens of millions of dollars in capital to help plan for expansion in the United States and abroad.

In an initial public offering (IPO) in Canada, Charlotte’s Web generated net proceeds of $71.5 million. Elixinol Global raised A$40 million (US$28.7 million) in a secondary offering.

Institutional investors are hungry to sit at the CBD table amid monumental changes in federal law.

Thanks to the 2018 Farm Bill, the Drug Enforcement Administration (DEA) no longer will interfere with hemp in interstate commerce. Retailers—both large and small—are carrying hemp extracts and reporting strong consumer demand. And FDA has signaled a willingness to identify a legal path for CBD in foods and supplements.

Investors, though, have a discerning palate. They want a seat at the table with winners who are going to build value and an esteemed reputation over the long-term.

To be a winner, it’s not enough to sell CBD or hemp extracts in a supplement or food. It’s too late to be the first to market. Hundreds of brands are peddling hemp extracts.

The challenge? “I don’t see much innovation in the CBD category,” Twinlab CEO Anthony Zolezz observed.

A few key principles could help your business stay ahead of the competition:

Companies must separate themselves from an increasingly cluttered pack. They can do so through product formulation, creative branding and other initiatives that carve out a specialized niche within the broader CBD/hemp extracts market.

“As CBD and THC become more mainstream, and manufacturers recognize their potential, the market will be dominated by outcome-based products,” Zora Milenkovic of Euromonitor International, the market research firm, wrote in an article for the INSIDER CBD digital magazine.  

Legal and regulatory compliance is equally paramount. Marketers and manufacturers of hemp-derived CBD must strictly adhere to local, state and federal laws and regulations. Institutional investors aren’t keen to risk their capital on players who flout the rules, inviting government scrutiny.

In a statement the day the Farm Bill was signed into law, FDA’s commissioner, Scott Gottlieb, M.D., asserted his agency would only consider a path to market for CBD in a food or supplement “if the agency were able to determine that all other requirements in the [Food, Drug and Cosmetic Act] are met, including those required for food additives or new dietary ingredients.”

The future looks bright indeed for the hemp-based CBD industry—provided companies are willing to follow all the rules and create safe products that provide consumers’ meaningful health benefits.

For more, download the CBD opportunity: Smart brands capitalize on market expansion digital magazine.