We are entering Year 3 of federally legal Hemp CBD, and everyone—brands, manufacturers, retailers and investors—is scrambling to predict the future after COVID-19 and oversupply-driven market dislocation. This new era of the market will see sustainable growth driven by the entry of national brands, a fast-maturing supply chain, and the three Rs: research, regulatory clarity, and retail recovery.
We continue to see established companies entering the market alongside new distribution opportunities, strategic acquisitions, and the rise of powerful brand leaders. In this blog, we’ll share some of the notable commercial trends accelerating the development of the cannabinoid-enabled market.
CPG Behemoths Gearing Up
Consumers want CBD, but they don’t know who or what to trust because of the lack of workable regulations and proliferation of unknown, unproven, generic brands. That is starting to change as premium brands emerge from the pack, led by experienced leaders and often backed by credible companies.
Nestlé: In May 2021, Nestlé entered into an agreement to acquire The Bountiful Company, the No. 1 pure-play leader in the global nutrition and supplement category. The transaction includes the high-growth brands Nature’s Bounty, Solgar, Osteo Bi-Flex and Puritan’s Pride, as well as the company’s U.S. private label business.
Of note, Nature’s Bounty offers the Hemp Plus collection, which features organic hemp seed oil alongside complementary co-actives in capsules to provide support for sleep, joint comfort, skin hydration, and stress.
Colgate-Palmolive: In June 2021, personal care giant Colgate-Palmolive announced the development of an antiperspirant formula containing cannabidiol (CBD) that it says works as an anti-irritant on the skin.
“Beyond antiperspirants, Colgate said its invention could be applied to other personal care items for the skin and hair, including hand soaps, body washes, shampoo hair conditioners, and even cosmetics. And while CBD has been highlighted as a preferable cannabinoid in the patent filing, it said other cannabinoids, including CBC, CBG and CBT, among others could be used.”
In 2020, Colgate acquired the Hello Products, featuring a collection of oral care CBD products including a fluoride and fluoride-free toothpaste, CBD mouthwash, and CBD lip balms.
Consumer Brands Association
Further, a coalition of consumer brands that includes Coca-Cola, PepsiCo and Kellogg Company is appealing to US health regulators to accelerate guidance on CBD products (the FDA has been reviewing CBD policy since 2019 without a resolution). The July 22nd letter from the Consumer Brands Association argues that current US policy on CBD is “not working” and urges uniform federal regulation to enable broad market access for trusted manufacturers.
New Brick and Mortar Distribution
Rite Aid: In direct response to growing demand, CBD products and other alternative medicines will now be available at local Rite Aid pharmacies, as the company watches the cannabis market for buying opportunities. Rite Aid CEO Heyward Donigan spoke at the virtual event The Future of Everything Festival, saying that pharmacists are now trained to advise customers on homeopathic alternatives to over-the-counter and prescription medicines.
Southern Wine & Spirits
The beverage format appeals to consumers new to CBD because it is accessible, easy to dose, and resembles functional drinks in the mainstream market. Picking up a single can or bottle is a relatively inexpensive solution for curious mainstream consumers. Plus, beverage consumers are twice as likely to have purchased from a brick and mortar retailer location than CBD buyers overall.
Southern Glazer’s Wine & Spirits, one of the world’s pre-eminent distributors of alcoholic beverages, is filling the void and leading the industry with national CBD distribution, providing capabilities and validation that retail buyers have been looking for in the market.
In April, Canopy Growth partnered with Southern Glazer’s Wine & Spirits to distribute its CBD-infused sparkling water Quatreau to an initial seven states. In July, Kill Cliff CBD announced their distribution deal with Southern Glazer’s Wine & Spirits. Kill Cliff CBD products offer customers 25 mg of broad-spectrum hemp-derived CBD in each can.
Category Consolidation
The 2018 Farm Bill legalizing hemp across the U.S. spawned a fiercely competitive market for CBD products. Many smaller brands have dropped out of the space, while several startups and entrepreneurs never moved “out of first gear,” according to Bethany Gomez, managing director of Brightfield Group, which tracks sales in the CBD market.
The industry has shrunk to around 2,000 brands, Gomez said, down from a peak of 3,500 at the end of 2019. This trend will continue. Several CBD brands are eying acquisition targets in a move that will lead to further consolidation of the market.
In 2021 we’ve seen The Valens Co. acquire Green Roads for $40M, HempFusion Wellness Inc. revealed plans to acquire APCNA Holdings Inc. (Apothecanna), HempFusion disclosed an agreement to acquire Sagely Enterprises Inc. (Sagely Naturals) and Kadenwood announced the acquisition of the Social CBD brand.
We expect this trend of market consolidation to continue and many of these brands who have been acquired will invest in revitalization of product lines and a larger distribution footprint.
Emerging Brand Leaders
The industry is now being strongly influenced by powerful CBD-only companies, such as Charlotte’s Web, Medterra, and CBDMD, which have been able to develop reputations and establish brand loyalty, refine and improve marketing strategies, and grow larger and more diverse customer bases despite regulatory and COVID-driven headwinds.
The Time Is Now
At OBX, we believe the new world order for the cannabinoid industry is upon us. 2021 will prove to be the turning point in building a thriving, healthy industry that contributes to societal good.
Nicole Brown serves as Chief Innovation Officer for Open Book Extracts (OBX), an ingredient manufacturer and product development house focused on cannabinoid-enabled health and wellness, located in North Carolina. As Chief Innovation Officer, Nicole channels data-driven consumer insights into a long-term course of action, delivering immediately usable innovation, and drives awareness and thought leadership by overseeing strategic marketing efforts, including PR, event marketing, advertising, and partnerships.
