Hemp-CBD prices will fall, ingestibles for people and pets will rise, and more product will land on traditional retail shelves.
Welcome to Part II of CBD Retail Trends’ conversation with Rich Maturo, vice president for cannabis practice at Neilsen, the market research organization known for having its finger on the pulse of consumer trends and markets.
CBD Retail Trends: In Part I of our Q&A, you mentioned a handful of developments in 2020 may tip the scales for manufacturers and retailers. One of those developments you see on the radar for 2020 is CBD product prices falling. Can you give us some detail on that?
Rich Maturo: CBD manufacturers that narrow the price gap between hemp-based CBD products and their Consumer Packaged Goods (CPG) equivalents will maximize the opportunities to compete within the CPG space.
Currently, the price gap is large. Depending on potency, CBD products frequently range between four and 10 times the retail price of CPG products used for comparable needs. Production efficiencies linked to cultivation and extraction practices will affect product pricing. The number of U.S. hemp farmers will rise over the next decade, as will the multi-million dollar investments that Canadian Licensed Producers are making in cultivating hemp in the U.S. market.
We also expect to see price efficiencies from the growing of hemp in Latin American countries. A recent study by Hemp Benchmarks reveals that nearly 50% of current hemp cultivators in the U.S. expect to increase the acreage they devote to hemp cultivation. All of these will set the stage to make hemp-derived CBD more affordable for producers and manufacturers, fostering lower prices at shelf.
CBDRT: We hear a lot about CBD gummies and other ingestibles. You see some growth there in the coming year, is that right?
RM: Capsules, gummies and beverages will significantly grow their user bases, pending the Food and Drug Administration’s (FDA) permission for manufacturers to legally infuse hemp-CBD extracts into ingestible products. In fact, Nielsen projections show that with FDA approval, ingestible formats could grow their existing user base as much as 250%-375% in a year’s time, as these are the formats that consumers are most familiar with.
In addition, we know that these formats will benefit from recent technological advances in this space. For example, new water-soluble and nanotechnologies both allow for more efficient absorption.
We believe that over the next decade, categories that consumers use habitually or as part of their daily routine will contribute significantly to CBD growth and ultimately garner high sales due to replenishment frequency.
CBD-infused beverages are especially a good fit for this—think coffee, functional waters, energy drinks, teas and sport drinks.
CBDRT: For many consumers, seeing CBD products targeted at pets is a bit of a humorous novelty. But isn’t this a market that people should start to take seriously?
RM: Hemp-CBD is exploding in the pet space, and a sizable portion of pet owners are already hopping on board. Our data shows that 37% of dog owners who give their dogs vitamins and supplements today say they’re likely to give their dog a hemp-CBD infused vitamin in the next 12 months.
That said, we know from our “Thinking Beyond the Buzz” study that, of those who claim to have given their dog a hemp-CBD product, more than 20% used a product not specifically formulated for a dog.
As more U.S. adults adopt products from the hemp-CBD category, it’s imperative for pet CBD product manufacturers to provide a recognizable and valued level of differentiation between their products and those intended for human consumption to ensure that this number does not grow.
CBDRT: It seems like an extremely large proportion of CBD products are exclusively available online. Do you see that changing?
RM: Over the next decade, traditional brick-and-mortar CPG retail channels, inclusive of food, drug, mass, club, convenience and dollar store channels, will begin to steal share from online CBD retailers, local specialty CBD retailers, and vape and tobacco shops.
An influx of new consumers will tip the scales for traditional retailers. Compared with current hemp-CBD users, our survey data shows that new CBD consumers who say they’re likely to consume CBD products in the next 12 months but have yet to consume are more than twice as likely to state that they’ll shop for CBD products at a grocery chain or mass merchandiser.
These same consumers are more than 3.5 times more likely to state that they’ll purchase hemp-CBD products from a chain drug store.
With the rising appeal of hemp-CBD and ubiquity of CPG, the two industries have much to offer each other. As the regulatory outlook becomes clear, manufacturers and retailers can’t afford to ignore the still-nascent CBD space.